Orbis Supervisory Board approved changes to the company’s strategy for the years 2006-2009, according to the ‘Parkiet’ daily, citing Orbis spokesperson. Orbis now targets 55% of the revenues to be generated from economy segment by 2009, instead of 50% forecasted earlier. Orbis would put more emphasis in economy hotels segment, increasing the number of 2-star Ibis hotels to 20 by 2009, instead of 17 planned earlier. On the other hand number of 3-star Mercure hotels would be cut compared with earlier plans. Importantly, Orbis decided to cease rebuilding its old ‘Orbis Hotels’ outlets into new Accor branded hotels. Instead, old hotels would be demolished, and the new ones would be constructed from the scratch. On top of that Orbis would dispose of 10 locations, which do not fit into its hotel portfolio.
We view the modified strategy as the step in right direction, as it steps-up investment in the most prospective segment, while pulling out of the segment where competition is too fierce. Apart from that it opens the way for realising the hidden value of its real property portfolio, by continued asset disposals. Nonetheless, until we hear more news on real property portfolio valuation (expected to be released this Friday, May 26), we reiterate our Sell rating for the stock.