20140606-Maybank_KERPL-Central_Plaza_Hotel__CENTEL_TB_Good_news_priced_in_12页_679kb

Central Plaza Hotel (CENTEL TB) Summary

Core Content

Central Plaza Hotel (CENTEL TB) is a Thai hotel and food services company that has been impacted by political unrest and a slowdown in tourism traffic. Despite this, the company has shown signs of recovery in its hotel and food businesses following the lifting of the curfew in key destinations such as Phuket, Samui, and Pattaya. The company's share price is currently at THB33.00, with a target price of THB35.00, indicating a 6% upside. The market capitalization is USD1.4B, with an average daily turnover of USD3M.

Main Points

• Operational Improvements: The hotel and food businesses have shown continuous operational improvement in 2H14, with occupancy rates increasing from 71-72% in 2Q to 74-80% in 2H14.
• Curfew Impact: The curfew in Phuket, Samui, and Pattaya contributed to a 38% share of hotel revenue. Krabi and Hua Hin are expected to follow with curfew lifting.
• Performance: The company's 1Q14 net profit dropped by 23% YoY but rose by 73% QoQ. Revenue was flat YoY, while food revenue increased by 6%. The EBITDA margin decreased to 23.6% due to increased operating and SG&A expenses.
• Outlook: Occupancy rates are expected to stabilize in 2Q14 at 52-53% and recover to 60% in 3Q14 and 65% in 4Q14. The food business is expected to show a rebound in same-store-sales growth, with a 1% YoY increase in May14.
• Valuation: The current valuation is based on a DCF model with a target price of THB35.00, implying 3.8x PBV and 31x PER for FY14F. The valuation is not considered compelling due to limited earnings growth and is compared unfavorably to MINT, which is preferred with a higher growth profile and lower valuation.
• Investment Plans: The company has a capex budget of THB1.8bn for 2014 to expand its hotel and food business. It also plans to build new owned hotels in 2015-2017 with a total investment of THB6.6bn. Additionally, it is considering setting up a REIT in 1H15.
• Market Position: CENTEL is a major player in the Thai hotel market, but its performance has been affected by political instability and seasonality. The company is targeting a 60/40 split of food and hotel revenue by 2018F.

Key Information

• Share Price: THB33.00
• Target Price: THB35.00 (+6%)
• Market Cap: USD1.4B
• Average Daily Turnover: USD3M
• Major Shareholders:
  • Tiang Chirathivat Co. Ltd. - 5.0%
  • Boonsri Nutteera - 3.9%
  • Chirathivat Suthichai - 3.7%
• Current Valuation:
  • Core P/E: 28.6
  • P/BV: 5.1
  • Net Dividend Yield: 0.9%
  • ROAE: 21.2%
  • Net Debt/Equity: 129.5%
• Projected Earnings:
  • FY14E Core Net Profit: THB1,390.0m
  • FY15E Core Net Profit: THB1,628.2m
  • FY16E Core Net Profit: THB1,806.7m
• Comparative Valuation with MINT:
  • MINT has a lower P/E (24.1x), P/BV (3.8x), and offers better growth prospects.

Key Takeaways

• Earnings Decline: 1Q14 net profit dropped 23% YoY due to political unrest and domestic economic slowdown.
• Curfew Impact: The lifting of the curfew in key tourist areas is expected to boost occupancy rates and revenue.
• Consumer Confidence: There is a strong correlation between the consumer confidence index and same-store-sales growth in the food business.
• Valuation: The current valuation is not compelling compared to MINT, which is preferred for its better growth profile and lower valuation.
• Expansion Plans: The company plans to expand its hotel and food portfolio, both domestically and internationally, with a focus on asset light expansion.

Outlook

• Hotel Revenue: Expected to stabilize in 2Q14 and gradually increase in subsequent quarters.
• Food Revenue: Projected to show improvement in same-store-sales growth in 2H14.
• Market Position: Despite the challenges, the company is well-positioned for recovery as the curfew is lifted in key destinations.
• Investment Strategy: The company is focusing on both asset-heavy and asset-light expansion to grow its hotel and food businesses.