Good start to the financial year despite the challenges
Despite concerns about France, French Revpar for Q1 was up c4% on a LFL basis. NCEE
saw Revpar up 7.2%, MMEA saw Revpar up 3.6%, AsiaPac up 5.2% (despite China
c-5% for HotelInvest) and Americas up 1.3%. HotelInvest revenue was up c5% LFL and
c6% reported while HotelServices saw revenue up c8% LFL and reported growth was
c11%. Furthermore, c7k new rooms were added to the system.
And we expect more to come over summer
Although Accor remains vigilant to demand in Brazil, France and London (due to
currency) the company outlook was constructive at the time of the Q1 results. Recent
industry data from STR and MKG remains supportive with the 28 day moving average
for Europe at c8% while France is now showing YTD growth of c3%. We should next
hear from the company with their Q2 sales update in July (expect trends to continue).
With a strong restructuring story
The group continued to restructure with an additional 10 hotels being restructured (9
leased hotels and 1 owned). Accor intends to accelerate the restructuring (towards 100
hotels) during the course of the year given the guidance at the time of year end results.
Despite concerns that the company may be paying higher multiples to restructure than
a few years ago, financing costs remain low and the company has been able to drive
the margin upwards.
Valuation: Value on 2015E SOTP, raise price target to €57.75 from €52.75
We value using a SOTP methodology, valuing HotelServices on 12.5x (previous 11.5x)
2015E EV/EBITDAR and HotelInvest on 10x (previous 9.5x) 2015E EV/EBITDAR which we
think is at a discount to peers but also reflects recovery. At our price target, Accor
would trade at a 10.6x blended 2015E EV/EBITDAR multiple. We rate the shares Buy.