Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)

In line with our expectation
CENTEL posted a record core profit of Bt652m for 1Q13, up by 28% YoY. The net profit was in line with our estimate, but 11% below the street preview. Despite core earnings growth, the 1Q13 bottom-line dived 24% YoY, due to a Bt329m 1Q12 gain from the acquisition of the Centara Karon Hotel (re-classification from associate firm to subsidiary).
Results highlights
CENTEL retroactively rescheduled the gain from the acquisition of the Centara Karon from 4Q12 to 1Q12 (the acquisition date). Thus, there isn’t a valid QoQ net profit comparison. The impressive 1Q13 core earnings were led by high season for tourism and a strong Food business. Hotel RevPar jumped 29% YoY (occupancy was 84% versus 75% in 1Q12; the room rate rose 15% YoY, thanks to a premium room rate for the Maldives I hotel). Food TSSG was 14.5% YoY and SSSG was 3.2%.
The 1Q13 top-line hit a record high of Bt4.4bn (up 21% YoY); 51% from the Hotel business, 49% from Food. Hotel GM inched up 1.7% YoY to 67% (a new high), which was more than sufficient to offset the effect of slimmer food GM—down 1.8% YoY to 50%, due to higher wage costs. The net gearing ratio was stable QoQ at 1.2x at end-March (the best balance sheet since YE08).
Outlook
CENTEL will report YoY profit growth, led by the Hotel business (the consolidation of the Maldives I hotel). Hotel RevPar in April jumped 37% YoY, management guides—a high occupancy rate of 80% (67% in April 2012), and a 14% increase to the mean room rate). Food TSSG was 13% YoY in April. 2Q13 profit will drop QoQ because of tourism low season.
What’s changed? 
1Q13 core profit represents 41% of the forecasts of both BLS and the consensus. We conservatively maintain our model unchanged. There may be scope for earnings upside from: 1) negotiating with the owner of the other 50% stake in Centara Kata Beach, Phuket that CENTEL doesn’t already hold, 2) new management contracts, 3) two new food brands and 4) asset sales to an REIT.
Recommendation
We maintain our BUY rating on CENTEL with an unchanged YE13 target price of Bt44 (a 10% discount to DCF value). The firm should report the best FY13 RevPar growth of the Tourism stocks we cover. It trades at an FY13 PEG ratio of 0.9x, far cheaper than MINT’s 1.3x.