IC Market Espresso 13 Feb 2019

Arena Hospitality Invites Investors to Check on German Portfolio
Arena Hospitality Group, one of the leading Croatian listed tourism companies, invites investors to come see their Berlin-based hotel on March 4th. During the event they will also present the FY 2018 audited results.
Event Details

Date: Monday, March 4th 2019
Time: 9:30 CET (8:30 UK time)
Venue: art’otel berlin mitte, Wallstrasse 70-73, 10179 Berlin, Germany

RSVP: by Friday, 15th February 2019
To check more details and apply, please see the company’s official invite here: LINK

About Arena Hospitality Group

Arena Hospitality is one of the leading Croatian listed tourism companies which owns and operates properties on the Istrian peninsula (town of Pula and surroundings), as well as in Germany and Hungary. It came into investors’ focus in 2017, following a EUR 106m SPO targeted at future investments. The investments are under way but at a somewhat slower pace than anticipated, and the management is currently in the process of revising the projects.

Arena is majority owned by PPHE Group, an established London-based hotel management and real estate company and bearer of the brands Park Plaza and art’otel for Europe. As of 2007, Arena has the exclusive right to use and manage PPHE’s brands in Central Europe, from Germany in the West to Ukraine in the East and the ex-Yugoslavian countries in the South.

Arena’s History in Brief

Most of the Group’s hotels, resorts and campsites in Croatia were built during the 1970s and 1980s. In 1994, following Croatian independence, the Company was privatized, and its shares were listed on the ZSE in 2003.

In 2007, entities affiliated to certain funds managed by Goldman Sachs acquired a controlling interest, but the period was marked by low investments. The relationship with PPHE Group begain in 2008, when PPHE was awarded management contracts and acquired 20% of the Company. Starting 2011, the Group began refurbishing, upgrading and re-opening some of its properties under the Park Plaza brand.

In 2016 PPHE Group acquired the majority stake belonging to Goldman Sachs affiliates. In December that same year PPHE contributed the majority stake in its German and Hungarian operations (known as the Sugarhill Companies) to Arena, making it its Central-European hub.

In 2017 Arena did a EUR 106m SPO on the Zagreb Stock Exchange, with the goal to further refurbish its portfolio and spread further into Central Europe. Up to today there were no new CE acquisitions and the major hotel refurbishments are pending until the projects get revised (there was a surge in construction costs in Croatia). Some investments were made in campsites (adding mobile homes). Lack of significant investments is the reason why the season 2018 didn’t show growth.

wdt_ID HRKm 2014 2015 2016 2017 T12M (Sep18)
1 Revenue 354.167 402.759 435.871 717.200 752.800
2 EBITDAR 98.235 125.712 140.771 250.500 251.900
3 EBITDA 89.332 116.961 132.023 212.900 217.000
4 EBT -10.846 23.732 -137.971 111.500 113.300
5 Net income -12.797 17.939 -114.225 88.082 88.987
6 Debt 364.415 393.007 659.110 920.300 957.064
7 Cash 98.441 147.958 172.327 800.300 888.806
8 Net debt 265.974 245.049 486.783 120.000 68.258
Arena’s Portfolio

Arena’s Croatian portfolio consists of 7 hotels, 4 resorts and 8 campsites, all fully owned by the Group. In addition to using PPHE’s premium brands Park Plaza and art’otel, Arena Hospitality Group uses its own brands Arena Hotels and Apartments and Arena Campsites. Croatian portfolio is characterised by high seasonality (especially in campsites), with most tourist arrivals focused in the June-September period.

Arena works on reducing the seasonality-related risks by putting a focus on city hotels in Central Europe. For the moment they operate 6 hotels in Germany (3 owned, 2 co-owned and 1 leased) and 1 hotel in Budapest (leased). The step into Central Europe also marked the first time Arena used an asset-light strategy, operating part of the portfolio without owning the assets.

Peer Comparison

Comparing the multiples of Croatian tourism companies, we see there is a strong convergence, at least in terms of EV/EBITDA. The companies differ in terms of P/E, but this indicator is in many cases impacted by one-offs (different D&A policies, recognition of tax benefits related to investments etc.).

Actually, the local shares seem to be priced in accordance with international peers’ EV/EBITDA, as one can see in the graphs.

Although EV/EBITDA multiples are similar, they are still ranked in accordance with growth potential. Maistra is leading with 9.5x as the huge CAPEX cycle is expected to result in a high growth. Valamar and Plava Laguna are priced similarly in terms of EV/EBITDA, while Arena Hospitality is traded at a slightly lower multiple as no significant investments have yet been announced (Turisthotel has a somewhat different model, focusing exclusively on campsites).

However, the large cash pile still held in Arena’s balance sheet testifies to the potential (0.3x net debt / EBITDA vs cca 2.5x for Valamar and Maistra). If the management succeeds in picking up the pace of refurbishment and new development, the resulting growth should ensure a drop in trading multiples, well below its peers.

Investments and portfolio growth in CE are obviously a key point in valuing Arena Hospitality Group, and we hope the management will shed more light on these issues during the presentation.

Investments and portfolio growth in CE are obviously a key point in valuing Arena Hospitality Group, and we hope the management will shed more light on these issues during the presentation.

HUP-Zagreb Shares Delisted Today
HUP- Zagreb announced its delisting which will occur today, 13 February 2019.

Following up on Adris filing for squeeze out-of HUP-Zagreb, yesterday, HUP- Zagreb announced its delisting which will occur today, 13 February 2019.

To recap, Adris acquired a 59% stake in HUP-Zagreb through the acquisition of Expertus early in 2018. A mandatory bid followed in which Adris offered HRK 3,969.16 per share and ended owning 94% shares of HUP-Zagreb (slightly above 95% if we take into account the treasury shares). On 10 December 2018 HUP-Zagreb held a shareholders’ assembly where they approved the squeeze-out at HRK 3,446 per share and a dividend of HRK 515 per each HUP-Zagreb share (ex-date was 13 Dec 2018).

Triglav Group Eyes Macedonian Pension Market
Triglav Group applied to manage Compulsory and Voluntary Pension funds in Macedonia.

Zavarovalnica Triglav published a document stating that they have submitted an application to establish a company for the management of compulsory and voluntary pension funds with Macedonia’s Agency for the Supervision of Fully Funded Pension Insurance (MAPAS). The company further states that the purpose of expanding the operations of Triglav Group in the Macedonian pension insurance market is consistent with its strategic guidelines.

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