Research that is free to access for all investors. Companies commission these providers to write research about them.
Brokers who write research on their corporate clients and make it available through our main bundle offering.
Research that is paid for directly by asset managers. Only accessible to institutional investors permissioned for access.
Event in Progress:
View the latest research on other companies in the sector.
5% EBITDA beat driven by strong performance in Spain and better cost evolution OandL REVPAR reached EUR128 in 2Q 25 (+3.6% YoY), mainly driven by growth in Spain (+5.8%) and Europe (+4.7%). EBITDA was up 8% YoY, 4.8% above consensus estimates, with margins at 28.2%, up c.100bps YoY. Melia reported a very positive FCF figure, with EUR67m generated in Q2, driving net debt down to EUR2,208m, below consensus estimates of EUR2,220m. Outlook: more upbeat than peers Q3 is expected to follow similar trends as Q2, with Spain being the top contributor thanks to mid-single digit growth in rates YoY. In contrast, EMEA points to weakening results YoY, impacted by the Euros and the Olympic Games, both held last year. America is showing a recovery thanks to volumes picking up in Mexico (MICE recovering) and better air connectivity in the Dominican Republic. Key takeaways from the call 1) FY25 guidance of mid-single digit REVPAR growth reiterated; new target provided of EBITDA margin expanding 100bps YoY in 2025. 2) CF generation to be around EUR200m excluding dividends and equity investments, supported by the reduction of financial expenses YoY. 3) Melia continues to focus on cost evolution, though the new collective agreement signed in the Balearic Islands has been slightly worse than expected. 4) US demand to EU is strong with volumes up 6-7% YoY. 5) Melia is actively looking for growth opportunities. Outperform reiterated; TP raised to EUR9.7 We raise our EBITDA by 6% on average over 2025-26 on better cost evolution. As a result, our TP is lifted to EUR9.7 (from EUR9.2). We reiterate our positive view on Melia. Our investment case has started to pay off over the last few months thanks to REVPAR growing steadily in Europe, CF generation improving significantly, and investors starting to recognise the attractiveness of Melia''s FCF yield relative to peers. We reiterate our Outperform rating.
Melia Hotels International Melia Hotels International, S.A.
What happened? Melia Hotels has just reported its 2Q'' 25 results. The company is holding a conference call at 9am CET tomorrow (link). BNPP Exane View: Positive set of results thanks to a very decent 3.6% REVPAR growth, a 5% EBITDA beat, declining financing costs and very positive FCF generation EUR67m during the quarter, above consensus expectations. We would expect a positive reaction at tomorrow''s opening. On the not so bright side, we flag the uncertainty around the performance of hotels in the Caribbean and the negative effect of the depreciation of the USD into FY25 estimates, which in our view has not been yet fully reflected into Consensus figures. Highlights are as follow: . Top-line up 5% YoY, with sales at EUR546m, +1.2% above Consensus expectations. OandL REVPAR amounted to EUR128 in 2Q 25 (+3.6% YoY) mainly driven by REVPAR growth in Spain (+5.8%) and Europe (+4.7%). . Geographically, top contributors were Spain (thanks to Easter and ARR c.+6% YoY) and EMEA (thanks to the good performance of France and Italy) while America was the underperforming region with a REVPAR of -3% (impacted by occupancy down 4% and the close of Paradisus Cancun that has been closed for renovation). . EBITDA is up 8% YoY, 4.8% above consensus estimates with margins at 28.2%, almost 100bps up YoY. . Positive cash flow generation of EUR67m during the quarter that drives the total net debt down to EUR2,208m (below consensus estimates of EUR2,220m) and vs the EUR2,275m reported in Q1 25. . Outlook: Q3 is expected to follow the same dynamics seen in Q2, with Spain being the top contributor thanks to mid-single digit growth in rates YoY. In contrast, EMEA points to weakening results YoY impacted by the Euro Cup and the Olympic Games, both held last year. America seems that is performing better thanks to volumes picking up in Mexico and better air connectivity in the Dominica Republic. . Key issues to address at the conference call tomorrow: 1) Last minute sales...
What happened? We held a call with Melia IR ahead of the company''s Q2 25 results scheduled on Wednesday 30th July (market close) and note that there has been no change to full-year guidance. BNPP Exane View: Following the call, we maintain our optimistic view on the stock thanks to the solid performance and outlook of Spanish leisure hotels. However, we also acknowledge some concerns stemming from the performance in the Caribbean, although we view these issues as more temporary. All in all, our estimates indicate that the group will generate an FCF of c. EUR55m in Q2 25. Highlights are as follow: - Spain: Mid-single digit REVPAR growth YoY in Q2, driven by positive ADR evolution, while occupancy levels remained stable at c.75%. Results in Spain were also positively influenced by an increase in available rooms, thanks to the JV deal closed with Banca March, and the timing of Easter week, which fell within Q2. - EMEA: REVPAR growth was relatively flat YoY in Q2. Results in Europe were negatively affected by weak performance in Germany (REVPAR c. -7%) compared to the previous year, due to the impact of the 2024 Euro Cup. Other countries performed reasonably well, with pricing remaining in line YoY and moderate increases in occupancy. - America: Negative REVPAR growth of 2-3% due to the underperformance of the MICE business, currency depreciation (EUR/USD), and the temporary closure of Paradisus Cancun (700 rooms) for renovation. Mexico performed slightly better than hotels in the Dominican Republic and has not been significantly affected by Sargassum. - Outlook: Booking data for 3Q-4Q 2025 remains in positive territory, driven by the strong performance of Spain, which continues to show 6-7% on the book''s growth, EMEA shows moderate gains YoY, while America shows flattish on the books growth YoY and remains impacted by the USD depreciation. - Asset sales: During Q2, Melia Hotels International signed an agreement with Banca March to form a new joint...
EBITDA miss despite REVPAR being up +3.4% in Q1 25 Top-line was up 1.1% YoY, with sales at EUR445m, -3.3% below Consensus expectations. Owned and Leased REVPAR amounted to EUR77.5m in 1Q 25 (+3.6% YoY) mainly driven by higher average rates per room in Spain and better occupancy in EMEA. EBITDA was down 3% YoY and 4% vs Consensus impacted by restructuring costs (c.EUR2m) and slightly higher rental expenses YoY. Net Profit was flat YoY thanks to lower financing expenses recorded during the quarter. FCF has been weak, partly expected given the seasonality of the business, though Net debt step up has been above our expectations increasing EUR39m. While REVPAR outlook has been reiterated, no EBITDA guidance was provided this time Melia''s management has reiterated the REVPAR guidance of mid-single digit for 2025 and the target of signing a minimum of 30 new hotels and opening at least 25 new properties. However, unlike previous years, the company has not given EBITDA guidance for the year due to the uncertain outlook related to tariffs at the time of making the decision (some weeks ago). Although this points to a more pessimistic outlook going forward, the reality is that on the books reservations are up YoY while 2Q trends remains positive except for the impact of the FX in the Caribbean. Outperform reiterated; TP cut to EUR9.2 p.s We have revised downwards our EBITDA by 3% on average between 2025-26 incorporating the impact of the USD depreciation, and the weak results of hotels in CUBA in 1Q 25. As a result, our TP is reduced to EUR9.2 p.s (from EUR9.5 p.s prev.). That said, and despite a weak start to the year, we stick to our positive view on Melia. We expect improving results throughout the year and we continue to flag the discount of Melia vs peers (in a macro context where leisure hotels are a more defensive play), the attractive spread between its ROE and actual P/B and FCF yield of c. 10% on average over the next three years.
Solid quarter with REVPAR growth of 7% YoY Top-line is up 12.8% YoY, with sales at EUR512m, above consensus expectations (+4.5% above VA Consensus), driven by property sales and revenues from managed hotels. Owned and Leased REVPAR amounted to EUR78m in 4Q 23 (+7% YoY), mainly driven by higher average rates per room (+7% YoY), while occupancy remained flat YoY. EBITDA amounted to EUR105m excluding capital gains (+2% YoY and in line with consensus). Margins reached 20.5% in Q4 (-20bps YoY). Net debt reduction above expectations Net Debt stood at EUR2,236m (below the EUR2,243m expected by consensus), implying a decline of EUR83m vs Q3 24 mainly thanks to the operational cash flow generated during the quarter and the sale of two assets in Punta Cana (Paradisus Palma Real Golf and Spa and Zel Punta Cana) for c. USD60m. Key takeaways from the call 1) REVPAR to grow mid-single digit in 2025. 2) Cash Flow generation to significantly improve YoY. 3) Repositioning opportunities exist, mainly in the Caribbean (Paradisus Cancun to represent bulk of growth Capex in 2025, maintenance Capex of c. EUR60-70m). 4) Net unit growth expected at about 4% YoY (c. 4k rooms). Outperform reiterated; TP lifted to EUR9.5 We slightly raise our FY25-26 EPS on lower DandA and financing costs. Additionally, we raise our TP to EUR9.5/sh (from EUR9/sh) due to lower leverage levels than expected for FY24. We stick to our positive view on Melia: trading at a significant discount vs peers, the spread between its ROE implied and actual P/B has never been as wide and it offers an FCF yield of c. 10% on average over the next three years. Additionally, the updated property appraisal (up c.16% vs 2022 valuation) also supports our view that the shares are undervalued. Maintain Outperform.
With the Spanish economy growing faster than peer countries and our Spanish Property companies under coverage well placed in terms of sub-segment exposure, we see a good year ahead for Melia Hotels, Merlin Properties, and Colonial. We look at earnings momentum, risks to consensus, near-term catalysts and valuation and remain Outperform on the stocks with Melia our preferred name. Sub-segment preferences going into 2025: positive on Hotels and Logistics We expect a positive year for the Logistics and Hotels sub-segments, with anticipated LfL growth exceeding inflation and yields compressing. We are more neutral on offices, with prime offices performing well, particularly in Madrid, but we expect secondary offices to deliver no rental growth and yield expansion to persist throughout 2025. In addition, we are less enthusiastic about retail as we expect lower consumer activity levels throughout the year. Up/downside risk to consensus and near-term catalysts We see upside risk to consensus at Melia thanks to yield management and at Merlin due to positive surprises on DC commercialization, while on the downside we flag Colonial''s limited pipeline rental contribution and weaker EBITDA-FFO flowthrough. In terms of catalysts, we see: 1) Melia''s asset rotation aimed at driving growth opportunities, 2) Merlin''s lease of Phase 1 capacity in Bilbao (24MW), and 3) Colonial''s potential sale of its Criteria Resi exposure above book value. Valuation: Deep discounters (Colonial and Melia) vs Growth accumulators (Merlin Properties) Melia currently trades at a c.50% disc. vs EU peers (vs hist. 25%), but we think its profile (high exposure to resorts) and sensitivity to interest rate moves should help the stock to outperform the sub-segment. Colonial and Merlin Properties are trading at wide discounts to their 25e NTA, with Colonial at 52% (vs 25% hist.) and Merlin at 33% (vs. 28% hist). Both companies offer attractive EBITDA yield to debt cost spreads, but Colonial''s is...
MEL MEL COL COL MRL MRL
We revisit the Melia Hotels investment case: with a favourable European outlook, margin stabilization, a healthier balance sheet, and attractive valuation, we upgrade to Outperform (from Neutral) and raise our target price to EUR9/sh (from EUR8.2/sh). With potential ownership changes on the horizon, we see multiple catalysts for upside, making Melia an attractive investment opportunity. Still some room for REVPAR to grow (+4% between 2024-26e) We believe leisure and corporate spending in Europe will continue to show resilience, supported by healthy household saving rates, positive real wage growth and declining interest rates. We are also optimistic about the performance of Spanish hotels thanks to all-time high tourism levels, limited room supply growth and rising regulation against alternative accommodation. Margins no longer under pressure and CF generation boosted by lower financing costs We anticipate stabilization of EBITDA margins at c.25% as the cost base is no longer under pressure from abnormal inflation levels. FY25-26 CF generation will be enhanced by the gradual reduction of financing costs driven by 1) lower debt levels (EUR869m expected by FY24 vs EUR1.3bn in FY23); 2) lower rates (c. 50% of debt being variable); and 3) lower spreads in debt recently refinanced and to be refinanced (-100bps below historical average spread of c.260bp). This positive view in part leads us to be +4%/+11% ahead of consensus EPS estimates in 2025/2026. Melia''s asset-heavy model should outperform in a declining interest rate environment Melia offers an attractive entry point, trading at a 50% discount to peers and 35% discount to historical multiples. Furthermore, the spread between ROE and P/B has never been as wide. Looking ahead to 2025, Melia is likely to benefit from a lower interest rate environment given its defensive leisure-focused hotel business and high sensitivity to rate moves (reflecting higher debt levels and asset-heavy model), and this should...
Top-line growth driven by strong average daily rates (ADRs) in Spain and EMEA Top-line was up 2.6% YoY, with sales at EUR584m, slightly below Consensus expectations (-2.3% below V.A Consensus) driven by a higher level of eliminations on consolidation. Owned and Leased REVPAR amounted to EUR135m in 3Q 23 (+10.7% YoY) mainly driven by higher average rates per room (+10.3% YoY) while occupancy remained almost flat YoY (+0.2pp YoY). Strong EBITDA margin and operating cash flow achieved in Q3 EBITDA amounted to EUR188m (+12.1%YoY and inline with consensus). Margins reached 32.2% in Q3 (+ c. 270bps YoY). Net Debt stood at EUR2,319m (slightly above the EUR2,313m expected by consensus), and it implies a decline of EUR63m vs Q2 24 mainly thanks to the operational cash flow generated during the quarter. Guidance reiterated, limited upside to consensus estimates though Although Melia has reiterated its FY24 EBITDA target of EUR525m, we see limited headroom for consensus to review upwards its current estimates (EUR528m). Although hotels in Europe and Spain continue to benefit from rate increases, Q4 results will be weighed down by the underperformance in American hotels, where bookings have been affected by the US elections, and declining occupancy levels in Mexican hotels, which continue to struggle due to reduced airport capacity. TP raised to EUR8.2/sh - Neutral stance reiterated We slightly decrease our FY24-26 EBITDA estimates by 2% on average while we increase our Net Profit 24e estimate by c.4% on associates'' income. We raise our TP to EUR8.2/sh (from EUR7.8/sh) on higher average peer multiples applied to our FY24 EBITDA estimates. That said, in our view shares already reflect the deleveraging of the company in recent quarters and the good dynamics of hotels in Europe.
REVPAR grew at 11% YoY and Q2 results were in line with consensus... Q2 revenues were broadly flat YoY despite having c.5% fewer leased rooms YoY thanks to an +11% REVPAR growth YoY driven by better occupancy (+270pbs YoY) and higher average rates per room (+6.8% YoY). The positive performance was clearly driven by Spain with REVPAR growth of +16% YoY, followed by EMEA with +8.6% YoY, while REVPAR in the Caribbean only grew by 3.6% YoY. EBITDA amounted to EUR142m (+1.3%YoY and in line with consensus) while margins reached 27.4% in Q2, remaining stable YoY. ...but deleverage was below expectations Q2 24 Net Debt stood at EUR2,382m (vs. EUR2,367m expected by consensus), a decline of EUR248m vs. Q1 24 thanks to the Santander sale transaction (EUR235m cash inflow). Excluding this effect and the negative impact of the repricing of long-term liabilities (EUR40m), Net Debt would have declined by c. EUR70m. FY25 guidance confirmed Melia expects to achieve a low-double-digit REVPAR increase YoY and a leverage ratio below 2.5x ND/EBITDA (pre-IFRS), and has confirmed the FY24 EBITDA target of at least EUR525m. Additionally, the outlook for the summer season remains optimistic, mainly thanks to the expected positive performance of hotels in Europe, which are capitalizing on the Olympic Games and the Euros, while hotels in Spain should continue benefitting from all-time high tourist arrivals. We fine-tune our estimates, no change in rating/TP We slightly increase our FY24-26 EBITDA estimates as we anticipate a better performance from European hotels in Q3. However, as we also revise minority interests upwards, the overall impact on EPS estimates is marginal. Neutral rating reiterated.
Strong start to the year YoY, but very much in line with expectations Q1 sales came in at EUR440m (+11% YoY), very much in line with our expectations (-0.7% vs BNPP Exane estimates). Owned and Leased REVPAR amounted to EUR102m in 1Q 24 (+17% YoY), driven by occupancy rates (+400pbs YoY) and higher prices (+10% YoY). The positive performance was clearly driven by resorts in the Canary Islands (REVPAR +20% YoY) and those in the Caribbean (REVPAR +16% YoY), while operating metrics of urban hotels in EMEA also grew positively at double digits (REVPAR +12.6%). Good margins, but no deleverage in Q1 EBITDA amounted to EUR98m (+25%YoY and in line with BNPP Exane estimates) while margins reached 22.3% in Q1 (+260bps YoY) on lower variable rents due to the transfer of the Equity Inmuebles portfolio and cost measures. Net debt stood at EUR2,630m, which implies an increase of EUR30m due to seasonality and higher financing costs. FY24 guidance upgraded and short-term outlook still compelling Melia''s management upgraded the company''s FY24 EBITDA target by EUR25m to EUR525m and increased the target of room openings by 2.5k to c.7k. Management also reiterated its intention of achieving a leverage ratio (pre IFRS) below 2.5x. Additionally, the short-term outlook remains positive for resorts with on the book data pointing to double-digit growth for the summer season. Estimates and TP upgraded, Neutral recommendation unchanged We lift our EBITDA by 5% on average in FY24-25, driven by higher prices in Spain and America, which leads us to raise our TP to EUR7.8/share (from EUR7.1). However, we stick to our Neutral rating. We see the good start to the year as already priced in (shares are c.+25% YTD). Melia currently trades at 9.2x FY24 EV/EBITDA, in line with historical multiples, and we think VA consensus estimates at EUR519m already factor in the FY24 target, limiting further consensus upgrades.
It''s been a busy start to the year, particularly after publishing our RE outlook for Spanish property companies where we took a more sceptical view on Colonial, became more constructive on Melia Hotels and maintained Merlin Properties as our top pick in the space. In this note, we explain the main debates we''ve had with investors so far, upgrade Colonial to Neutral and assess the potential value creation opportunity if Merlin gives the green light for a capital injection. Deep discount vs growth attractions: the main debate around Colonial and Merlin There are no doubts about the quality of operational performance of both companies'' portfolios. Where we have seen more discrepancies among investors is regarding what will drive shares up this year - NTA discounts vs rental creation through pipeline contribution. More pushback than we expected on our more constructive view on Melia Hotels Likely higher opex than expected and disappointing FCF generation are the main pushbacks, while on the positive side, the strong pricing of leisure hotels and fading doubts on occupancy along with Melia''s high operational leverage could continue supporting the positive momentum of shares. Colonial upgraded to Neutral after -25% performance YTD, new TP of EUR5.2/sh With the stock down 25% YTD, we believe the stock offers limited valuation downside from here. We continue to be sceptical about the company''s internal development angle and we expect some headwinds for the office portfolio in the near term. That said, at a c.50% discount to our forecast trough EPRA NTA and offering a 5.3% dividend yield in 2024, we think a Neutral rating is justified. Merlin remains our top pick: we assess the potential value creation from a capital injection Assuming a EUR1bn equity injection we estimate EUR1,096m of value creation if Merlin were to expand the capacity of its Data Centers by 180MW. With an equity injection at a 20% premium vs current prices, current shareholders would...
With valuations no longer as attractive, it''s a good opportunity to review the outlook for the largest REITS in Spain, Colonial and Merlin Properties, and also take a look at Melia Hotels given its Real Estate asset model. We downgrade Colonial to Underperform on worsening LfL KPIs and limited growth levers, upgrading Melia Hotels to Neutral as we see limited valuation downside from here, and reiterating our Outperform on Merlin Properties, liking its growth angle on Data Centres. It''s all about sub-segment exposure, pipeline contribution, leverage and valuation We set our sub-segment outlook for 2024 (bullish on hotels and logistics, less positive on offices and Shop. Centres). Looking at company-specific earnings growth, leverage and valuation, we see Merlin offering the most attractive risk-return profile, Melia to benefit from pricing dynamics and Colonial''s position not attractive at this point, only ranking well in leverage, thanks to its ability to rotate assets. Colonial: Risk/Reward skewed to the downside - Downgrade to Underperform. A more bearish view on offices and the downside risk we see on rental income means we downgrade FFO estimates by 18% on average for 2024-26. We thus lower our TP to EUR5.4. Melia Hotels: Good operating dynamics and limited valuation downside - Upgrade to Neutral Melia is enjoying all-time high room rates, and much of the margin erosion and financing cost step up is already in the past. Trading at a 30% discount to peers limits valuation downside, though unwillingness to sell assets delays any potential rerating. TP lifted to EUR6.4. Merlin Properties: Betting on Data Centres - Outperform reiterated The traditional business is performing as never before, while the story has an attractive Data Centres growth angle. We expect FFO CAGR of c.10% 2023-26, and the stock price to move closer to NTA as Data Centres start contributing. We raise outer year estimates on higher rental growth from Data Centres and bring...
Melia’s Q3 results came in above the consensus, mainly explained by a further recovery in occupancy and cost efficiencies. While the group’s net debt ended up missing the consensus, the asset disposals currently being discussed should help repair the company’s debt profile in the coming months. Up-to-date booking momentum remains strong, and occupancy is expected to climb further to be back at its pre-crisis level next year. We have upgraded our 2023 EBITDA by 4% but there is no change in our bottom line.
Net income miss on higher than expected financing costs Melia has released its 3Q22 results. Top line figures came in line expectations with Sales at EUR569m (+1.2% above V.A consensus) and EBITDA at EUR168m (-0.4% below V.A consensus). However, EPS came significantly below expectations at EUR53m (-20.3% vs V.A consensus), on higher financial expenses than expected. Good operational performance, but first signs of declining profitability OandL REVPAR amounted to EUR91 in 3Q22 (+1.4% YoY) driven by occupancy rates (+5.6pp YoY) and to a lesser extent price increases (+2.3pp YoY). However, EBITDA margins reached 29.6% in Q3 (-150bps YoY and -90bps vs 3Q19). In line with our expectations, margins have started to erode due to higher personnel expenses, worse sales mix, and inflation impacting on FandB and external supplies. Debt continues to be unsustainable Despite the good operational results, FCF generation has been limited as Melia''s debt stood at EUR2,706m (vs 2,668m of consensus), which only implied a decline of EUR33m. Asset sales continue to be the most logical imminent solution, although in our view, it would require sales above the latest company''s indications to see a material deleverage and avoid the incremental cost of near term refinancing. TP cut to EUR4.9/sh (from 5.6/ prev.) on lower peer multiples and tougher outlook for hotels We continue to be sceptical of Melia''s business short term outlook, foreseeing pressure on rates driven by a tougher macro environment, declining occupancy rates in the Caribbean and worse margins. Thus, although we raise our FY23 EPS to factor in lower DandA and higher income from associates (capital gains from asset sales), we cut our TP to EUR4.9/sh on lower average peer multiples applied to our FY24 EBITDA estimates.
Melia’s H1 results came in slightly above the consensus. Robust booking momentum has been witnessed in all regions except for Cuba and this should extend into the coming summer. The FY EBITDA guidance has been maintained. Therefore, no major changes are expected to our seemingly aligned estimates.
Solid quarter with EBITDA 5% above Consensus It was a positive 2Q, with OandL REVPAR reaching EUR75.8 in Q2 (+15% YoY), driven by +8.7% increase in ADRs and +4.1 percentage points in occupancy. EBITDA stood at EUR141m (in line YoY but +5% of Consensus) with an EBITDA margin of 27.4% (vs 29.8% in Q2 22 and 26% in Q2 19). Despite the positive EBITDA figure, Net Income came in at EUR43m (-30% YoY), driven by higher financing costs (EUR19m paid in Q2 23 vs EUR10m paid last year). FY23 EBITDA target reiterated Melia''s management reiterated the FY23 EBITDA target of EUR475m, and we expect consensus to upgrade figures to close to the company''s target. Although 1H performance indicates that the company is on track to achieve this figure, we see some risk here, given the limited visibility on Q4 and the uncertainty coming from last-minute bookings for H2. Despite the good operational results, debt is not declining Net debt including IFRS increased by EUR3m QoQ to EUR2,793m despite the positive tailwinds (strong pricing/occupancy) during the quarter. Melia continues to see debt reduction as a top priority; however, it has provided limited visibility regarding how deleveraging will come (asset sales strategy) and how the company will deal with near-term refinancing risk. Melia continues to be highly leveraged, with a ND/EBITDA ratio standing at 6x at the end of Q2. We raise our FY23 EPS on better performance in Spain, but Underperform reiterated The Spanish portfolio has performed above expectations. We raise our FY23e EPS by 33% on higher occupancy rates. Our target price rises to EUR5.6/sh (from EUR4.6/sh) on higher forecasts and higher average peer multiples applied to our FY24 estimates. However, we have doubts on Melia''s margin sustainability and FCF generation. We continue to see headwinds: higher labour costs from wage increase and employees/hotel catching up with 2019 levels, lower direct sales and continued FandB and external services inflation,...
The group’s Q1 results were broadly consistent with the market’s expectations. Pricing remains remarkably stronger than in 2019 and the occupancy rate is expected to return to its pre-pandemic level in mid Q2. Meaningful recovery signals have been seen in all operational aspects. We are convinced by Melia’s cautious optimism and will upgrade our estimates.
Q1 23 top line figures in line with consensus, below at the EBITDA level Melia''s 1Q 23 top line figures were very much in line with Consensus with Sales at EUR396m (+1.3% vs Cons) while EBITDA stood at EUR78m (-3.7% vs Cons). Owned and Leased REVPAR amounted to EUR87.1 in Q1 23 (+14% above the EUR76.6 reported Q1 23). Results were positively impacted by the strong performance of the Canary Islands and America (with ADRs 15-20% above 2019 levels and similar occ. rates) while weighed down by the performance of hotels in EMEA that posted soft figures on weak occ. rates. Margin dilution has started to be noticeable As we were expecting, 1Q 23 results show a significant deterioration of the total group''s EBITDA margin that stood at 19.7%, almost 400bps below the 23.7% margin reported in 1Q 19. In our view, this is the result of higher energy and supply costs and due to the increase of labour costs (not only driven by higher salaries reflecting inflation but also due to a higher number of headcount per hotel owned/leased). Negative Net Income impacted by higher financial costs Q1 23 Net Income was negative with a loss of EUR2.8m negatively impacted by higher financial costs incurred during the quarter (EUR16.3m vs 9.6m paid in Q3 22). We highlighted the impact of higher financing costs and the threat of near term refinancing risks in our latest note MELIA HOTELS INTL: The balance sheet stretch. We flagged the significant downside risk to financing costs, not yet discounted by consensus. In addition, we have not seen any deleveraging as Net debt ex-IFRS 16 has increased by EUR63.5m to EUR2,736m (vs 2,710m expected by consensus). Margins suffering, too much debt and demanding consensus. Underperform reaffirmed Despite the strong top line growth seen in recent quarters (thanks to the positive dynamic of ADRs), we believe our bearish view on s/t and m/t margins (higher leasing, external services and labour costs) will continue to play a major role in the...
Given the current situation of the markets, we have dived into Melia''s balance sheet to assess the company''s financial strength in the face of a more bearish macro scenario, involving higher interest rates for longer than expected. We believe Melia faces significant downside risk to finance costs... and these are not discounted yet by consensus. Debt levels keep weighing on our investment case Although Melia is capitalizing on the current positive dynamics of the industry, mainly thanks to the rally seen in ADRs, we continue to see Melia''s balance sheet as stretched. Leverage continues to be high in absolute and relative terms, with over 80% of debt being bank debt and c.55% of debt tied to variable rates (up from 45% since last refinancing). We update our estimates to reflect a more difficult refinancing scenario, lowering our EPS estimates by 8% on average between ''23-''25. The coverage ratio will not improve between 2022-25 Unless we see significant asset disposals (beyond the EUR120m announced by Management for 2023) or a rights issue (which is unlikely given Management''s view on this), Melia''s interest coverage ratio will continue to be low in 2025 (5.1x), and we see limited upward potential for this to improve relative to the change in multiple of the European hotel sector between 2023-25. Near term refinancing needs look tight If we look at near-term refi needs between 2023 and 2024, we believe there is a significant downward risk to financing costs as near-term refinancing needs represent c. 35% of Melia''s total gross debt. Our funding analysis suggests an accumulated shortfall of EUR266m by 2025. We reaffirm our Underperform rating on Melia; New TP of EUR4.6/sh On top of our bearish view on short-term and mid-term margins (higher leasing, external services and labour costs), we believe there is a structural issue with Melia''s debt, and assuming a more bearish interest rate scenario (with higher interest rates for longer), we see a...
Melia’s 2022 results came in above the consensus and the guidance, approaching their 2019 level. It is worth highlighting the remarkably strong and peer-beating pricing, which the company hopes to be able to extend into Q1, but also Easter and the summer holidays. Considering this buoyancy and the improving occupancy, we will raise our 2023-24 forecast.
Results very much in line with estimates Q4 Revenues came at EUR419m (+3% vs consensus), while EBITDA came at EUR90m (-2.2% vs consensus). OandL REVPAR increased to EUR95 (vs EUR80 in 4Q19), driven by the strong rise in rates, which were c. 20% above 2019 levels. Occupancy data is less positive as it remains on average c. 10-13% below 2019 levels. Melia posted an EBITDA margin of 22% (vs 25% in Q4 19). Net debt declined by EUR75m YoY, but leverage remains at c. 4.8x ND/EBITDA pre. IFRS Net debt exc. IFRS declined by EUR75m YoY to EUR2.6bn thanks to the positive cash generation during FY22. Melia continues to see debt reduction as a top priority considering asset disposals, though it now envisages a minimum of 120m in proceeds (vs EUR250m prev.) as the JV partnership in the Caribbean seems not to be panning out as expected. Nonetheless, even if we included asset sales in our model, Melia''s leverage would continue to be relatively high. The ND/EBITDA ratio stood at 4.8x at the end of 2022. FY23 Outlooks remains optimistic, but we have a more bearish view S/t figures remain strong (+20-25% vs 2019 in 1Q 23), and occupancy is also closing the gap with 2019 levels across the portfolio driven by better corporate data. However, we remain concerned around margin sustainability, as we foresee important headwinds for FY23: 1) Higher labour cost from wage increases and employees per hotel catching up with 2019 levels; 2) Declines in direct sales through Melia.com; and 3) Pressure from continued inflation impacting supplies and higher leases and finance costs. Figures updated: Valuation and recommendation unchanged We fine-tune our FY23-25 estimates, raising our EBITDA by 4% on average, driven by higher revenues, though lowering our margins by 35bps on average given the headwinds that we mention. Melia currently trades at 9.9x FY23 EV/EBITDA, slightly above historical multiples and we see consensus estimates very demanding at EUR457m, which factors in a...
After the weak performance of the stock YTD (-20%), we revisit Melia''s investment case. We still see headwinds for 2023 that we believe are not fully priced in, keeping the risk/reward skew to the downside, in our view. We cut our FY23-24 EPS by c.40% on average, and now stand 22% below Consensus, seeing risk of further downgrades. We reiterate our Underperform rating. A rather unconvincing strategy In our view, Melia''s strategy/pipeline growth is not differentiated enough for it to outperform the hotel sector. Despite investments made in the past, Melia''s portfolio remains tilted to mid-upper scale hotels that are more exposed to cyclical swings and that could see their earnings/margins heavily impacted in the event of REVPAR drops. A tougher season ahead for the hotel sector Decreasing household saving rates, limited corporate spending recovery and higher airline tickets are our main concerns for the next season. In particular, we are more sceptical about the performance of hotels in EMEA and Spain given Melia''s exposure to corporate travel spending in EMEA and the high sensitivity of Spanish hotels to economic fluctuations. Margins under pressure: limited tools to contain inflation in 2023 and higher financial costs Margins will likely be weighed down by: 1) Favourable electricity hedges rolling off at the end of 2022; 2) Labour contract renegotiations in Spain; 3) Higher level of direct sales. We expect a 310bps EBITDA margin contraction in 2023 (23.4% vs 26.5% in FY19). In addition, we expect higher financial costs (+c.EUR7m vs 2022) as c.40% of Melia''s gross debt is on variable rates. Undemanding valuation... but not attractive either Melia currently trades at 9.6x FY23 EV/EBITDA, very much in line with historical multiples. Its 25% discount vs peers could be seen as an entry point, but has been higher during downturns, and given the macro context we don''t rule out it widening. We note that the size of net debt (2/3 of EV when...
