20140804-Maybank_KERPL-Expect_a_weak_quarter_13页_867kb

Central Plaza Hotel (CENTEL TB) Summary

Core Content

Central Plaza Hotel (CENTEL TB) is a Thai hotel operator with a current share price of THB36.00 and a target price of THB40.00, representing a 1% increase. The company has a market capitalization of USD1.5B and an average daily turnover of USD3M. The report discusses the company's performance in the second quarter of 2014, highlighting a weak quarter due to various factors, and provides an outlook for the remainder of the year and future periods.

Main Points

• Performance in 2Q14:

  • Occupancy rate is expected to drop to 69%, down from 76% in 1Q14 and 75% in 2Q13.
  • ADR is expected to increase by 10% YoY.
  • RevPAR is projected to rise 1% YoY but fall 37% QoQ due to seasonality.
  • Net profit is forecasted to fall to THB46m, a 91% drop QoQ and 76% drop YoY.
  • The consensus expects a net profit of THB219m, which is significantly higher than the forecasted THB46m.

• Reasons for Weak Performance:

  • Political instability in Thailand led to reduced tourist arrivals, particularly in Bangkok.
  • The food business faced margin contraction due to rising costs.
  • Higher deferred tax expenses also contributed to the decline in net profit.

• Positive Factors:

  • The stock has increased by 31% YTD, with positive factors already priced in.
  • The political situation is expected to improve, leading to a rebound in occupancy rates from 3Q14 onwards.
  • The food business is showing signs of improvement, with SSSG increasing by 0.3% and TSSG at 8.3%.

• Earnings Forecast Adjustment:

  • The report raises the earnings forecast for CENTEL by 1% to 10%, considering improved occupancy and SSSG.
  • The new fair value is THB40, based on a DCF model with an 8.5% WACC and 3% terminal growth.
  • The new target price implies 30.2x PER, 4.3x PBV, and 1.1x PEG for FY15F.

• Market Outlook:

  • The company is expected to see a recovery in occupancy rates and RevPAR from 3Q14, with the potential for 80% occupancy in 1Q15.
  • Room rates are projected to increase by 5%–8% in 2H14.
  • The report suggests that CENTEL's performance in 2H14 could be affected by slower-than-expected tourist recovery and weaker domestic consumption growth.

Key Information

• Key Metrics for FYE Dec (THB m):

  • Revenue: THB14,503.8 (FY12A), THB17,096.0 (FY13A), THB18,307.6 (FY14E), THB20,384.6 (FY15E), THB22,205.2 (FY16E)
  • EBITDA: THB3,731.6 (FY12A), THB3,892.3 (FY13A), THB4,122.5 (FY14E), THB4,687.1 (FY15E), THB4,996.9 (FY16E)
  • Core Net Profit: THB1,595.8 (FY12A), THB1,321.9 (FY13A), THB1,404.2 (FY14E), THB1,786.9 (FY15E), THB1,957.1 (FY16E)
  • Core EPS: THB1.18 (FY12A), THB0.98 (FY13A), THB1.04 (FY14E), THB1.32 (FY15E), THB1.45 (FY16E)
  • Net Dividend Yield: 0.8% (FY12A), 1.1% (FY13A), 1.2% (FY14E), 1.5% (FY15E), 1.6% (FY16E)
  • ROAE: 21.2% (FY12A), 13.7% (FY13A), 13.0% (FY14E), 15.1% (FY15E), 15.0% (FY16E)
  • ROAA: 6.3% (FY12A), 4.6% (FY13A), 4.7% (FY14E), 5.7% (FY15E), 6.0% (FY16E)
  • EV/EBITDA: 12.8 (FY12A), 12.5 (FY13A), 14.6 (FY14E), 12.8 (FY15E), 12.0 (FY16E)
  • Net Debt/Equity: 129.5% (FY12A), 102.7% (FY13A), 97.0% (FY14E), 86.0% (FY15E), 77.5% (FY16E)

• Key Data:

  • 52-week high/low: THB42.75/24.10
  • Free float: 43.0%
  • Issued shares: 1,350m
  • Market capitalization: THB48.6B
  • Major shareholders: Tiang Chirathivat Co. Ltd. (5.0%), Boonsri Nutteera (3.9%), Chirathivat Suthichai (3.7%)

• Analyst Recommendation:

  • Maintain HOLD rating.
  • Prefer MINT due to a more diversified hotel and food brand portfolio, potential growth in the China market, superior earnings growth, and a more attractive valuation.

Risks and Outlook

• Downside Risks:

  • Slower-than-expected tourist recovery.
  • Weaker-than-expected domestic economic outlook in 2H14.

• Upcoming Catalysts:

  • Expected improvement in the political situation and the lifting of travel warnings.
  • The military government is expected to end martial law in 3Q14.
  • CENTEL plans to acquire 50% in Kata Phuket in 3Q14, contributing 1% to the bottom line in 2014.

• Comparative Analysis:

  • MINT is preferred over CENTEL due to its better performance in the food business (TSSG +12%, SSSG +2%), stronger growth momentum, and cheaper valuation (23% and 7% discount to CENTEL for 2015F PER and PBV).
  • CENTEL's share price has outperformed the SET and the hotel sector by 15% and 6% respectively YTD.

Conclusion

The report suggests that CENTEL is expected to have a weak quarter due to the impact of political instability and seasonality. However, the outlook for the remainder of the year is more positive, with an expected recovery in occupancy rates and RevPAR from 3Q14 onwards. Despite this, the current valuation is considered unattractive, and the report recommends maintaining a HOLD rating while preferring MINT due to its superior performance and growth potential.