Valamar Riviera 2Q 20 - Tax incentives boosted bottom line

2Q 20 wrap-up: It seems that we were overly pessimistic regarding companys top-line as Valamars consolidated sales revenue, in the amount of HRK 68 mn, exceeded RCBe by a double-digit number. The rationale is stronger than expected number of overnights, as the reported yoy decline in ADR surprised us negatively. The company highlighted that the latter is mainly due to the closure of hotel properties that carry a higher ADR compared to camping resorts. Namely, the Group started opening its camping resorts from May 22, followed by a gradual resumption of hotels and resorts business operations since June. The strong double-digit yoy decline in ADR during the 1H 20 is no exception from the reported results of its local peers. Although we were hoping for a positive EBITDA, it remained in negative territory in 2Q 20. One of the reasons for the deviation from our estimate is a higher than expected number of employees, which consequently led to higher staff costs. Further down the P&L we were surprised by the positive effect on the bottom line from tax incentives and thus, at the consolidated level the net loss a.m. came in significantly lower than expected.