20140507-Maybank_KERPL-Expect_double-digit_decline__HOLD_11页_675kb

Central Plaza Hotel (CENTEL TB) Summary

Core Content

• Share Price: THB30.75
• Target Price: THB35.00 (+14%)
• Market Cap (USD): 1.3B
• ADTV (USD): 3M
• Country: Thailand
• Sector: Hotels
• Rating: HOLD (Unchanged)

Main Points

• 1Q14 Performance:

  • Net Profit: THB446m, up 54% QoQ but down 31% YoY.
  • Occupancy Rate: 75.6%, down from 80.3% in 4Q13 and 84.3% in 1Q13.
  • ARR (Average Room Rate): Up 19% YoY to THB6,103.
  • RevPar (Revenue Per Available Room): Up 21% QoQ and 7% YoY.
  • SSSG (Same Store Sales Growth): Fell nearly 2% YoY due to political turmoil and sluggish domestic consumption.

• Factors Affecting Performance:

  • Weak SSSG due to political unrest and reduced domestic consumption.
  • Occupancy rates in Bangkok dropped sharply.
  • Room rates in Bangkok hotels decreased by 9% YoY.
  • Food margin contracted by 60bps.
  • The car bombing at Hat Yai Hotel is expected to negatively impact tourism for the next six months.

• Valuation:

  • The target price of THB35 implies a 3.8x PBV and 31x PER for FY14.
  • CENTEL is currently trading at 29.4x PER (above the five-year mean), 12.6x EV/EBITDA, and 3.7x PBV.
  • Compared to MINT, CENTEL has a slower profit growth profile and is not as attractively valued.

• Outlook:

  • The outlook for CENTEL is positive for 2H14, assuming no political tension.
  • However, profit growth is expected to be lackluster during the low season in 2Q14.
  • The company's performance in the Maldives was strong, contributing 22% of hotel revenue with increased occupancy, ARR, and RevPar.
  • Despite this, the overall performance of CENTEL's hotel business in Bangkok was weak, leading to a decline in EBITDA margin.

• Key Financial Metrics:

  • Revenue: Expected to remain flat YoY at THB4,579m in 1Q14F.
  • EBITDA: Down 13% YoY to THB1,003m.
  • Core Net Profit: THB446m, contributing 31% to the full-year forecast.
  • Core EPS: THB1.03, with a growth rate of 5.1% YoY.

Key Information

• 1Q14 Revenue Breakdown:

  • Hotel: THB2,200m (0% QoQ, -3% YoY).
  • Food: THB2,279m (-2% QoQ, +6% YoY).
  • Total Revenue: THB4,479m (flat YoY).

• Profitability:

  • EBITDA Margin: 21.9% (down 340bps YoY).
  • Operating Margin: 12.5% (up 4.1% QoQ, down 4.0% YoY).
  • Net Profit Margin: 9.7% (up 3.5% QoQ, down 4.6% YoY).

• Performance of Maldives Hotels:

  • Occupancy rate increased to 90% (from 81% in 1Q13).
  • ARR increased by 5% YoY.
  • RevPar increased by 18% YoY.

• Competitive Position:

  • The company is preferred over MINT, which is rated BUY with a target price of THB30.
  • CENTEL's stock price has pulled back 5% since the initiation note, but it still has 14% upside to the 12-month target.

Peer Valuations

Summary of Key Ratios

• Revenue Growth: 6.5% for FY14E.
• EBITDA Growth: 3.0% for FY14E.
• EBIT Growth: 1.1% for FY14E.
• Pretax Profit Margin: 13.4% for FY14E.
• Net Profit Margin: 11.0% for FY14E.
• ROAE: 19.7% for FY14E.
• ROAA: 6.3% for FY14E.
• Net Debt/Equity: 129.5% for FY14E.
• Dividend Yield: 1.0% for FY14E, expected to rise to 1.6% in FY15E.

Conclusion

CENTEL's performance in 1Q14 was impacted by political unrest and reduced domestic consumption, resulting in a 31% YoY decline in net profit. While the Maldives segment showed strong performance, the overall hotel segment, especially in Bangkok, faced significant challenges. The company is currently trading at a higher valuation compared to its peers, and the outlook remains cautious due to ongoing political uncertainty and seasonal weakness. Despite this, the company's stock has some upside potential, but the HOLD rating is maintained for now.