Lopesan's German subsidiary has plenty of fuel to run. Just as it's about to present its 2024 financial statements, with a capitalization of €296 million, the hotel company presents a dramatic turnaround in its 2023 income statement. While in 2022, LS Invest AG was bleeding to death with €7,31 million in net losses, 2023 has worked a miracle: a positive net result of €44,88 million. A jump of almost €52 million.
But here comes the key, often hidden in the fine details of press releases: net sales barely budged from €123,64 million to €128,76 million. However, total revenue soared from €131,83 million to €217,23 million. This difference between a modest increase in sales and a spectacular increase in overall revenue points directly to a substantial asset sale or non-recurring extraordinary income. This is where one wonders: Where's the trick or the magic? This "boost" in revenue that has catapulted profit figures has been the sale of hotel assets in Europe.
This significant improvement has logically translated into its valuation ratios. The PE, that yardstick that many find difficult, has dropped from an unsustainable negative of -37,8x in 2022 to a PE of 6,05x in 2023. A value of 6x is, for a company that has returned to the path of profit, not only low, but almost ridiculous in a normal market environment. This either suggests that the market does not believe in the sustainability of these extraordinary profits, or that it is seriously undervalued if these asset sales transactions are to be repeated. The Enterprise Value (EV) to Sales also fell from 2,49x to 1,83x, a sign of efficiency, undoubtedly, but one that accompanies the PE enigma.
But the figure that deserves the most attention is net debt. From a net debt of €33,7 million in 2022, LS Invest AG has moved to a net cash position of -€33,9 million! in 2023. This means that the company has not only paid off its debt but has also accumulated net cash worth almost €34 million. In a capital-intensive sector like the hotel industry, going from debt to cash in a single fiscal year, with a relatively modest increase in sales and a profit driven by "other income," invites a deeper investigation into the source of that liquidity. Clearly, these asset sales or extraordinary income have been the fuel that has cleaned up the balance sheet and plugged the holes. The key, as always, lies in the operating cash flows and not just the accounting result inflated by non-recurring items.
Despite these spectacular profitability and liquidity figures, LS Invest AG's share price has behaved with a prudence that clashes with the buoyant balance sheet. Yes, it has risen 9,40% in the last six months and 6,67% so far this year, and even 21,90% in one year according to the sector comparison table, which is not insignificant. But its capitalization of 296 million euros places it as a minor player in a sector dominated by giants.
The 99,69% of its float could be an anomaly in itself; almost all of its shares are available for trading, which could imply greater liquidity, but also greater volatility. Management, with Santiago de Armas Fariña as chairman since 2005 and Hans Vieregge as director since 1994, brings a patina of experience, but not always stability. Ultimately, LS Invest AG presents an intriguing case. A dream 2023 in the numbers, driven by "other income" that masks a more moderate improvement in core business. Is this the beginning of a golden age based on one-off divestments or the reflection of an accounting adjustment in an exceptional year to spruce things up? As always in this game, the devil, or the blessing, will be in the details that have yet to be revealed.
