Our opinion on the current state of SSU(SSU)

Southern Sun Hotels, previously known as Tsogo Sun Hotels, is a prominent player in the gaming, hotel, and entertainment industry in South Africa. The company strategically separated its gaming and hotel operations into distinct entities, aiming to unlock shareholder value and enhance focus within each business unit.

Economic Context and Business Adaptation:
The economic stabilization efforts by President Ramaphosa, particularly post-pandemic, are anticipated to bolster business and consumer confidence gradually. Southern Sun Hotels has capitalized on these improving conditions, especially with its investment in limited payout machines (LPM) and electronic bingo terminals (EBT), which are predominantly located in restaurants and bars. These smaller-scale gambling outlets have shown profitability, although they were affected by COVID-19 related disruptions.

Financial Performance Overview:
For the six-month period ending 30th September 2023, Southern Sun Hotels reported an occupancy rate of 56.3% and a 21% decline in headline earnings per share (HEPS). Despite this decline, the company's income rose by 34%, and it executed share buy-backs worth R389 million. The adjusted headline profit for the period was R255 million, a substantial improvement from R17 million in the previous year. This notable recovery in profits was largely driven by robust trading in the Western Cape, buoyed by major events like the Netball World Cup held at the Cape Town International Convention Centre.

Future Outlook and Trading Statement:
Looking ahead, Southern Sun Hotels provided a positive outlook in its trading statement for the year ending 31st March 2024, projecting an increase in HEPS of between 5% and 9%. The company attributes this optimistic forecast to the effective maintenance of cost efficiencies realized during the comprehensive restructuring throughout the COVID-19 period. Additionally, the significant exposure of its owned hotel portfolio to the Western Cape, particularly Cape Town, has been beneficial. The region has enjoyed a strong year marked by a resurgence in tourism, business travel, and events.

Stock Performance and Investment Considerations:
The stock performance of Southern Sun Hotels reflects a significant recovery since the onset of the COVID-19 pandemic. Described as "oversold" during the pandemic, the company's shares exhibited an "island formation" in trading patterns, suggesting a potential reversal in trends. Following a decisive upside break through the downward trendline on 21st March 2021 at 175c per share, the stock has risen sharply, reaching current levels around 555c. This rapid appreciation indicates robust investor confidence and a positive market reception to the company's recovery strategies and financial performance.

Conclusion:
Southern Sun Hotels appears well-positioned to benefit from the ongoing recovery in South Africa's economic landscape, particularly in the hospitality and gaming sectors. The company's strategic focus on operational efficiency and its strong foothold in a region experiencing significant travel and event-driven activities contribute to its positive outlook. Investors considering this stock should continue to monitor broader economic indicators, tourism trends, and the company’s execution of strategic initiatives, as these factors will play critical roles in sustaining its growth trajectory.