Arena Hospitality Group: Vacation – all I ever wanted (BUY - initiation of coverage)
We initiate coverage of Arena Hospitality Group with a BUY recommendation and a price target (PT) of HRK 320/share. Thanks to the proceeds of the c.EUR 100m capital increase completed in mid-2017, we believe Arena is well-positioned to weather the hit to European tourism from COVID-19. Additionally, Arena is well-positioned geographically to capture a larger share of the summer tourism spending, we believe. Compared to Italy or Spain, the COVID-19 cases in Croatia have been low and the large majority of guests arrive by personal car, a relative advantage over taking a plane to Greece or Turkey. In our base-case assumptions, where occupancy at Arena’s resorts falls by half in a truncated summer season, we expect the company to post a 2020E loss on the EBITDA line. Nonetheless, it has the cash to continue investing in refurbishments and new room growth, which should boost its average daily rates (ADRs) materially, when we assume that the business fully recovers for the 2022E season.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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