Arena Hospitality has bucked travel industry despondency with the expectation of a ‘strong’ summer in Croatia, its longstanding profit driver, and confirmation of sustained targeted investment despite market challenges. Indeed, this ‘surge in leisure demand’ is substantiated for June by industry reports of a c 80% year-on-year rise in foreign tourist nights in Istria, where Arena is based. While half the level of 2019, this is no mean feat, given extensive site closures until June, and shows potentially rapid recovery on travel easing. Also in H121, key investments made good progress, notably repositioning the iconic Hotel Brioni in Croatia, opening in Belgrade on the push eastwards and a new mobile check-in app. Robust finances (c 56% bank gearing at June 2021) should allow Arena to capitalise on growth opportunities enhanced by pandemic fallout.
Arena Hospitality |
Eastward Ho!
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Travel & leisure |
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23 August 2021 |
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Arena Hospitality has bucked travel industry despondency with the expectation of a ‘strong’ summer in Croatia, its longstanding profit driver, and confirmation of sustained targeted investment despite market challenges. Indeed, this ‘surge in leisure demand’ is substantiated for June by industry reports of a c 80% year-on-year rise in foreign tourist nights in Istria, where Arena is based. While half the level of 2019, this is no mean feat, given extensive site closures until June, and shows potentially rapid recovery on travel easing. Also in H121, key investments made good progress, notably repositioning the iconic Hotel Brioni in Croatia, opening in Belgrade on the push eastwards and a new mobile check-in app. Robust finances (c 56% bank gearing at June 2021) should allow Arena to capitalise on growth opportunities enhanced by pandemic fallout.
‘Sehnsucht nach dem Süden’: A welcome lure
In the thick of COVID-19 travel restrictions the long-established particular appeal of the south (so-called ‘Sehnsucht nach dem Süden) to those in central Europe continues to be a boon to Arena. While summer 2020 saw access by car to Croatia from key feeder countries boost the popularity of its high-margin campsites (albeit Q320 Croatia EBITDA was down 70% year-on-year), in June 2021 the marked recovery was led, as expected, by tourists from Germany (comfortably the largest market), Slovenia, Austria and eastern Europe, according to the Croatian Bureau of Statistics. Encouragingly, Arena reports continued good bookings since June, backing its confidence in a ‘strong summer’ (64% of 2019 EBITDA ex Q3 Croatia).
Maintained investment focus despite torrid times
This late pick-up apart, Q221 saw only a marginal year-on-year cut in EBITDA loss with COVID-19 restrictions collapsing demand in Germany (hotel occupancy just 8%) and prompting extended closures in Croatia and Budapest. Yet this has not stemmed Arena’s strategic aim to expand in central and eastern Europe (opened in Belgrade in May, with Zagreb in 2022) and complete major asset repositioning projects in Istria, headed by its HRK260m flagship development of Hotel Brioni.
Valuation: Fair but ready to punch above its weight
Given COVID-19 disruption, we base the valuation on 2019 and pre-IFRS 16 numbers. HRK206m EBITDA on HRK800m net debt (June 2021) gives an EV/EBITDA of 11.6x (European peer average 9.4x on a similar basis), reflecting Arena’s international ambitions, boosted by its association with PPHE (ie access to strong branding (Park Plaza) and global distribution (Radisson Hotel Group)).
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Consensus estimates
Source: Refinitiv. Note: *FRS3. |
EDISON QUICKVIEWS ARE NORMALLY ONE OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: Healthcare
Shield Therapeutics (STX) successfully launched its key asset, Accrufer (oral ferric maltol for iron deficiency), in the US market on 1 July, in line with previous guidance. The US commercialisation of Accrufer is key to unlocking value (the US iron market is a huge market at ~10 million patients per year and is the key value driver) and FDA approval in 2019 led to the broadest possible label, which encompasses iron deficiency from any cause. The H121 results reported total revenue of £0.5m entirely from royalties on Feraccru sales from European partner Norgine (versus £8.9m in H120, of which £8.7m related to a milestone payment from ASK Pharm for China rights). We value STX at £631.3m or 293p/share.