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Three reasons why Berenberg does not just trust Meliá



At the end of this week, Berenberg lowered his assessment of Meliá from 6.60 euros to 6.10 euros. Although this price is above current trading levels (5.7 euros), and although it has reiterated its advice to 'keep', the truth is that the German firm doubts the hotel chain for a number of reasons:

1. America's hotels are benefiting from exposure to American consumers as it is getting back to normal there, but from Berenberg they recognize that "progress is slow".

2. The recent sale of your assets (at the beginning of the month announced the sale of eight hotels to Bankinter Investment for 203.9 million), although it contributes to boosting the financial flexibility of the company, appears to have been completed "at a significant discount from the 2018 median valuation"these experts say. Meliá has retained a 7.5% stake in the parent company that has purchased the assets and will also maintain a management contract with the eight hotels. As a result, in the second quarter there will be a capital gain at EBITDA level of 62 million euros.

3. The fact that widespread restrictions on international travel continue, both in Meliá's main markets in Europe, as well as in the US and the UK. Berenberg stresses that the recovery in Europe has so far been weaker, with national and local demand making up the largest part of reserves. "The company's exposure to resorts will benefit it once international travel resumes, but visibility on when this happens is still limited", he points out.

All this leads Berenberg to cut his Meliá income forecasts by 2021 by 27%, by 11% by 2022 and by 5% by 2023, fundamentally to reflect that lower recovery in international travel, he says. "Our 2021 revenue is now 62% below the 2019 figure, while our 2022 revenue is 29% below. The changes lead to a 'substantial' decline in EBITDA in 2021, a cut of 32 % in 2022 and 11.5% in 2023 ", they conclude.

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