Egnatia cuts Tsokkos target price

Egnatia Financial Services have cut their price target on A. Tsokkos Hotels Pcl (TSH) from CYP 0.158 per share to CYP 0.145, but have maintained their buy recommendation, implying an upside potential of 21% from the stock’s current price.

Based on our target price, TSH yields a 2007 P/E ratio of 14.4x. Our Buy recommendation is maintained, Egnatia said in its report.

A. Tsokkos Hotels released a weak set of 1Q06 results, with net loss up by 44.7% YoY to CYP 623.000. The drop in profitability was mainly attributed to lower revenues, as 1Q06 did not include the Catholic Easter holiday period as in the previous year (April 06 vs. March 05), as well as the operation of fewer hotel units in 1Q06 vs. 1Q05.

Earnings outlook for TSH appears satisfactory and is based on its long-term relationships with key tour operators and its substantial bed capacity within the key resorts. Egnatia anticipate that the Company is poised to benefit from the recovery of both tourist flow and yields within the next few years.

Overall, Egnatia expect that the lost ground of 1Q06 to be regained in the remaining 2006 period amid an improved pricing policy (thus higher RevPARs) and the recent addition of ‘Vrissiana Hotel’ in its hotel portfolio in Protaras. The ‘newcomer’ will add CYP 650.000 in revenues in 2006 and CYP 850.000 in 2007, according to Egnatia estimates.

“All in all, we believe that a stable tourism outlook will prevail over the next couple of years, with a more conservative approach for both

tourism revenues and arrivals.”

Egnatia have proceeded to a downward adjustment of its previous forecasts and extended our projected period to 2008. “We note that revenues have been adjusted lower on the grounds of a lower growth rate than originally anticipated. All in all, net earnings in 2006, 2007 and 2008 are expected to reach CYP 2.28 mln, CYP 2.50 mln and CYP 3.09 mln respectively (CAGR 2005-2008 : 8.7%).