1

September 20, 2013

HOTELES CITY EXPRESS

Initiating coverage with BUY recommendation and MP 27.0 target price

Stock Performance

We are initiating coverage on Hoteles City Express (“HCity” or “City Express”), Mexico’s

largest hotel chain focused on business travelers, with a BUY recommendation and a 12-

month target price of MP 27.0 for a potential 26% peso return. We like HCITY for the

following reasons:

■ Focus on an attractive segment of the hotel industry.- The hotel industry in Mexico,

especially the segment focused on the business traveler, is highly pulverized as most of the

competing hotels are mom & pops. Professional brands at every day low prices and high

quality propositions promise to capture a high share.

■ Solid growth prospects.– City Express has a proven experience at opening hotels rapidly

and successfully, growing from 5 hotels in 2003 to 71 by the end of 2012, translating into a

34% CAGR for the period. We believe that HCITY will continue to expand at fast rates going

forward.

■ Brand power.- In a short period, City Express has created a powerful brand name which is

one of the most recognized in Mexico. We believe that the brand will become as widely

recognized as OXXO or Bimbo in the future.

■ Management team with a solid track record.– The team has developed more than 8K

rooms during the 2003-2012 period, with high profitability (an estimated 12.3% ROIC on

stabilized owned and co-owned properties). Management was also successful at attracting

sponsorship from well known institutional investors like Morgan Stanley, the World Bank and

WAMEX.

■ Healthy financial structure.– We expect HCity to close the year with a net debt to EBITDA

ratio of only 0.3x as a result of the recent IPO.

■ Attractive valuation.– HCity currently trades at 12.0x EV/EBITDA for 2014, representing a

discount of 7% against its international peers.

■ Our 12-month target price of MP 27.0/ share for City Express is based on a DCF model

which assumes an 8.0% WACC and a 3.0% growth rate in perpetuity. The implied EV/

EBITDA multiples of City Express are 20.3x for 2013 and 14.7x for 2014.

HCity’s main risks are: i) macroeconomic slowdown; ii) insecurity issues; iii) natural disasters;

iv) more competition from larger international brands; v) inability to execute the expansion plan;

and/or vi) significant increase in debt levels.

BUY

Actinver Corporate Headquarters 1200 Guillermo González Camarena Floor 5, Santa Fé México, D.F. 01210

Toe Matsumura Real Estate tmatsumura@actinver.com.mx +52 (55) 1103 6600 x1841

Ramon Ortiz rortiz@actinver.com.mx +52 (55) 1103 6600 x1835

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HCITY* IPC

Eduardo Fonseca Fons Food & Real Estate efonseca@actinver.com.mx +52 (55) 1103 6600 x 4122

Ticker HCITY*

Target Price P$ 27.00

Last Price P$ 21.45

Expected Return 25.9%

2013E Div. Yield 0.0%

Total Return 25.9%

Float 38.0%

3 Month Avg. Value (Mn) P$ 13.7

Mkt. Cap (Mn) P$ 5,901

LTM Price Range P$ 21.93 - 23.90

MULTIPLES 2011 2012 2013E 2014E 2015E

EV / EBITDA 36.5x 26.4x 16.2x 12.0x 9.6x

P/E NM NM 51.3x 33.5x 22.1x

Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%

P/BV 1.9x 1.8x 1.2x 1.1x 1.1x

OPERATING INDICATORS 2011 2012 2013E 2014E 2015E

Sales 715 932 1,155 1,552 1,949

Operating Profit 68 123 184 292 412

EBITDA 176 267 371 550 732

Net Profit 21 24 115 176 268

EPS NM NM 0.42$ 0.64$ 0.97$

Net Debt 534 1,157 125 670 1,106

Sales Growth NA 30% 24% 34% 26%

EBITDA Growth NA 52% 39% 48% 33%

EBITDA Margin 24.6% 28.7% 32.1% 35.4% 37.6%

Net Debt / EBITDA 3.0x 4.3x 0.3x 1.2x 1.5x

Source: Actinver

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LEADING POSITION IN THE MEXICAN HOTEL INDUSTRY

City Express is a leading hotel chain in the select and limited Service segment in Mexico.

As of June 30 2013, the company had 73 hotels in operation (72 in Mexico, 1 in Costa Rica),

equivalent to 8,360 rooms. In 1H13, the company opened 2 hotels: City Express Chetumal with

109 rooms and City Express Santa Fe with 159 rooms. By the end of 2013 we expect the com-

pany to operate 83 hotels in Mexico plus the one in Costa Rica with 9.5K rooms. We anticipate

another 27 additional hotels by the end of 2014 (26 in Mexico).

HCity has three brands in the limited service economy segment, City Express, City Suites

and City Junior, as we can see in the following table. The company has fully integrated own-

ership, operations, franchising and development platforms.

At the end of 2012, City Express had presence in 26 of the 32 states in Mexico. We expect

the company to expand presence to 28 states by the end of 2013. In Mexico, HCity currently

has 20 development projects in areas offering an attractive economic growth potential going

forward such as the Bajío region (Central Mexico), the border with the US, the Atlantic and the

Pacific. In addition, it has plans to expand into Colombia and Chile, where it has already secured

10 sites.

Hotels in Operation Land acquired for future projects

Chile

Peru

Colombia

Costa Rica

City Express Presence in Central and

South America

Border Corridor

Agricultural Corridor Petrochemichal, Industrial and Export

corridor of the Gulf of Mexico

Industrial, Commercial and Export

corridors of NAFTA

City Express City Suites City Junior 2013 Openings Business Corridor

Legend

City Express Presence in Mexico

City Express City Suites City Junior

Description

Flagship brand targeting

the value conscious

business traveler

Larger rooms aimed

at extended stay

business travelers

Basic hotel services

aimed at the domestic

budget business

traveler

# Hotels 58 4 9

# Rooms 6,808 282 1,002

Estimated Capex per

room 2013 (ex Mexico

City and Int’l)

USD 47,700 USD 87,000 USD 39,900

Average Daily Rate USD 55 – USD 65 USD 80 – USD 90 USD 40 – USD 45

Average Room Size 23 m2 (248 sq. ft) 30 m

2 (323 sq. ft) 17 m

2 (183 sq. ft)

Year Launched 2003 2004 2008

Source: Company Filings. Figures as of the close of 2012.

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City Express bases its growth strategy in the following strategic pillars:

■ Hotel development capabilities: The hotels’ tightly standardized design and develop-ment processes produce low and predictable construction costs per room. The develop-ment process has been designed to emulate a manufacturing assembly line. HCity uses highly qualified third-party contractors selected through transparent bidding processes, which decrease the risk of cost overruns. Properties can be developed in a matter of months from ground breaking to hotel opening. In addition, the stream of construction projects allows for scale efficiencies in construction contracting and purchases of furnish-ings. This type of construction process allows the company to increase scale in a very flexible manner. In addition, the company is compliant with international environmental standards, which contributes to cost reductions of 24% to 33% in energy and water.

■ Operating efficiency: HCity’s hotels have operating standards that are maintained throughout the chain, across all areas, which helps keep costs low and margins high.

■ Distribution and franchise expertise: The sales strategy is based on a multi-channeled centralized distribution platform. Reservations can be made through a call center, web-sites of each of their brands, smartphone app, online travel agencies, global distribution systems (GDS), and airline websites. They also have a loyalty program, City Premios. HCity has over 10K corporate agreements, which account for 60% of room nights sold, and airline agreements with Aeromexico, Vivaerobus, Volaris, Interjet and Avianca Taca.

■ A core element is to find the best locations to attract business travelers. Decisions to open hotels in certain locations are based on in-depth marketing research studies they conduct in house (from 2003 to 1Q13, they conducted 135 research studies in Mexico and 26 in other countries).

HCity has a proven experience at opening hotels rapidly and with a fast beak-even point.

The company went from 5 hotels in 2003 to 71 at the end of 2012, representing a 34%

CAGR. Sales and EBITDA increased at an 36% and 43% CAGR respectively during the same

period. We believe that HCITY will continue to expand at fast rates going forward taking ad-

vantage of its vast knowledge in the construction of hotels, its reservation system, its well recog-

nized brand name and its management, which as a combination, ensure a high growth potential

and a fast break-even point.

With respect to the construction process, HCity normally buys strategically located land

in fast growing middle-sized cities after conducting the required feasibility studies. HCity

then auctions the construction to the companies it works with (three of them in Mexico at this

moment) and participates in the supervision of the construction process and in the acquisition of

building materials. Due to its high purchasing power, the company normally obtains significant

New hotel openings from YE-2006 to YE-2012 in Mexico

Source: Actinver, Company Data, Public Filings

Openings for Grupo Real Turismo exclude Quinta Real Hotels

50

26

21

1613

9 8 7

1

0

10

20

30

40

50

60

HCITY Posadas IHG amResorts Hilton Marriott ChoiceHotels

Grupo RealTurismo

Starwood

4

discounts compared to retail prices.

A tightly standardized room design and structured development processes have pro-

duced low and predictable construction costs per room. As a result, average return on in-

vested capital on stabilized owned and co-owned properties was 12.3% in 2012. And, at the

same time, this standardization has created a consistent room experience that follows world

class standards of comfort and safety, and very reduced environmental impact.

Another major competitive advantage of HCity is its internally developed technology plat-

form that supports most of the company’s operations. It connects all the hotels with a cen-

tralized monitoring platform. One of the most remarkable systems is the reservation system,

which generates 30% of occupancy. This enables the company’s hotels to reach the break-even

point in 6 to 12 months, which is a very short period for industry standards. Also, approximately

95% of HCe hotels are above average breakeven occupancy. The company has developed in-

ternet and mobile applications for an easy way to reserve a room. These two channels repre-

sented 10% of all reservations in 2012.

HCity has developed one of the best known brands in the Mexican hotel industry in a very

short-period due to its very attractive name (which makes reference to a fast and comfortable

stay), the standardization that we mentioned before, and its hotels with bright colors such as

pink, orange and yellow. In fact, HCity is one of Mexico’s top brands.

52%

13%

13%

12%

9%

1%

Sales breakdown

Call Center City@cces OTA Websites GDS Airlines

Source: Actinver, Company Data, Public Filings

5

HCity also counts on a solid management team with a proven track record. The team has

developed more than 8K rooms together, with high profitability. The company was incorporated

in 2002 by Luis Barrios and Javier Arce. By 2003, they had opened their first five hotels with a

total of 586 rooms. In 2004 they launched the City Suites Brand in Mexico City. In 2008 they got

funding from Morgan Stanley, and launched the City Junior brand in the city of Toluca. By 2012

they had secured more funding from WMAEX, ALAC & IFC, and had 71 hotels in operation with

8,092 rooms.

■ Luis Barrios, Chairman and CEO. He has more than 25 years of experience in the hotel industry. Before the foundation of City Express, he worked at Grupo Posadas in various positions, such as CFO (1986-1993) and CEO (1994-1999). He also boosted the growth of Posadas, taking it from a mere participant in the local hotel industry to the biggest hotel operator in Latin America in both room and hotel terms. Luis Barrios developed the Fiesta Inn brand, the first hotel chain focused on the business traveler in Mexico. Mr. Barrios has a degree in systems engineering from Universidad Iberoamericana and an MBA, from Texas University.

■ Javier Arce, Chief Devlopment Officer. He has more than 17 years of experience in hotel construction, development and supervision. Along with his team, he has developed more than 16K rooms in his career in Mexico and Latin America. In HCe, he is responsi-ble for the development of hotels, including land sourcing, selection and acquisition, ar-chitectural planning, budgeting, contractor selection and construction supervision. He has a degree in industrial engineering and an MBA, both at Universidad del Valle de México.

■ Roberto Palacios Prieto, CFO. He joined the company in 2006. He has participated in the structuring of different transactions, and capital and debt funding for different hotel developments. Prior to tha, he has worked as COO in Grupo Dupuis and as an invest-ment banker in Goldman Sachs and Protego. He has a degree in business administration by Instituto Tecnológico Autónomo de México and an MBA from the Stanford GSB.

■ Rogelio Avendaño Martínez, COO. He incorporated City Express in 2003 and has more than 20 years of experience in the hotel industry. He worked in as a hotel manager in

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

# Rooms ('000)

Largest Selected and Limited Service Hotel Brands in Mexico

Source: Actinver, Company Data, Public Filings

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Grupo Posadas, InterContinental Hotels Group and in other hotel brands. Rogelio has a business administration degree and different management courses at IPADE and ITESM/IE.

■ Blanca Herrera, Chief Marketing and Franchise Services Officer. She has been in the company since 2002 and has more than 20 years of experience in the tourism industry. Prior to joining HCe, she managed the marketing and marketing research departments at Grupo Posadas. She has a degree in tourism from the Instituto Politecnico Nacional and an MBA from IPADE.

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1

FINANCIAL HIGHLIGHTS AND PROJECTIONS

For the end of 2013 we forecast that HCity will have 84 hotels in operation (of 13 new ho-tels that will open in 2013, 8 are fully owned and the remaining 5 are co-owned, leased or managed) with a total of 9,558 rooms. For, 2014 we expect the company to close the year at 100 hotels with a total of 11,200 rooms. Given that the company will pursue a very aggressive expansion strategy in Mexico, we believe that the number of hotels could potentially reach 128 in 2017 for a total of 14,336 rooms.

In 2012, HCe’s occupancy was 56.8%, ADR was MP 683 and RevPAR was MP 388. Despite the weak macroeconomic performance, we expect the occupancy to reach 58.8% by 4Q13. We believe that the company will continue to raise daily rates above inflation in order to offset the previous year’s lag. This means that the ADR will likely rise 5.5% in 2013 to MP 720, translating into a RevPAR of MP 424.

For 2014 we project an occupancy of 59.5% due to a stronger macroeconomic activity. The company will likely maintain its aggressive pricing strategy leading to a 6.6% increase in the ADR to MP 768. This would result in a RevPAR of MP 457. We anticipate City Express’ operat-ing metrics to continue growing steadily in the following years. By 2017, we estimate occupancy to reach 63.5%, ADR MP 877 and RevPAR MP 557.

Revenues reached MP 932 million in 2012, representing a 34% CAGR from 2004, when City Express only had 10 hotels (1,061 rooms). Based on the operating assumptions men-tioned before, we expect revenue to grow 24% to MP 1.2 billion in 2013 and 34% in 2014 to MP 1.6 billion.

HCity registered a 43% EBITDA CAGR from 2004 to 2012 to MP 311 million. EBITDA margin expanded from 19.6% to 28.0% in the same period. Going forward, we forecast that HCity’s EBITDA margin will expand to 32.1% in 2013 and 35.4% in 2014 due to increased occupancy, increased nightly rates, and improved cost structures as the number of hotels increases.

For 2013 we expect net profit to reach MP 115 million, and MP 176 million for 2014. We also expect capex will be around MP 1.1 billion in 2013 and MP 931 million in 2014. For the next five years we expect negative cash flow, reaching negative MP 774 million in 2013 and negative MP 453 million in 2014. However, as the aggressive expansion phase is finished, and more ho-tels that are now being built start maturing (around 2018), we expect cash flow to be positive.

At the end of 2012, the net debt / EBITDA ratio was 4.3x. We expect this ratio to fall to 0.3x in 2013 as a result of the IPO. However, we anticipate that this ratio will reach 1.5x at the end of 2015 due to high investments.

0

500

1,000

1,500

2,000

2,500

2013E 2014E 2015E

Sales

Source: Company data, Actinver.

0

100

200

300

400

500

600

700

800

2013E 2014E 2015E

EBITDA

Source: Company data, Actinver.

$-

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

2013E 2014E 2015E

EPS

Source: Company data, Actinver.

8

VALUATION AND TARGET PRICE

International Comparables

HCity currently trades at 12.0x EV/EBITDA for 2014, which represents a discount of 7% against international peers.

DCF Model

We are valuing City Express through the DCF methodology for a five year period, consid-ering it as a reasonable measure to estimate the price target based on the profits that the company will generate in the coming years. It is worth noting that our estimates are based on expected earnings generated by the current hotel properties, and openings of 13 hotels in 2013, 16 hotels in 2014 and 15 hotels per year the rest of the period. Therefore a modification in the pipeline of hotel openings could affect our valuation.

Our model considers a terminal growth rate of 3.0%, with a weighted average cost of capi-tal (WACC) of 8.0%, a risk free rate of 4.3% and a beta of 1.0. Taking into consideration this data, our 12-month target price is MP27.0 per share, which implies a EV/EBITDA 2015E of 11.7x.

L12M 2013E 2014E L12M 2013E 2014E

Home inns & hotels China 36.61 24.72 18.20 15.79 8.07 6.76

Accor France 213.81 23.28 19.68 6.52 9.34 8.91

Hotel Leela Venture India n.a. n.a. n.a. 32.31 21.55 20.61

Global premium hotels Singapour 17.24 14.71 12.50 22.04 25.66 19.89

City lodge hotels South Africa 20.14 18.64 16.11 12.79 10.47 9.09

NH hoteles Spain n.a. n.a. n.a. n.a. 14.71 13.64

Millenium & Copthorne UK 15.17 18.76 17.61 13.26 11.22 10.48

Choice hotels USA 21.60 23.02 20.87 16.13 15.68 14.29

Red lion hotels USA n.a. n.a. n.a. 12.91 n.a. n.a.

Average 54.09 20.52 17.50 16.47 14.59 12.96

P / E EV / EBITDA

HOTELES CITY EXPRESS, S.A.B. DE C.V.Discounted Cash Flow Model (2013-2017E)Millions of Pesos 2013E 2014E 2015E 2016E 2017E Perp.

EBIT 184 292 412 515 644 683

Effective Tax rate 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%

Tax Effect On EBIT (37) (58) (82) (103) (129) (137)

NOPLAT 148 234 330 412 515 546

Depreciation 187 258 320 336 352 370

Working Capital Changes (22) (13) (17) (18) (19) (20)

CAPEX (1,086) (931) (881) (899) (944) (200)

FCFE (774) (453) (249) (169) (95) 696

Perpetuity Growth Rate 3.0%

Present Value of Explicit Period (2013-2017E) (1,491)

Perpetuity Value 13,955

Present Value of Perpetuity Value 8,799

Theoretical Firm Value 7,308

Net Debt (83)

Minority Interest 1

Theoretical Market Value 7,389

Number of Shares (Mn) 275

Theoretical Price / Share 26.86$

Current Market Price 21.45$

Potential Return 25.2%

Average Cost of Debt 7.2%

Long Term Tax Rate 30.0%

After-Tax Cost of Debt 5.0%

Cost of Capital 9.4%

Market Risk Premium 5.0%

Risk Free Rate + Country Risk Premium 4.3%

Beta - Adjusted MexBol 1.03

% Total Debt 33%

% Capital 67%

WACC 8.0%

Source: Actinver

9

RISK FACTORS

Listed below are the main risks that could affect our investment thesis and therefore

change our target price and / or recommendation:

■ Economic slowdown. An economic slowdown could directly affect the company’s per-formance, as hotel occupancy and ADR could decrease.

■ Insecurity.– Violence could affect occupancy if social issues arise derived from income inequality or increased criminal activity.

■ Natural disasters.– Hurricanes or tropical storms such as the recent “Manuel” or “Ingrid” hurricanes could affect HCity’s operations in a significant way.

■ More competition from larger international brands. An increase in the number of com-petitors in the same segment, be it from other hotel chains or from FIbras, could affect City Express’ ability to attract business travelers.

■ Inability to find the right locations. There could be unexpected changes that could affect the viability of certain locations, which could affect the execution of City Express’ expansion plan.

■ Significant increase in the debt levels. City Express requires a high level of resources to continue its ambitious expansion plans. Leverage could be an option to continue devel-oping properties, and if It is not disciplined, it could increase risk levels.

10

Managed & Franchised

17

Leased 10

Co-Owned 21

Owned23

Hotel Ownership Type

Source: Company dataNote: Figures as of Dec 31,2012

HCe,S.A.B. de C.V.

Hotel Ownership / Prop Co.

Inmobiliaria Hotelera City

Express

Promotora Hotelera City

Express

JV Costa Rica y ColombiaJV Chile

Hotel Operator & Management / Op Co.

Operadora Hoteles City

Express

Operadora Hoteles City Internacional

100% 72% 100% 100%

COMPANY DESCRIPTION

Hotel ownership types and corporate structure

Hoteles City Express has two main divisions, (1) a real estate division for managing the owner-

ship of hotels and (2) an operating division for hotel operations. Each of the two divisions has

two subsidiaries, one for Mexico and the other for international hotels. This structure brings flexi-

bility to the company for the international expansion and gives them the ability to control all their

hotels.

Hotel Ownership Division

Inmobiliaria Hotelera City Express is the real estate owner. At the end of 2012, it had 23

owned hotels, 21 co-owned hotels, 26 parcels in land reserves and 5 parcels under contract, 10

property lease contracts, and 44 projects in different development stages.

Promotora Hotelera City Express is the investment vehicle for international expansion. It

has a JV in Costa Rica and Colombia with Hospiteum Corporation and another JV in Chile with

the Saieh family. Through its ownership division, HCe holds 72% of this subsidiary.

Hotel Operation & Management Division. This division is the hotel operator and franchisor. As

of 2012, it managed 67 hotels and had 4 hotels in pure franchise. The division has two subsidiar-

ies: (1) Operadora de Hoteles City Express that operates hotels in Mexico and (2) Operadora de

Hoteles City Internacional, which currently operates the hotel in Costa Rica and will operate

other hotels that are opened outside of Mexico.

The company has four ownership types: Owned, co-owned, managed & franchised, and

leased. In the chart at the left, we can see the number of hotels in each ownership type at the

end of 2012.

11

Successful IPO

HCity conducted its Initial Public Offering on the Mexican Stock Exchange last June 13,

2013, issuing a total of 105,637,794 shares at a price of $24.00 each. The company is plan-

ning to use the net proceeds of the primary portion of the offering to continue its growth plans,

expanding the number of new hotels, including the development, implementation, operation and

marketing of future projects in the regions in which Hoteles City operates; and to continue with

the development of the chain brands mainly in Mexico. In addition, Hoteles City will use a portion

of the proceeds from the offering to continue with the selective acquisition of hotels under the co-

investment scheme, as well as the acquisition of third-party hotels in strategic locations.

The secondary part of the offering was sold by private institutional investors and by some

individuals that had already finished their investing cycle. The company has a 38% float.

Efficient Corporate Governance

The board of directors consists of 9 members:

There are four main committees:

Committee Main responsibilities

Planning & Finance

Committee

• Analysis and evaluation of strategy and long term business plan, including financial structure and

organizational resources.

• Evaluate fund raising efforts, new products and international expansion.

• Opine on fund raising efforts, new products and international expansion.

Audit Committee

• Determine appropriateness of financial and tax structures for HCe.

• Opine on financial and tax structure of international expansion.

• Opine on HCe financial reporting, accounting policies, control and IT systems.

• Opine on HCe budgeting process and cash flow management systems.

• Evaluate and recommend the external auditor.

• Ensure independence and efficiency of internal and external audits.

• Evaluate transactions with related parties and identify potential conflict of interest.

Corporate Practice Sub-

Committee

• Develop, recommend and review corporate governance guidelines for HCe and subsidiaries.

• Recommend amendments to the By-laws of HCe and subsidiaries.

• Keep under review all legislative, regulatory and corporate governance developments that may affect

HCe operations and make recommendations to the Board in relation there to.

• Define the compensation policy and performance evaluation for senior management.

• Utilize best practices for market compensation to align interests of shareholders and top management.

• Opine on related party transactions.

Procurement and

Construction Sub-

Committee

• Obtain the best balance among cost, quality and time in the development of new hotels.

• Define and review bidding processes for fairness and to protect the process from conflict of interest.

• Review the analysis and recommendations of management to assign construction and installation

contracts, as well as furniture, fixtures and equipment.

Source: Company Data

Name AgeInitial

appointmentPosition

Luis Eduardo Barrios Sánchez 60 2002 Chairman

Armando J. García Segovia 61 2002 Independent

John Timothy Morris 46 2011 Independent

Juan Luis Elek Klein 69 2002 Independent

Ricardo Maldonado Sosa 66 2002 Independent

Eduardo Raúl Azcárraga Pérez 43 2002 Independent

Francisco Andragnes 43 2013 Independent

Sergio del Valle Cantú 43 2010 Independent

José Ignacio Mariscal Torroella 66 2013 Independent

Source: IPO prospectus

12

HOTELES CITY EXPRESS, S.A.B. DE C.V.(Figures in Millions of Pesos)

INCOME STATEMENT 2013E 2014E 2015E 2013E 2014E 2015E

Sales 1,155 1,552 1,949 24% 34% 26%

Cost of Sales (621) (841) (1,059) 24% 35% 26%

Gross Profit 534 711 890 24% 33% 25%

Gross Margin 46.2% 45.8% 45.7%

General Expenses (151) (150) (139) 3% (1%) (7%)

Profit Before Other Income and Expenses 195 304 432 132% 56% 42%

Margin 16.9% 19.6% 22.2%

Other Income and Expenses (11) (12) (19) (26%) 13% 57%

Operating Profit 184 292 412 50% 58% 41%

Operating Margin 16.0% 18.8% 21.2%

Depreciation and Amortization (187) (258) (320) 29% 38% 24%

EBITDA (adj) 371 550 732 39% 48% 33%

EBITDA Margin (adj) 32.1% 35.4% 37.6%

Financial Gain 34 55 61 99% 59% 12%

Financial Cost (82) (110) (110) (24%) 33% 0%

Taxes and Profit Sharing (26) (66) (102) 360% 159% 54%

Tax and Profit Sharing Rate 18.7% 28.0% 28.0%

Profit from Continuing Operations 111 170 262 333% 54% 54%

Discontinued Operations 0 0 0 NM NM NM

Net Profit Before Minorities 111 170 262 333% 54% 54%

Minority Interest 4 6 6 (367%) 33% 0%

Net Profit 115 176 268 380% 53% 52%

N° of Shares 275 275 275 NM 0% 0%

EPS MP 0.42 MP 0.64 MP 0.97 NM 53% 52%

BALANCE SHEET 2013E 2014E 2015E 2013E 2014E 2015E

TOTAL ASSETS 7,950 9,640 10,398 48% 21% 8%

Current Assets 2,606 3,588 3,750 244% 38% 5%

Cash and Temporary Investments 2,334 3,246 3,328 321% 39% 3%

Long Term Assets 5,344 6,052 6,648 16% 13% 10%

Property, Plant & Equipment 5,341 6,048 6,644 19% 13% 10%

Property 4,663 5,594 6,475 19% 20% 16%

Plant & Equipment 47 48 49 (0%) 2% 2%

Other Equipment 659 672 686 9% 2% 2%

Cumulative Depreciation (598) (855) (1,175) 38% 43% 37%

Construction in Progress 570 590 610 58% 4% 3%

TOTAL LIABILITIES 2,928 4,442 4,933 39% 52% 11%

Current Liabilities 989 2,503 3,084 317% 153% 23%

Long Term Liabilities 1,939 1,939 1,848 4% 0% (5%)

TOTAL DEBT 2,460 3,915 4,434 44% 59% 13%

NET DEBT 125 670 1,106 (89%) 435% 65%

TOTAL CAPITAL 5,021 5,197 5,465 54% 4% 5%

Shareholder's Equity 5,021 5,197 5,465 54% 4% 5%

Minority Interest 0 0 0 NM NM NM

CASH FLOW STATEMENT 2013E 2014E 2015E 2013E 2014E 2015E

PRE-TAX PROFIT 111 237 364 256% 113% 54%

Investment Activity Related Items 207 335 401 NM 62% 19%

Financing Activities 149 200 200 NM 34% 0%

Pre-Tax Cash Flow (1,733) (3,727) (3,664) NM 115% (2%)

Working Capital Changes (22) (13) (17) NM (41%) 35%

Cash Flow from Operations (1,755) (3,739) (3,682) NM 113% (2%)

Cash Flow from Investment (893) (852) (802) NM (5%) (6%)

Cash Flow from Financing 4,388 5,451 4,514 NM 24% (17%)

Net Incr. (Decr.) in Cash and T.I. 1,741 860 31 NM (51%) (96%)

Net Cash and T.I. Beginning of Period 0 2,334 3,246 NM NM 39%

Net Cash and T.I. End of Period 2,334 3,246 3,328 NM 39% 3%

Source: Actinver

13

2Q13 3Q13E 4Q13E 1Q14E 2Q14E 3Q14E 4Q14E 1Q15E 2Q15E 3Q15E 4Q15E

Total # Hotels 73 79 84 88 92 96 100 104 108 112 115

Total # Rooms 8,360 8,959 9,558 9,856 10,304 10,752 11,200 11,648 12,096 12,544 12,880

Total # Room Nights 747,368 815,269 869,778 877,184 927,360 978,432 1,019,200 1,036,672 1,088,640 1,141,504 1,172,080

# Days in Period 89 91 91 89 90 91 91 89 90 91 91

Average Occupancy 54.8% 56.8% 58.8% 59.0% 59.2% 59.4% 59.6% 59.8% 60.0% 60.2% 60.4%

ADR 720 720 720 731 742 753 764 776 787 799 811

RevPAR 394 409 423 431 439 447 455 464 472 481 490

HOTEL OPERATING PROJECTIONS

14

Disclaimer

Research

Martín Lara Head of Equity Research

Telecoms, Media & Financials (52) 55 1103-6600

x1840 mlara@actinver.com.mx

Ramón Ortiz Cement, Concessions & Construction (52) 55 1103-6600

x1835 rortiz@actinver.com.mx

Toe Matsumura Real Estate & Food (52) 55 1103-6600

x1841 tmatsumura@actinver.com.mx

Federico Robinson Conglomerates, Industrial & Mining (52) 55 1103-6600

x4127 frobinson@actinver.com.mx

Gustavo Terán , CFA Beverages & Retail (52) 55 1103-6600

x1193 gteran@actinver.com.mx

Michel Gálvez Fixed Income (52) 55 1103 -6641 mgalvez@actinver.com.mx

Jaime Ascencio Economic & Markets (52) 55 1103-6600

x5032 jascencio@actinver.com.mx

Roberto Galván Technical Analysis (52) 55 1103 -6600

x5039 rgalvan@actinver.com.mx

Investment Strategy

Ernesto O’Farrill Director (52) 55 1103-6645 eofarril@actinver.com.mx

Sales & Trading

Gerardo Román Head of Trading (52) 55 1103-6690 groman@actinver.com.mx

Julie Roberts US Institutional Sales (210) 298 - 5371 jroberts@actinversecurities.com

María Antonia Gutiérrez US Institutional Sales (52) 55 1103-6796 agutierrez@actinver.com.mx

Salomón Saba US Institutional Sales (52) 55 1103-6710 ssaba@actinver.com.mx

Tulio Chávez Institutional Sales (52) 55 1103-6762 mchavez@actinver.com.mx

Luis Javier Basurto Institutional Sales (52) 55 1103-6742 lbasurto@actinver.com.mx

15

Analyst Certification for the following Analysts: Martín Lara

Toe Matsumura

Ramón Ortiz

Federico Robinson

Gustavo Terán, CFA

Michel Gálvez Jaime Ascencio

Roberto Galván

The analyst(s) responsible for this report, certifies(y) that the opinion(s) on any of the securities or issuers mentioned in this document, as well as any views or forecasts expressed herein accurately reflect their personal view(s). No part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this document.

Any of the business units of Grupo Actinver or its affiliates may seek to do business with any company discussed in this research document. Any past or potential future compensation received by Grupo Actinver or any of its affiliates from any issuer mentioned in this report has not had and will not have any effect our analysts’ compensation. However, as for any other employee of Grupo Actinver and its affiliates, our analysts’ compensation is affected by the overall profitability of Grupo Actinver and its affiliates.

Guide to our Rating Methodology

Total Expected Return on any security under coverage includes dividends and/or other forms of wealth distribution expected to be

implemented by the issuers, in addition to the expected stock price appreciation or depreciation over the next twelve months based on our analysts’ price targets. Analysts uses a wide variety of methods to calculate price targets that, among others, include Discounted Cash Flow models, models based on expected risk-adjusted multiples, Sum-of-Parts valuation techniques, break-up scenarios and relative valuation models.

Changes in our price targets and/or our recommendations. Companies under coverage are under constant surveillance and as a result

of such surveillance our analysts update their models resulting in potential changes to their price targets. Changes in general business conditions potentially affecting either the cost of capital and/or growth prospects of all companies under coverage, or a given industry, or a group of industries are typical triggers for revisions to our price targets and/or recommendations. Other micro- and macroeconomic events could materially affect the overall prospects of an individual company under coverage and, as a result, such event-driven factors could lead to changes in our price targets and/or recommendation of the company affected. Even if our overall expectations for a given company under coverage have not materially changed, our recommendations are subject to revision if the stock price has changed significantly, as it will affect total expected return.

Terms such as "price targets, our price targets, total expected return, analyst's price targets” or any other similar phrase are used in this document as complementary to our recommendation or as a condition that could change in our point of view and, according to article 188 of Securities Market Act, do not imply in any way that Actinver, its agents, or its related companies are in any form providing assurance or guarantee, nor assuming any responsibility for the risks associated with any investment in the discussed securities.

Recommendations for companies, both in the Índice de Precios y Cotizaciones (IPyC) Index and also not belonging to the index. We have three possible recommendations: a) BUY, b) HOLD or c) SELL. A stock classified as BUY is expected to yield at least 15% within the next 12 months. A stock rated as HOLD are expected to yield between 5% and 14% within the next 12 months. A stock rated as SELL

is expected to yield less than 5% within the next 12 months.

Rating Distribution as of June 26, 2013

BUY: 42%

HOLD: 24%

SELL: 34%