Accor AC announced today the firing of CEO Denis Hennequin, due to a disagreement between Hennequin and the board of directors on the pace of implementation of the company’s “Asset Right” strategy of selling owned hotels and converting owned hotels to management and franchise contracts.
On an interim basis, Yann Caillère, previously president and chief operating officer, will serve as CEO. We view the firing of Hennequin as a positive, as we think it will accelerate the sale of owned hotels, which we expect to be a major catalyst for the stock the next several years. We expect the company’s Asset Right strategy to enable the company to significantly improve margins and returns on invested capital, lower capital expenditure requirements, and reduce cyclicality for the company’s results.
The management shakeup did not cause us to change our narrow economic moat rating or are fair value estimate of EUR 38 per share, but does provide an upward bias to our current stewardship rating of standard. We continue to view Accor as undervalued, with the stock trading at a 34% discount to our fair value estimate and a current-year enterprise value/EBITDA multiple of 8.4 times (compared with an average of nearly 12 times for other global hotel operators we cover).
While we view the stock as undervalued, we continue to think the stock may trade lower in the near term, given our expectation of a continuation of increased unemployment in the eurozone, and we would wait for a more attractive entry point of below EUR 23 (a 40% discount to our fair value estimate).
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