 Good day, fellow investors. Today we're going to discuss a Swedish hotel stock. So I know if you're not from Sweden or not from Europe this will not be interesting but if you are from around the world you will see okay what can I buy in Sweden, what can I buy in Europe and compare that to what you own in your portfolio in the US or Australia or from wherever you might be. So this will be an interesting video as all of them are for everybody in the world but especially Swedish people and European people. So let's see about this Swedish hotel stock called Scandic. This overview was prepared by my intern during the summer David Mostl who did an amazing work researching many companies. So thank you David for this. Let's look at the fundamentals. Scandic hotel groups, so price earnings ratio of 11, price to book 1.29, the forward dividend yield 1.79 not that much but the earnings yield is there and they're reinvesting in growth. They hope to stabilize the past great growth they had and then do a little bit better. What we're going to discuss a little bit the overview the Nordic market, the hotel market, the German market, their lease model, the risks, the growth, the debt, the management, the valuation, the investment thesis, the earnings models and the conclusion. So Scandic Hotels is a hotel chain headquartered in Stockholm, Sweden. It was founded in 1963, then it has been owned by the Hilton Group and then IPOed in 2015 at the market capitalization of 6.9 billion Swedish Kroners. Scandic is the leading hotel company in the Nordic countries. It has the largest, widest hotel network in the Nordic market. There is only one brand the Scandic brand and they are a full-service provider of accommodation, restaurants and conference facilities. So 67% of revenues comes from hotel nights, 15% from meetings and conferences, 18% of food of beverage and they have more than 4,000 corporate agreements. The revenue per available room has been growing stably over the last years, which shows a good business model and they even grew revenue in 2015, which was not such a good year for Norway and Sweden with lower prices of oil. The Nordic market has been growing between 2 and 5% since 2010. The capacity grew about 2%, which resulted in positive revenue per available room for the market. Growth is expected to be stable around 2% for the foreseeable future if there is not a major global shock. Now, very interesting about Scandic is that it has a lease model. So larger chains have limited presence as they favor franchise and management agreements rather than a lease model. This gives Scandic a competitive advantage against larger chains. So they have a variable lease model and it has proven an advantage in the Norwegian Oil Crisis in 2015, where the demand for hotel nights dropped drastically, supply increased and however Scandic managed to maintain positive margins. So the property owner is responsible for maintaining and refurbishing the building and the technical installation and bathrooms, while Scandic is responsible for maintaining and renovation of the furniture, fixtures and equipment. So you can see a very long timeline for lease agreements that will be probably renewed in 2027. Most of the leases are variable with a fixed minimum rent, which means that in case of lower demand, then the variable lease allows Scandic to be still profitable and still have a positive margins no matter the demand on the market. So very, very flexible cost structure that allows sustaining profitability during weaker periods. The biggest risk, of course, the hospitality industry is highly volatile, which Scandic tries to mitigate with the variable lease rates. Further also, as you are in Sweden in Norway, it is very risky from a currency perspective, especially if the Swedish corona goes down in relation to the euro. But it's again a positive if we look from the euro from the US dollar, if those currencies go up. So it's always an if with currencies. Further, the debt isn't that high. So that's not a big deal, let's say, for the company. They have still 15 hotels in the pipeline and they expect to bring 6,000 new rooms by 2021. This should correspond to 11% of their existing portfolio. They recently acquired RESTLE, a hotel operator in Finland, where they now have a market leading position. It was done with a good timing as the Finnish economy was a bit weaker in the last years and is now improving. Let's take a look at the fundamentals. The weak Swedish corona has improved Q2 2018 numbers. So if that persists, then it should be again more demand for their Swedish operations. As said about the debt, the net liability to EBITDA is 2.6, which might seem high, but the total assets are 18 billion on 6 billion on long-term liabilities and of course the 4 billion of current liabilities. So 6 billion, 8 billion, 9, 50% of debt to assets, which is okay and not that high. Now if we look at an earnings model, we always use at my company a 15% discount rate, then if we put that into a model, stable growth, 5% growth, then the present value is at 60 crores. The current stock price is around 90, so it's overvalued. However, if we put a 10% growth rate, then we are closer to the current value. But if we change everything to a discount rate of 10%, then everything looks much, much better. And if the company grows at 10% over the next 10 years, we are undervalued territory. If we look at it from a recession perspective, so let's say there is a recession in 5 years that lowers earnings by 50%, that then recover, then at 15%, the present value is again much lower. But at 10%, the present value is closer to the current stock price. So the investment thesis, the strengths, the market leader, the leasing model gives flexibility, a strong brand in the Nordic countries and go lots of agreements with cooperation for a stable revenue. The weaknesses are always the Swedish Krona. The lease model depends how you look at the opportunities. The Nordic market is getting more heuristic, more Asians visiting, so a very nice area, especially from a natural perspective. And the threats are always Airbnb. And then other hotel chains may adapt to leasing model as they see the Nordic market as an opportunity and then again hit on their weakness if in 2027 their contracts expire. However, if we look at the S&P 500 ratio of 25 and the price or new ratio here of 11, you can see that, okay, there are some cheaper stocks around the world. How cheap it is? Well, I'll leave that up to you. So this was a very interesting analysis. I really wanted to see, okay, we have companies with price or new ratio of 11. It will be volatile depending on the Swedish Krona, depending on a recession hitting the area Europe or Europe in general, which will come eventually. So you might want to really wait for blood in the streets or if you have a well-diversified, fully invested portfolio, you might want to switch something at 20 per PE ratio with something at 10.11 that is still growing and exposed to an interesting market. Thank you for watching. Looking forward to your comments and I'll see you in the next video.