Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)

Event
- CENTEL held an analyst meeting yesterday for 2Q13 guidance. Hotel and food performance should be in line but higher-than-expected tax expense should result in 2Q13 earnings coming in slightly below our expectation. The 2Q13 result is scheduled to be announced on 15 August. Maintain OP.
Impact
- Hotel. CENTEL guided hotel revenue growth of 30% YoY in 2Q13, driven by rising RevPar and additional rooms at a new hotel in Maldives. Hotel RevPar increased 35% YoY in 2Q13 (Occ. rate +10% YoY to 75%; ARR +16% YoY). Excluding the hotel in the Maldives, RevPar increased 9% YoY (Occ. rate +10% YoY and ARR -6% YoY). However, the company guided for EBITDA margin will decline to 22% in 2Q13 from 25% in 2Q12 due to start-up costs from the Maldives hotel.
- Food. TSS improved 11.7% YoY in 2Q13, driven by increases in SSS of 2.2% YoY and number of outlets of 11% YoY to 704. SSS for two key brands is expected to remain positive, with KFC up 3.6% YoY and Mister Donut up 5.6% YoY. But Auntie Anne’s is expected to show negative SSS growth of 1.6% YoY due to a change in product line-up. However, CENTEL said that it started to recover in July.
- Deferred taxes. Due to a change in accounting policy related to deferred taxes, CENTEL guided that tax expense in 2Q13 will be higher than normal. Reflecting a higher tax expense, we now expect 2Q13 net profit of Bt190m (+16% YoY and -70% QoQ) vs. our previous estimate of Bt203m.
- 2013E new targets. Given the strong hotel stats in 1H13, management revised up its 2013 target for hotel RevPar to 29% (from 20% previously). Meanwhile, it maintained the SSS target for food at 4%YoY and TSS +15% YoY in 2013.
Earnings and target price revision
- No change.
Price catalyst
- 12-month price target: Bt36.00 based on a DCF methodology.
- Catalyst: Continued strong international tourist arrivals.
Action and recommendation
- We maintain our 2013 earnings forecast and TP for CENTEL, given that the better performance in hotels should offset softness in the food business and higher tax expense. We still like CENTEL as we believe it is one of the best tourism plays and has a reasonable valuation. It is trading at a PER of 28x in 2013E and 21x in 2014E vs. a 3-yr CAGR