At a press conference held yesterday in Prague, Orco announced that it will open the originally planned MMR, which will used as hotel, with 100 rooms in downtown Moscow in January 2007 while it plans to expand its Prague Riverside hotel within the next 16-18 months in order to attract more business clientele and conferences. Orco also said that its MMR, Pachtuv Palac, was added into the Small luxury hotels network; i.e. part of the MMR will be used as a hotel. The company will announce a new hospitality structure with several weeks.
Our view: the hospitality business has been underperforming and we believe that a revamp of this business line is needed and should provide an upside to this business segment. Based on our personal experience, a visit, we also see an upside from the Suncani Hvar project (portfolio of 9 hotels on the Hvar island) due to a complete lack of quality accommodation in Croatia and in particular on the Hvar island. We reiterate our Buy recommendation.
Separately, a tender for re-building Ostrava’s centre, in which Orco together with Trigranit participates should be decided today. Should Orco win the tender, the project would add EUR6 per share into our valuation.