Company Profile

The report contains a brief analysis of the Abu Dhabi listed company National Corporation for Tourism & Hotels. The first part of the report includes company profile which provides detail about NCTH such as its headquarter location, size of the firm, key competitors and many more. The second part of the report deals with the recommendations given on the financial performance and stock analysis of NCTH, illustrated with the help of graphs and calculated ratios.

1. The headquarters of National Corporation for Tourism & Hotels are situated in Abu Dhabi, United Arab Emirates (Ncth.com. 2018).
2. Chief Executive Officer – Mohamed Ahmed Arafah Mounib

Chief Financial Officer – Mr. Hany Farag

1. The company was founded in 1996 and is a UAE based corporation (Ncth.com. 2018).
2. It is listed on Abu Dhabi Securities Exchange and is traded with a ticker symbol of XADS: NCTH.
3. NCTH basically deals with making investment in hotels and leisure complexes. The company operates in Abu Dhabi and provides many services such as retail, catering services and holding segments. It also has fully owned five-star hotels which include Danat Jebel Dhanna Resort and many others. The company also serves many hotel management companies by offering them asset management services, catering facilities and owner representation services. However, the primary business line of the corporation relates to travel and tourism only (Ncth.com. 2018).
4. The size of the firm includes its total assets, total sales and number of employees working in the organization. According to the annual report of 2017, NCTH’s total assets are AED 2,116,220,871 million which was way more than the assets reported in 2016. The sales reported for the same year AED 727,899,294 million though reduced as compare to 2016. The number of employees working are 50 in the organization (Zawya.com. 2018).
5. Other companies operating in hospitality sector of Abu Dhabi are Abu Dhabi National Hotels (ADNH) and Hyatt Capital Gate, part of Hyatt Hotels Corporation give tough competition to National Corporation for Tourism & Hotels.
6. Comparison of ratios over the three years

Earnings per share

	NCTH
	2015 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	2016	2017
Net income available for shareholders (A)	165,524,257	171,633,962	103,881,467
number of shares (B)	567,000,000	680,400,000	680,400,000
EPS (A/B)	0.29	0.25	0.15

(Adx.ae. 2017).

Price Earnings ratio

	NCTH
	2015	2016	2017
Current value per share	3.5	2.8	2.14
Earnings per share	0.29	0.25	0.15
P/E ratio (A/B)	11.99	11.10	14.02

(Adx.ae. 2017).

Dividend yield

	NCTH
	2015	2016	2017
Annual dividends per share	0.25	0.15	0
Price per share	3.5	2.8	2.14
DYR (A/B)	7%	5%	0

(Adx.ae. 2017). 

Comparing to Competitors

	National Corporation for Tourism & Hotels	Abu Dhabi National Hotels	Hyatt Hotels Corp
Earnings per share	0.15	0.25	1.97
Price-earnings ratio	14.02	11.21	26.43
Dividend Yield ratio	0	4.5%	0.77%

 The recent market price of NCTH share is AED 1.86. Graphical representation of its last two years prices is as follows: 

(Adx.ae. 2018).

Comparison of ROA and ROE over past two years

Return on Assets 

	NCTH
	2016	2017
Net Income (A)	171,633,962	103,881,467
Total assets (B)	1295234065	1296701924
ROA (A/B)	13%	8%

(Adx.ae. 2017).

Return on equity

	NCTH
	2016	2017
Net Income (A)	171,633,962	103,881,467
Shareholder’s equity (B)	785109925	823361196
ROE (A/B)	22%	13%

(Adx.ae. 2017).

Comparing to Competitors

	National Corporation for Tourism & Hotels	Abu Dhabi National Hotels	Hyatt Hotels Corp
Return on Equity	13%	2.70%	6.70%
Return on Assets	8%	2.35%	3.23%

First of all, looking at the market value ratios of the company, it can be said that NCTH earnings per share has reduced over the three years. In 2015, its EPS was 0.29 which reduces to 0.15 in 2017. This is due to reduction in the company’s net income available for shareholders while the number of shareholders outstanding remain the same for the past two years. In, NCTH’s net income was AED 177,633,962 million which reduces to AED 103,881,467 million in 2017. However, the reverse trend was noticed in the P/E ratio of the company. It rises from 11.99 to 14.02 last year due the high market price of the NCTH’s share. An increased Price earnings ratio indicates that the investors are expecting high growth in future. This is used as a benchmark to evaluate the worthiness of company’s stock. Looking at the NCTH P/E ratio, it can be said that it is worth buying the stock (Rich, Jones, Heitger, Mowen & Hansen, 2011).

The dividend yield ratio of NCTH was 5% in 2016 and is 0% in 2017. Reason being company has not declared any dividends last year due to less profits. Comparing these market ratios with NCTH’s competitors Abu Dhabi National Hotels and Hyatt Hotels Corp, it is observed that EPS, P/E ratio and Dividend yield of Hyatt hotels is much higher than its two competitors. NCTH has high P/E ratio than Abu Dhabi National Hotels but its EPS and dividend yield is lower than that. This implies that company has not performed well in the market and within the industry in which it operates (Papadopoulos, 2010).

Comparing to Competitors

Talking about the profitability ratios, NCTH’s ROA and the ROE both have reduced during 2017. ROA previously was reported at 13% and now it is 8%. Similarly, ROE of the company was 22% and now it is 13%. The main reason is the reduced profits and increased total assets and shareholders’ equity. When comparing the ratios to the competitors, the profitability position of NCTH is much better than its two competitors. Both the ratios of NCTH are higher than Abu Dhabi National hotels and Hyatt Hotel Corp. so it can be expected that, the profitability position of NCTH will improve in the coming years (Leach, 2010). 

Lastly, NCTH’s stock price comparison with Abu Dhabi Index shows that the share price of the company has fallen over the past two years as compare to ADI. It can be seen from the graph that the market index almost remains stable and there are very less fluctuations. On the other hand major movements can be seen in the share price of NCTH. It can be said that after March 2017, the price is been continuously fallen. 16, March 2017, was the last time when it was reported at AED 3 per share and after that a constant fall is been there. On April 22, 2018 the price was AED 2.05 share which by now has also reduced to AED 1.86 per share.

Ignoring the stock prices for once, it can be said that NCTH can enjoy profitability in short and long term as compare to its competitors. Reason being, when compared it was observed that The National Corporation for Tourism and Hotels has earned more profits against its competitor, Abu Dhabi National Hotels and Hyatt Hotels Corp. This can be noticed in its profitability ratios ROA and ROE. Company has high ratios as compare to ADNH, which implies that it is in a position to make more profits by properly utilizing its assets and offer more and reasonable returns to its shareholders. However, when compare to itself, NCTH performance has got worsen in 2017, as its net profits had been reduced which declines it ROA and ROE to a great extent (Lee, Lee & Lee, 2009). Prior to 2017, the company offered 22% return on its shareholders’ equity and in 2017 the same figure turns out to be 13%. Same is the case with return on assets, in 2016 it was 13% which falls to 8% in 2017. This means the company profitability position has deteriorated over the two years. Also, if not ignoring the trends in the stock prices, it can be said that prices have shown a continuous downfall, so it may not be possible for NCTH to enjoy profitability in short and immediate term. Due to the declining profitability, share prices has also reduced. This fall majorly affect NCTH’s overall financial performance and does not positioned the company to enjoy profitability in coming years. Reason being, the share prices are been observed by many people that includes, investors, banks, partners, associates, lenders and creditors. NCTH falling prices shows that company is not performing well in the market. However, when compare to its core competitor ADNH, it is observed that it has performed better than its competitor company (Wahlen, Baginski & Bradshaw, 2014). 

Opinions and Recommendations

In general while selecting or buying a stock of a company, following factors are to be considered:

• Price-earnings ratio: It should be between 1.0x and 10.0x
• Earnings per share: EPS must be positive and must show a growth over the years or quarter.
• Beta: As such, there is no measure for good beta because it totally depends upon the time horizon of the investment. Also, one thing which is considered is that beta should be positive.
• Dividends: company must declare regular dividends as they are a sign of good health and investors always look for the stocks that offer more dividends.
• Return on Assets: This measure defines how efficiently company is using its assets to make profits. It should be positive and increasing.
• Return on Equity: It is the most important factor which every investor look up to. It is a way to measure company’s profit generating capacity and paying returns to its shareholders or investors (The Economic Times. 2016).

The above listed factors are usually judged while buying the stock or shares of a particular company. When looking at the stock performance of NCTH, it is observed that company’s share price has reduced over the past two years. Also its profits has been declined resulted in low ROA and ROE. Other points are also reflected from the historical data of the company. They are as follows:

• First of all, NCTH has high and increased P/E ratio last year, which clearly implies that the share price will enjoy high growth in future and investors are also expecting the same.
• Apart from P/E ratio, company’s EPS has reduced during the last year and is also less than its competitors. This reflects that the NCTH shares has not made more earnings in the last year.
• Taking from the market information, NCTH has a negative beta of -0.03. This implies that company’s shares has an inverse relation with the market. It means that the stock will do better, if the market declines. But in case of NCTH, Abu Dhabi Index had remain almost same for the past two years and a major decline has not been observed. As a result of which, company’s stocks has not performed better (Gulfbase.com., 2018).
• Talking about dividends, NCTH has not declared and paid any amount of dividends last year to its shareholders.
• ROA of the company has also fallen from 13% to 8% along with the ROE, witnessing a decline from 22% to 13%. This means that firm’s profit making capacity has been reduced in the last year.

Considering all the above points, it will be recommended not to buy the stock of NCTH. Reason being it has negative beta, no dividends, reduced share price, profits and EPS. Apart from the P/E ratio, all other factors indicates that investor must not buy the company’s stock as it may not give growth in future.

References 

Adx.ae. (2017). Annual Report. Retrieved from https://www.adx.ae/English/News/Pages/20180215085011-NCTH.aspx 

Adx.ae. (2018). MARKET HISTORY. Retrieved from https://www.adx.ae/English/Pages/Data/TradeHistory/MarketHistory.aspx 

Gulfbase.com (2018). National Corp. For Tourism & Hotels – Company Overview. Retrieved from https://www.gulfbase.com/profile-summary-national-corp-for-tourism-hotels-ncth-391 

Leach, R. (2010). Ratios made simple: a beginner’s guide to the key financial ratios. Great Britain: Harriman House Limited.

Lee, A. C., Lee, J. C., & Lee, C. F. (2009). Financial Analysis, Planning and Forecasting: Theory and Application Second Edition. 2^nd ed. Singapore: World Scientific Publishing Company.

Ncth.com. (2018). Abu Dhabi Travel- Best Abu Dhabi Hotel Resorts- National Corporation for Tourism & Hotels. Retrieved from https://www.ncth.com/ 

Papadopoulos, P. (2010). Investment Report-Fundamental Analysis/Ratio Analysis. Germany: GRIN Publications.

Rich, J., Jones, J., Heitger, D. L., Mowen, M., & Hansen, D. (2011). Cornerstones of Financial and Managerial Accounting. 2^nd ed. USA: Cengage Learning.

The Economic Times. (2016). Five factors to keep in mind while investing in market from here on. Retrieved from https://economictimes.indiatimes.com/markets/stocks/news/five-factors-to-keep-in-mind-while-investing-in-market-from-here-on/articleshow/51344569.cmshttps://economictimes.indiatimes.com/markets/stocks/news/five-factors-to-keep-in-mind-while-investing-in-market-from-here-on/articleshow/51344569.cms 

Wahlen, J., Baginski, S., & Bradshaw, M. (2014). Financial reporting, financial statement analysis and valuation. 7^th ed. USA: Nelson Education.

Zawya.com. (2018). National Corporation for Tourism & Hotels (NCT&H) – Company Details. Retrieved from https://www.zawya.com/mena/en/company/National_Corporation_for_Tourism__Hotels-718004/ 

Bloomberg.com. (2018). NCTH:Abu Dhabi Stock Quote – National Corp for Tourism & Hotels. Retrieved from https://www.bloomberg.com/quote/NCTH:UH 

Investing.businessweek.wallst.com. (2018). NATIONAL CORP TOURISM & HOTE (NCTH:Abu Dhabi): Stock Quote & Company Profile. Retrieved from https://www.investing.businessweek.wallst.com/research/stocks/snapshot/snapshot.asp?ticker=NCTH:UH 

Jenter, D., & Lewellen, K. (2015). CEO preferences and acquisitions. The Journal of Finance, 70(6), 2813-2852.

Parrino, R., Kidwell, D. S., & Bates, T. (2011). Fundamentals of corporate finance. John Wiley & Sons.

Saleem, Q., & Rehman, R. U. (2011). Impacts of liquidity ratios on profitability. Interdisciplinary Journal of Research in Business, 1(7), 95-98.

Tracy, A. (2012). Ratio analysis fundamentals: how 17 financial ratios can allow you to analyse any business on the planet. RatioAnalysis. net.