Emma Villas

As we have mentioned since we added it to the Portfolio in December – approximately 3% of it – Emma Villas is an investment that closely resembles a Venture Capital investment. It has a very small capitalization and is practically illiquid, which causes very sharp movements in its price. Our time horizon for Emma Villas is 4-5 years, and we act accordingly, paying less attention to the chart and not trying to understand its weekly movements (beyond large volume increases) and focusing on the three things we think will drive its revaluation over this period:

1. Growth capacity (the main KPI is the increase in Villas under management)
2. Operational efficiency (Weeks reserved per year, ratio of weeks per villa and average price per week, evolution of contract types…)
3. Financial robustness (Maintaining the gross margin around 40%, acceptable SG&A expenses, and adequate resource management – It is not the easiest balance sheet to understand since they report twice a year and the first report includes all the advances of the second half of the year’s reservations -)

In this update, we want to discuss the movements of this first half of 1H24, which include:

• FY23 results
• Increase in the number of Villas, M&A & 2024 bookings YTD
• Launch of Chiara Travels (Nov-23)
• New initiatives launched in 1H24
• Quick valuation & our thoughts/conclusion

FY23 Results

• Sales increased by 14.4% to €32.2MM.
• AEBITDA increased to €3.9MM (from €2.9MM). However, it is important to consider €2MM in IPO expenses (EBITDA €1.9MM).
• The total number of reserved weeks rose from 7,390 (FY22) to 7,633, but the average occupancy fell from 15 to 14.1 weeks.
• The number of managed villas increased from 493 to 543 (as of the end of May 2024, there are 636).
• €3.2MM cash (+77% vs FY22)

In general, quite good results show significant growth from 2022, although the drop in average occupancy is notable. We believe this is largely explained by the increase in managed villas, as those added to the portfolio typically:

• Are acquired: almost always with an average occupancy several points below the 15 weeks per year of Emma Villas, so until marketing activity is done and they are repositioned, this KPI decreases.
• New agreements with owners (they count towards the calculation of annual average weeks, but there is a ramp-up during which the first months have fewer reservations than under normal conditions).