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SOL MELIA INVESTMENT CASE
Bright and Breezy!
Joao Almeida
Marta Calvário
Hugo Fontinha
David Jacques
UC3M Equity Research
1st May 2008 New York
Sol MeliaCompany Description
• Major international chain in the hotel industry
• Ranking 2nd in Europe and 1st in Spain.
• Operates Resorts , City Hotels and Time‐Sharing
• Hotel business represents 80% of SOL’s EBITDA
Business Portfolio
Time‐SharingSMVC
Hotel BrandsAsset
Rotation
LuxurySegment Upper
SegmentMidscaleSegment
• Has an active Asset Rotation Plan
• Manages around 80,000 rooms
• Present in more than 30 countries
• Remarkable presence in Spain and LatAm
Overview
OVERVIEW
Economy & Hotel Sector Corporate Developments
We think SOL faces challenging times and believe it has compelling qualities to withstand a slowdown in the hotel business cycle.
Business by Business
BUSINESS BY BUSINESS
BUSINESS BY BUSINESS
EUROPE
BUSINESS BY BUSINESS
34.8%EBITDA08E
22.8% EBITDA08E
BUSINESS BY BUSINESS
AMERICAS
25.0% EBITDA08E
11.7% EBITDA08E
34.8%EBITDA08E
22.8% EBITDA08E
BUSINESS BY BUSINESS
5.8% EBITDA08E
Investment Case
INVESTMENT CASE
New Organizational Model
Caribbean Prospects
Spain as top tourism destination
Management’s Commitment
Time‐Sharing
Trading at attractive multiples
Shareholding Structure
Condo Hotels
Investment Positives
Cyclical Industry
Economic Slowdown
Exposure to Spain
Real Estate
Credit Squeeze
USD depreciation
Execution & Acquisition Risks
Leveraging Risk
Investment Negatives
Valuation & Recommendation
VALUATION & RECOMMENDATION
Valuation
Why not NNAV?
Our approach
YE08 Price Target: € 14.00
Recommendation
Industry Average
SOL
9.1x
6.9x
16.2x
10.3x
EV/EBITDA 08
P/E 08
BUYClosing Price 25‐04‐2008
Q&A
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