Ceiba interim result show Trump impact – Ceiba Investments (CBA) has published interim results to 30 June 2019. NAV per share decreased from US$1.49 as at 31 December 2018 to US$1.39 at 30 June 2019, mainly as a result of the increased discount rate and a downward adjustment of the estimated future cash flows to be generated by the Meliã Habana Hotel.
John Herring to stay on as chairman
Comments from chairman John Herring: “All of the group’s assets continue to operate satisfactorily. Unfortunately, as I explained in last year’s annual report, the group is operating in an increasingly challenging political environment as regards the relations between Cuba and the US administration and this continues to have a negative effect on the performance of the group. In light of this, the independent valuers of CEIBA’s assets have applied a slightly higher discount rate to future cashflows. Your board and the manager consider that such an increase in the discount rate is appropriate given the negative headwinds faced by the country.
Despite the political backdrop, the group’s Varadero hotels and the Miramar Trade Center continue to trade well and to generate steady, attractive profits, with dividend income from the joint ventures consistent with the same period of the prior year. The Melia Trinidad Playa Hotel construction is also progressing well, on budget but with some delay. The hotel asset which has been adversely affected is the Meliã Habana Hotel, which has historically appealed to US tourists.
In April 2019, the US administration announced a new round of measures aimed at strengthening the US Cuban Embargo. These measures include limiting remittances to Cuba, further restricting travel by U.S. persons to Cuba, bringing Title III of the Helms-Burton Act into force and penalizing shipping companies that transport oil products from Venezuela to Cuba. More recently, on 4 June 2019, the US administration imposed additional new travel restrictions to Cuba by US nationals which include a ban on travel to Cuba by cruise ships, yachts and private or corporate planes. These measures have had a significant adverse impact on the Cuban economy and particularly on the tourist industry around Havana. They have also resulted in further shortages of diesel and other petroleum products in Cuba, as recently announced by President Díaz-Canel.
The manager and the board are highly sensitive to these external factors and are seeking to position the assets as well as possible in this adverse climate. However, over the years the group has experienced similar cycles of hostility and economic downturn, and the board remains of the view that the long-term investment case for each of CEIBA’s assets is strong and that in the present conditions attractive new investment opportunities on the island arise with very limited competition.
It is also encouraging that the Cuban government remains committed to its slow-but-steady programme of modernisation and continues to show a strong interest in attracting new foreign investment to the country. In addition, the European Union and many of its member states have stepped up their support for Cuba and for their national companies that are already invested, trading or seeking to enter.
As Havana celebrates its 500th anniversary this year, and despite the short-term challenges, the board remains optimistic on the long-term opportunities and prospects for growth in the Cuban tourism industry and economy, and on the group’s ability to capitalise on these in the coming years.
In my statement in the company’s annual report to 31 December 2018, I said that I would step down as chairman following the annual general meeting held in June 2019 and remain as a non-executive director. The board regularly reviews composition of the board and succession planning and the independent directors have resolved that, in the current environment, my continued role as chairman would be in the best interest of the shareholders as a whole. An announcement to this effect was made on 18 June 2019.
The Board extends its thanks to the Investment Manager and to the entire on-the-ground management team for their steady efforts on behalf of the Group.”
CBA: Ceiba interim result show Trump impact