10 June 2012

Kenya: Serena Has Come a Long Way


My memories of the Serena start in Mombasa many years ago when the Managing Director Mahmoud Jan Mohamed was the Manager. I was a teenager then and I remember losing my heart to a girl, who would beat me at table tennis, in a bikini. That table tennis is still there.

The Serena brand has always been sprinkled with a fairy dust and reminds me of halycon days [happy; joyful; carefree: halcyon days of youth]. That brand equity was appreciated on 7th June 2012 at the Grosvenor House where The Serena Hotels won the coveted " Best Hospitality, Travel and Tourism in Africa" Award at the African Business Awards.

The Mombasa Serena throws a Super New Years party as well and you find entire families, grandparents, parents, children and its that rare inter generational mix, speaking to a by gone age, which I really enjoy. The Serena Group in Africa comprises a collection of 24 luxury camps, safari lodges, resorts and hotels, which are located in Kenya, Tanzania, Rwanda, Uganda and Mozambique.

TPS Eastern Africa Ltd is the listed entity for the Serena Hotels and is in fact the only listed proxy for the tourism gig at the Nairobi Securities Exchange. TPS Serena rallied 9.38% to close at 43.75 on Friday, giving the enterprise a Market Capitalisation of 5.680bn Kenya Shillings or $66.823m. TPS trades on a Price Earnings Ratio of 9.6957, which looks inexpensive. If you look back over the last two decades, you will note that the MD has had to navigate a really high Beta, 'Boom and Bust' tourism cycle and has navigated this landscape with some facility and aplomb.

And now, Serena is clearly staking out a much more forward and offensive position across the region and as you know by now, I sense the Eastern sea board of Africa is at a tipping Point [The oil and gas refers but just as important is the late cycle arrival of the information century which is the entry ticket for Africa to join in the c21st - That Arrival of the Information Century is very grass roots because anyone with an Internet enabled mobile phone has an entry ticket and therefore, I see the expansion of the brand as timely and riding a rising tide.

The brand is established. Its got breadth, its not a 'mom and pop' operation. Sure, lots of folks are coming for Serena's lunch but their longevity, their ability to navigate has been proven and their DNA make them a formidable competitor. As an investor, my best investments are where I can go and kick the tyres, speak to the staff and do my own sleuthing up close and personal. I urge you to do the same. The share price has underperformed in 2012 and is overdue a rebound and over the medium term, I think its a must have for the portfolio.

TPS Eastern Africa closed at 43.75 on Friday. Shares are well held and supply is actually thin. I have a 60.00 Price Objective before year end which gives an Investor 37.142% of up side this year.

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