Bright and Breezy! SOL MELIA INVESTMENT CASE Joao Almeida UC3M Equity Research Marta Calvário Hugo Fontinha 1 st May 2008 New York David Jacques
Sol Melia Company Description • Major international chain in the hotel industry • Has an active Asset Rotation Plan • Ranking 2nd in Europe and 1st in Spain . • Manages around 80,000 rooms • Operates Resorts , City Hotels and Time ‐ Sharing • Present in more than 30 countries • Hotel business represents 80% of SOL’s EBITDA • Remarkable presence in Spain and LatAm Business Portfolio Time ‐ Sharing Asset Hotel Brands SMVC Rotation Luxury Segment Upper Segment Midscale Segment
Overview
OVERVIEW Economy & Hotel Sector Corporate Developments We think SOL faces challenging times and believe it has compelling qualities to withstand a slowdown in the hotel business cycle.
Business by Business
BUSINESS BY BUSINESS
BUSINESS BY BUSINESS EUROPE
BUSINESS BY BUSINESS 34.8% 22.8% EBITDA08E EBITDA08E
BUSINESS BY BUSINESS AMERICAS
BUSINESS BY BUSINESS 34.8% 22.8% 25.0% 11.7% 5.8% EBITDA08E EBITDA08E EBITDA08E EBITDA08E EBITDA08E
Investment Case
INVESTMENT CASE Investment Positives Investment Negatives Cyclical Industry New Organizational Model Economic Slowdown Management’s Commitment Exposure to Spain Shareholding Structure Real Estate Caribbean Prospects Credit Squeeze Spain as top tourism destination Leveraging Risk Time ‐ Sharing Execution & Acquisition Risks Condo Hotels USD depreciation Trading at attractive multiples
Valuation & Recommendation
VALUATION & RECOMMENDATION Valuation Recommendation Why not NNAV? Our approach EV/EBITD P/E 08 A 08 Industry 9.1x 16.2x Average SOL 6.9x 10.3x YE08 Price Target: € 14.00 BUY Closing Price 25 ‐ 04 ‐ 2008
Q&A
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