Orbis CEO Mr. Savoye said that the company would open 4 new one-star Etap hotels and start building 3 new two-star Ibis hotels in 2007, stepping up investment outlays from PLN 200m in 2006 to PLN 300m in 2007. It would also complete refurbishing of four-star Grand hotel in Warsaw and start building a Novotel in Gdynia. The CEO reiterated plans to dispose of 2 or 3 hotel-sites in 2007. He added that operating results of the hotels operations are improving and the outlook for 4Q06 and 1Q07 financial results is promising.
Our view: We do not find anything particularly new in the CEO statement. We note that the increase in the number of Etap openings in 2007 actually comes from a delay in opening the first Etap in Warsaw, originally scheduled for 2006. We have already factored in our valuation the outlook for accelerating investment in economy segment hotels, a gradual improvement in Orbis hotel operations, and more gains on asset disposal in 2007. However, after rising by 135% over the past 12 months and outperforming by 102% WIG index, we view Orbis as overvalued. We reiterate our Sell rating for the stock.