Why the Aspen (ASX:APZ) share price is charging higher?

The Aspen share price is surging 4.85% higher today as the company reported solid quarterly results. We take a closer look.

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The Aspen Group Limited (ASX: APZ) share price is pushing higher today after a strong quarterly announcement. The real estate investment trust (REIT) is up 4.85% in afternoon trade, reaching a price of $1.08.

Leisure & entertainment shares

What does Aspen do?

Aspen Group is an ASX-listed property group formed in 2001 which is strategically focused on providing "value for money" accommodation.

Aspen has owned and managed holiday and accommodation parks since 2004. The group currently owns 9 tourist parks across Australia.

Quarterly trading update

Aspen revenue in the first quarter of FY21 increased 8% to $8.79 million despite the impact of COVID-19. The company also saw a major boost in both operating profit and earnings before interest, taxes, depreciation and amortisation (EBITDA) as it cut down on expenses. EBITDA rose 59% to $3.18 million while operating profit soared from $1.72 million to $2.85 million.

All these factors drove 37% growth in underlying earnings per share (EPS) compared to 1Q FY20.

With the holiday season fast approaching, Aspen is pivoting back to the more profitable short-stay business model. Impressively, three of its NSW parks are now almost fully booked for the peak summer period at rates above the previous corresponding period.

Moreover, the company has ongoing insurance claims for lost profits and physical damage due to the bushfires last summer. These are still being negotiated and are not included in the results, which are expected shortly.

What now for the Aspen share price?

The company advised it was in a good position to acquire properties on attractive terms thanks to the recessionary environment. As such, Aspen would continue to seek opportunities to grow its portfolio of affordable accommodation properties through development and acquisition.

However, wages expenses will increase as the REIT will not meet the current Job Keeper requirements for the rest of the year. 

In addition, due to the ongoing impacts of the pandemic , the company was unable to update on profit or distribution guidance for FY21.

Aspen's share price is trading 6.78% lower this year, largely in line with the All Ordinaries Index (ASX: XAO) drop of 6%.

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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