Research: Consumer
Under comprehensive new management, Société des Bains de Mer (SBM) is building on its continued success (newly reported record EBITDA of c €150m for FY24) by looking to monetise its iconic Monte-Carlo brand in ‘new directions’ of international development and property. The purchase of a proposed luxury hotel in the French Alps (Courchevel), the company’s first such international transaction, and a new partnership with global restaurant group D.ream mark its intention to reach its customers where they travel and reside. While not immediately earnings transformative (the hotel faces long-term renovation and just one restaurant, in Dubai next year, has been announced), these moves suggest an arguably symbolic ‘opening up’ of SBM and are a clear growth driver, enabled by strong finances (net cash + liquid investments €385m + 10% of Banijay, c €375m).
Société des Bains de Mer |
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27 June 2024 |
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Under comprehensive new management, Société des Bains de Mer (SBM) is building on its continued success (newly reported record EBITDA of c €150m for FY24) by looking to monetise its iconic Monte-Carlo brand in ‘new directions’ of international development and property. The purchase of a proposed luxury hotel in the French Alps (Courchevel), the company’s first such international transaction, and a new partnership with global restaurant group D.ream mark its intention to reach its customers where they travel and reside. While not immediately earnings transformative (the hotel faces long-term renovation and just one restaurant, in Dubai next year, has been announced), these moves suggest an arguably symbolic ‘opening up’ of SBM and are a clear growth driver, enabled by strong finances (net cash + liquid investments €385m + 10% of Banijay, c €375m).
Bonne continuation
The reorganisation of SBM since early 2023 has seen a mix of the old and the new, with the appointment of Stéphane Valeri, a prominent Monegasque, as CEO and a fresh management team from major international companies, including Vincent Bouvet as CFO from Sodexo. The acquisition in Courchevel of the Palace des Neiges (78 rooms) is the team’s first significant strategic move, with the destination seen as highly complementary to Monaco in terms of clientele and brands as well as seasonality as a ski resort. No financial details have been disclosed. Renovation to luxury status sees closure until 2026. Management has talked of looking also at Dubai, Miami, Saint-Tropez and French overseas territories for hotel opportunities. Similar destinations are on the cards for SBM’s new restaurant partnership with D.ream, which has more than 80 luxury sites in 16 countries, including Monaco.
FY24 embedded rental earnings power
FY24 saw continued progress by property rental, with operating profit up 9% thanks to maximum occupancy and positive lease indexations, exemplified by the success of the One Monte-Carlo exclusive multi-use real estate project. Rental (commercial and residential) contributed 77% of operating profit, dwarfing gaming, SBM’s calling card (11%). Net cash was €69m and investments in support of strategy €316m.
Valuation: Lacking visibility
The absence of market forecasts and singularity of SBM’s business and assets do not make for easy valuation. FY25e EV/EBITDA of under 14x, assuming continued profit growth, is below that of Hilton and Hyatt with luxury brands (16x), while the significance of rental in Monaco’s tight property market brings earnings resilience.
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Historical financials
Source: Société des Bains de Mer accounts. Note. *Excluding profit from transfer of holding in BetClic to FL Entertainment (now Banijay Group). **Including c €15m dividend income from Banijay. ***To be declared in imminent annual report. ***Including c €375m from 10% holding in Banijay. |
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: Investment Companies
Following a review of Witan Investment Trust’s (WTAN’s) investment management arrangements, the boards of WTAN and Alliance Trust (ATST) have announced a combination of the two companies to create Alliance Witan PLC. Witan’s board unanimously recommended the deal, which ensures the continuation of its active multi-manager approach and a broadly similar investment strategy. With combined net assets of c £5bn, significant liquidity, economies of scale and eligibility for UK 100 index inclusion, Alliance Witan will aim to deliver a real-term return over the long term through a combination of capital growth and a rising dividend. It aspires to be the UK’s leading ‘one-stop shop’ for global equity investment, at the core of retail investors’ portfolios. The combination is expected to be finalised in September or October this year, subject to shareholder approval, and should deliver what the announcement deemed ‘substantial benefits’ for shareholders of WTAN, ATST and the new Alliance Witan trust.