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Ceiba struggles to access cash in Cuba

Ceiba Investments (CBA) has published its interim results for the six months ended 30 June 2022. During the period, CBA’s NAV per share fell by US$0.04 per share to US$1.12 per share – a fall of 3.5%. However, reflecting currency moves over the period, in sterling terms, CBA’s NAV rose by 7.1% from 86.4p per share to 92.5p per share (and using an exchange rate of £1:US$1.2143 as at 30 June 2022).

The discount to NAV widened significantly during the ;period – from 25.9% to 47.6%.

CBA’s chairman, John Herring, says that, given the challenging economic backdrop, CEIBA’s assets have traded remarkably well. He goes on to say that, “at the Miramar Trade Centre, occupancy has fallen very modestly but remains well above 90% and profitability remains near the record levels achieved in 2020 and 2021. The present challenge, and the main uncertainty for the company, is the difficulty of Inmobiliaria Monte Barreto S.A. (which owns the Miramar Trade Centre) to distribute the income generated from the property in the form of hard currency dividend payments to the Company. Although consistently profitable, between the interpretation being given to the Cuban reform measures which have so far given Monte Barreto a small portion of the hard currency it needs, and the present liquidity crisis in the Cuban banking system, Monte Barreto has not been able to transfer significant dividends outside the country. Management continues to discuss solutions to this problem with its Cuban counterparts in order to alleviate this issue

The valuation of the company’s stake in Monte Barreto has been reduced by 21.6% to $53.1m, from $67.7m as at 31 December 2021, largely as a result of an increased discount rate to take into account the higher risk stemming from the present difficulties.

The recovery in the trading of Ceiba’s four hotels is proceeding very well and better than anticipated at the start of the year. This good performance is partly due to the fact that the hotels continued to trade throughout the pandemic, albeit on a reduced and modified basis, and were therefore able to return to a higher level of activity relatively easily as demand recovered in 2022.

Although the broader tourism sector has been adversely impacted by the Ukraine war, which has resulted in a steep decrease in the number of Russian and Ukrainian tourists visiting Cuba since the outbreak of the war, occupancy was only affected for a short period and is holding up very well. The outlook is good for the remainder of this year and into 2023 when Cuba’s tourism industry is expected to complete its full return to normal conditions.

The valuation of the stake in Miramar is up 0.3% to US$94.8m, which compares to US$94.5m as at 31 December 2021.

The Trinidad hotel construction project is now proceeding well, after some delays experienced over the past year, and is currently scheduled to open in early May 2023. The development is being carried out directly by TosCuba, in which the company has a 40% interest and Melia Hotels International, the Spanish hotel operator which will operate the hotel, has a 10% interest. This new hotel is said to be extremely well positioned, close to the historic city of Trinidad, and is expected to be a very attractive destination in an area where there is limited competition.

CBA : Ceiba struggles to access cash in Cuba

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