Orbis: Announced changes to its strategy

Orbis has revealed modifications to its strategic plan on modernising and expanding its hotels chain on Friday, after the trading close. Orbis announced modifications to its plans in several key areas i) its has cut its EBITDA guidance for the next 5 years due to later dates for new hotels openings, on the back of red tape (by 9% to PLN 230m for 2007, by 5% to PLN 285m for 2008, by 8% to PLN 328 for 2009 and by 6% to PLN 361m for 2010) ii) its has raised the targeted number of new hotels from 29 by 2011 to 39 by 2012 iii) increased capex on the back of rising construction materials costs from PLN 863 m to OLN 1 421m iv) announced bigger pool of assets for disposal in order to finance higher capex, up by 77% to PLN 412m.

Our view: We would expect a negative market reaction on the back of cut in earnings guidance. This would be mitigated to some extent by higher gains on asset disposals. Nevertheless, we reiterate our Sell rating for the stock.