Hoteles City Tumbles in Stock Market Debut: Mexico City MoverJonathan Levin
Hoteles City Express SAB, Mexico’s third-largest hotel chain, tumbled in its first day of trading after pricing its initial public offering at the bottom of its projected range.
The shares fell 6.4 percent to 22.47 pesos at the close in Mexico City. The benchmark IPC index of 35 Mexican companies slipped 0.5 percent.
Hoteles City raised 2.54 billion pesos ($200 million) in its IPO, or as much as 2.92 billion pesos if underwriters exercise an overallotment option in its entirety, the Mexico City-based company said in a filing today. The price per share was 24 pesos. In earlier filings the company had estimated the shares would fetch as much as 29 pesos.
The price “is evidence that demand wasn’t strong and confirms our view that the offering multiples weren’t attractive,” Jorge Placido, head of fundamentals-based analysis at Vector Casa de Bolsa SA, said in an e-mailed report today.
The sale implied a ratio of enterprise value to earnings before interest, taxes, depreciation and amortization -- or Ebitda -- of 29 times, compared with 23 times for Brazilian hotelier BHG SA-Brazil Hospitality Group and 8.6 times for the IPC index, according to the company’s prospectus and data compiled by Bloomberg.
Hoteles City said in an investor presentation it would use the IPO money to expand and to buy some existing hotels. It more than tripled its hotels to about 71 hotels in the six years through 2012, making it Mexico’s fastest growing lodging chain by net hotel additions, according to an investor presentation. Hoteles City plans to have 83 hotels by the end of 2013, according to the presentation.
The company is already Mexico’s third-largest hotelier, behind InterContinental Hotels Group Plc and Grupo Posadas SAB. It operates under brands like City Suites and City Junior, as well as its namesake hotels.