MELIà HOTELS: 1Q’20 RESULTS, CHANGE OF RECOMMENDATION TO SELL & T.P. CUT (ANÃLISIS BANCO SABADELL)
1Q'20 vs. 1Q'19 ResultsSales: € 293.0 M (-25.4% vs. -24.4% BS(e) and -26.1% consensus);
EBITDA: € 14.1 M (-84.9% vs. -70.8% BS(e) and -73.5% consensus);
Net Profit: € -79.9 M (€ 11.5 M in 1Q'19 vs. € -37.2 M BS(e) and € -45.5 M consensus);
Results came in worse than expected on the operating level and Net Profit. The worse performance in EBITDA is explained by costs, which fell less than expected, and by a € 10 M provision for possible client non-payments. On the bottom line of the P&L statement, increased amortisations of rights of use (linked to rents) and negative differences due to FX explain the strong differences vs the estimated Net Profit. As for NFD (excl. IFRS), it increased sharply to € 854 M (€+271 M vs. € 593 M as of YE2019).
Given the low visibility, MEL did not unveil any guidance, although it outlines that April and May will be the hardest months in terms of revenues with almost all of its hotels closed. After these weak results and the lack of visibility we cut our estimates significantly (-40% in 2020/22e; see more details below) in our scenario of V-shaped recovery (2 quarters of deep recession followed by moderate recovery in 3Q, strong recovery in 4Q and very strong recovery next year, with a momentum that could even last until the second year), we cut our T.P. to € 4.00/sh. (-55% vs. previously), which yields an upside of +4%. In our negative scenario of U-shaped recovery (two quarters of deep recession with modest growth in 3Q and 4Q and strong recovery the next two years; recovery in 18-24 months), the cut would be somewhat more significant in 2020, where we might see negative EBITDA levels, and would be much worse in the long-term. Bearing this in mind, in addition to the fact that since February highs, when the impact from Covid-19 began to be felt, the stock has slid by -54% (-20% vs. Ibex), but has rallied by +53% from lows (whereas other stocks linked to the tourism sector have hardly rallied or are even hitting new lows), we change our recommendation to SELL.
Melia Hotels International is the parent company of a group engaged in the acquisition, management and operation of hotels. Co. operates its hotel network in Germany, Argentina, Brazil, Bulgaria, Cabo Verde, Chile, China, Costa Rica, Croatia, Cuba, Egypt, Spain, United States, France, Greece, Netherlands, Indonesia, Italy, Luxembourg, Malaysia, Mexico, Panama, Peru, Portugal, Puerto Rico, United Kingdom, Dominican Republic, Singapore, Switzerland, Tunisia, Uruguay, Venezuela and Vietnam under the followings brandnames: Paradisus Resorts®, Melia Hotels & Resorts®, TRYP Hoteles® and Sol Hotels & Resorts®.
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