Ann: CEO Address to Shareholders, page-5

Only Alf could get away with posting a “CEO’s Address” that looks like a Bugs Bunny cartoon.

Finally, some share price action! It has long seemed to me that the financial metrics suggest SRV should be trading at around $4.50-$5.00.

Alf did highlight one headwind, that current vacancies in commercial property is resulting in some landlords moving to fill those spaces with shared workspaces. But those offerings won’t be anything like SRV’s in terms of quality and service provision. So many fall for the trap of saying “there’s a low barrier of entry to SRV’s business”. I think that’s quite wrong. There IS a low barrier to serviced accommodation, granted, but it’s NOT a low barrier to provide a service level of the quality SRV is offering, worldwide. SRV will always be able to differentiate itself as an upmarket provider, accessing a somewhat different market to what the “we have some unused space, let’s offer it as shared accommodation” landlords are aiming at.

I guess the market was impressed with the commitment to actually INCREASE the dividend a little this year. It was already yielding 8%! The company enjoys the prospect of steady incremental growth (a few new sites are being added each year), a forecast in free cash flow increasing from $60 million to $70 million per annum (less than half of which is being paid out in dividends), absolutely no debt AND (astonishing to relate) a cash pile of over $100 million. For all this to equate to a market cap of only around $300 million has never made sense to me, and this is only partly addressed by the rise in the share price witnessed today.