Société des Bains de Mer — Sharing the love

Research: Consumer

Société des Bains de Mer — Sharing the love

Under comprehensive new management, Société des Bains de Mer (SBM) is building on its continued success (newly reported record EBITDA of c €150m for FY24) by looking to monetise its iconic Monte-Carlo brand in ‘new directions’ of international development and property. The purchase of a proposed luxury hotel in the French Alps (Courchevel), the company’s first such international transaction, and a new partnership with global restaurant group D.ream mark its intention to reach its customers where they travel and reside. While not immediately earnings transformative (the hotel faces long-term renovation and just one restaurant, in Dubai next year, has been announced), these moves suggest an arguably symbolic ‘opening up’ of SBM and are a clear growth driver, enabled by strong finances (net cash + liquid investments €385m + 10% of Banijay, c €375m).

Richard Finch

Written by

Richard Finch

Analyst, Consumer

Consumer

Société des Bains de Mer

Sharing the love

Travel and leisure

QuickView

27 June 2024

Price

€100

Market cap

€2,450m

Share price graph

Share details

Code

BAIN

Listing

Euronext Paris

Shares in issue

24.5m

Business description

Monte-Carlo Société des Bains de Mer (SBM) is the leader in luxury tourism in Monaco, where it also has exclusive rights to gaming. Within its iconic Monte-Carlo ‘resort’ operations include four hotels, two casinos, over 30 restaurants, entertainment and long-term commercial and residential property rental.

Bull

Leader in diverse markets of longstanding appeal with iconic assets and new management intent on monetising the Monte-Carlo brand.

Resilience of property rental (77% of FY24 operating profit) with favourable lease indexations.

Strong finances (net cash and liquid investments), facilitating goals of international and property development.

Bear

Economic and geo-political uncertainty and gaming volatility, mitigated by business mix, notably long-term property rental.

Risk of change in gaming regulations or loss of exclusive rights in Monaco, although already exposed to local and international competition.

Lack of share liquidity (small free float, under 20%).

Analysts

Richard Finch

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5700

Under comprehensive new management, Société des Bains de Mer (SBM) is building on its continued success (newly reported record EBITDA of c €150m for FY24) by looking to monetise its iconic Monte-Carlo brand in ‘new directions’ of international development and property. The purchase of a proposed luxury hotel in the French Alps (Courchevel), the company’s first such international transaction, and a new partnership with global restaurant group D.ream mark its intention to reach its customers where they travel and reside. While not immediately earnings transformative (the hotel faces long-term renovation and just one restaurant, in Dubai next year, has been announced), these moves suggest an arguably symbolic ‘opening up’ of SBM and are a clear growth driver, enabled by strong finances (net cash + liquid investments €385m + 10% of Banijay, c €375m).

Bonne continuation

The reorganisation of SBM since early 2023 has seen a mix of the old and the new, with the appointment of Stéphane Valeri, a prominent Monegasque, as CEO and a fresh management team from major international companies, including Vincent Bouvet as CFO from Sodexo. The acquisition in Courchevel of the Palace des Neiges (78 rooms) is the team’s first significant strategic move, with the destination seen as highly complementary to Monaco in terms of clientele and brands as well as seasonality as a ski resort. No financial details have been disclosed. Renovation to luxury status sees closure until 2026. Management has talked of looking also at Dubai, Miami, Saint-Tropez and French overseas territories for hotel opportunities. Similar destinations are on the cards for SBM’s new restaurant partnership with D.ream, which has more than 80 luxury sites in 16 countries, including Monaco.

FY24 embedded rental earnings power

FY24 saw continued progress by property rental, with operating profit up 9% thanks to maximum occupancy and positive lease indexations, exemplified by the success of the One Monte-Carlo exclusive multi-use real estate project. Rental (commercial and residential) contributed 77% of operating profit, dwarfing gaming, SBM’s calling card (11%). Net cash was €69m and investments in support of strategy €316m.

Valuation: Lacking visibility

The absence of market forecasts and singularity of SBM’s business and assets do not make for easy valuation. FY25e EV/EBITDA of under 14x, assuming continued profit growth, is below that of Hilton and Hyatt with luxury brands (16x), while the significance of rental in Monaco’s tight property market brings earnings resilience.

Historical financials

Year
end

Revenue
(€m)

Adjusted EBITDA (€m)

Net income
(€m)

EPS
(€)

DPS
(€)

EV/adjusted
EBITDA (x)

03/23

667.0

145.3

67.0*

2.7*

1.2

12.3****

03/24

704.0

149.6

103.9**

4.2**

***

14.0****

Source: Société des Bains de Mer accounts. Note. *Excluding profit from transfer of holding in BetClic to FL Entertainment (now Banijay Group). **Including c €15m dividend income from Banijay. ***To be declared in imminent annual report. ***Including c €375m from 10% holding in Banijay.

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This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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London │ New York │ Frankfurt

20 Red Lion Street

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United Kingdom

London │ New York │ Frankfurt

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United Kingdom

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