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The fortune of the Escarrer (Meliá) sinks in 500 million … and the crisis goes on for a long time



Bad times are running for Escarrer family. The Mallorcan hotel saga is experiencing one of the most difficult moments in its history due to the coronavirus pandemic, which has sunk the stock market value of its chain, Meliá Hotels International.

Despite the rebound on Monday, Meliá shares are trading at levels of 3.72 euros, far from its annual maximum of 8.40 euros marked before the crisis erupted. A full-blown crash of the 56% for a company that has seen in just a few weeks how its business model has been blown up.

The Escarrer control a 47% of the capital of Meliá. It is a portfolio of almost 108 million shares, with a current market value of 401 million euros. An important figure, but well below the 906 million in which it was valued just three months ago. A fall from 500 million which shows the severity of the crisis also with great fortunes.

And although Meliá is a solid company, which has a large portfolio of real estate assets, the main problem is the hard and long 'journey through the desert' that the tourism industry may face in the coming years.

Proof of this are the negative forecasts for Melía recently published by analysts at Bankinter, than they have lowered their recommendation on value to sell from hold, with a target price of 3.47 euros (after a 58% cut).

"The hotel sector is one of the most affected by the Covid-19. The containment measures on the sector will be the last to be lifted and the reopening will be progressive and with reduced capacity. We estimate an average occupancy in Meliá hotels of 30% in 2020 (vs. 71% in 2019), which implies a fall in income of 60%, net losses of 361 million and cash outflow of 672 million in 2020"These experts affirm.

In the first trimester, Meliá lost 80 million euros because the coronavirus caused the closure of most of its hotels. Revenues fell by 25% to 293 million euros, "affected by the successive closure of hotels throughout the month of March." Meliá confirmed that, of its 326 hotels, only 53 remain open.

And this Monday, she was forced to announce the cancellation of your dividend and announced the resignation of a historical like Sebastián Escarrer Jaume. It also confirmed the "definitive suspension" of its share buyback program, all to "strengthen its solvency and liquidity."

"The level of uncertainty is very high from 2021. A large part of the doubts are focused on the impact on employment and the possibility of having a vaccine against Covid-19, "says Bankinter.

"Our preliminary estimate is a occupancy recovery to 55% in 2021, although with net losses of 44 million. The return to profits would occur in 2022. Is dividend payment expected for years to come. We do not rule out additional liquidity needs, "adds the entity.

According to his calculations, Meliá had a liquidity of 647 million as of March 31, which they consider "enough for the next 12 months"And they emphasize that" with the current lack of visibility, we cannot rule out that Meliá has additional liquidity needs in 2021"

Thus, the Escarrer family, with its vice president and chief executive officer, Gabriel Escarrer Jaume, faces one of the most uncertain stages in its history. The pandemic has put the tourism sector in check and threatens one of the main engines of the Spanish economy.

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