Last Update 14 Apr 26
Fair value Increased 0.37%SHOT: Eco Focused Urban Expansion And New Openings Will Support Steady Outlook
Analysts have nudged their price target for Scandic Hotels Group slightly higher to about SEK 90.17 from SEK 89.83, reflecting updated assumptions for revenue growth, profit margins and a somewhat lower future P/E multiple.
What's in the News
- Scandic opened Norway's first Scandic Go hotel in downtown Oslo, a 96 room property at Grensen 20 that marks the launch of the Scandic Go brand in the country, with further openings planned in Tromsø and Stavanger (Key Developments).
- A new Scandic Go hotel with 152 rooms is planned in central Stavanger, in the Ankerkvartalet complex. Construction is scheduled to start in 2027, with an opening targeted for 2028, broadening the brand's presence in the city (Key Developments).
- Scandic plans its second Scandic Go in Norway in a new building in central Tromsø, with around 170 rooms and an expected opening during 2028, under a long term lease within a mixed use project with Nordlyskvartalet AS (Key Developments).
- Upcoming Scandic Go properties in Oslo, Tromsø and Stavanger are intended to offer an affordable, self service focused concept, with 24 hour menus and practical amenities such as laundry facilities. They are also planned to be certified by the Nordicwan Ecolabel with an emphasis on recycled materials (Key Developments).
Valuation Changes
- Fair Value: Updated slightly higher to SEK 90.17 from SEK 89.83.
- Discount Rate: Kept broadly unchanged at 10.30%.
- Revenue Growth: Assumption set at 13.89%, compared with the previous 13.49%.
- Net Profit Margin: Assumption set at 5.30%, compared with the previous 4.99%.
- Future P/E: Assumption adjusted down to 14.90x from 15.95x.
Key Takeaways
- Strong booking trends and increased occupancy are expected to drive future revenue growth, supported by higher average room rates.
- Strategic initiatives, including digital enhancements and loyalty partnerships, aim to boost customer retention and improve operational efficiency and margins.
- Geopolitical tensions, rate declines, and increased costs in Finland threaten Scandic's revenue stability and profit margins, with uncertain returns on tech investments.
Catalysts
About Scandic Hotels Group- Engages in operation and franchising of hotels in Sweden, Norway, Finland, Denmark, Germany, and Poland.
- Scandic is seeing strong booking trends for the spring and summer seasons, with expectations of increased average room rates and occupancy compared to last year, supporting future revenue growth.
- A new hotel with 214 rooms is planned to open in Berlin in the second half of 2026, part of efforts to grow their hotel portfolio, which is expected to provide a positive impact on future revenue.
- Strategic initiatives such as launching a new website and app to enhance customer experience, and a partnership with SAS enabling loyalty program status matching, are expected to improve customer retention and potentially boost revenue.
- The implementation of the workforce management platform, Quinyx, is anticipated to enhance scheduling efficiency, likely improving operational efficiency and margins.
- Potential efficiency improvements in central functions over time through digitalization and cost control measures could help mitigate inflationary pressures and positively impact net margins.
Scandic Hotels Group Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?
- Analysts are assuming Scandic Hotels Group's revenue will grow by 13.9% annually over the next 3 years.
- Analysts assume that profit margins will increase from 2.8% today to 5.3% in 3 years time.
- Analysts expect earnings to reach SEK 1.7 billion (and earnings per share of SEK 8.11) by about April 2029, up from SEK 625.0 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as SEK2.2 billion.
- In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 14.9x on those 2029 earnings, down from 32.5x today. This future PE is greater than the current PE for the GB Hospitality industry at 12.6x.
- Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 10.3%, as per the Simply Wall St company report.
Risks
What could happen that would invalidate this narrative?- Geopolitical tensions and ongoing uncertainties in the markets could adversely impact future booking trends and revenue stability.
- Scandic's average room rate experiencing slight declines, especially due to adverse price developments in Finland, may pressure overall revenue.
- The increased capacity in Finland, particularly in Vanda, is negatively impacting occupancy rates and potentially compressing hotel room pricing, risking net margins.
- If cost inflation, particularly in labor or specific goods, exceeds the company's ability to increase room rates, this could squeeze profit margins over time.
- The anticipated costs associated with technological investments (e.g., new website, app, workforce management platform) may not yield the expected reduction in distribution costs or increased bookings, which could affect net earnings projections.
Valuation
How have all the factors above been brought together to estimate a fair value?
- The analysts have a consensus price target of SEK90.17 for Scandic Hotels Group based on their expectations of its future earnings growth, profit margins and other risk factors.
- However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK110.0, and the most bearish reporting a price target of just SEK70.0.
- In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be SEK32.9 billion, earnings will come to SEK1.7 billion, and it would be trading on a PE ratio of 14.9x, assuming you use a discount rate of 10.3%.
- Given the current share price of SEK94.45, the analyst price target of SEK90.17 is 4.8% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
