Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)
Optimistic towards its hotel business. At the Opportunity Day meeting
presentation, it was clear that management is optimistic about its hotel business in
2H13 through 2014, undergirded by the strong Thai tourism industry - July industry
statistics showed 23% YoY growth in total international arrivals to 2.2mn – plus the
baht depreciation that makes Thailand a relatively cheaper destination. CENTEL said its
July Revpar growth was high at 12% (or 29% YoY including the first resort in Maldives)
boosted by a high occupancy rate of 83% from 73% in July last year. For 2013, CENTEL
targets occupancy rate at 77% (from 70% last year) and ARR growth of 17% from the
consolidation of both the first and the newly-opened second resort in Maldives,
resulting in RevPar growth of 29%. CENTEL believes the strong momentum of Thai
tourism will continue and that 1Q14 will be outstanding for its hotel business.
Food business is improving. Although same-store sales growth (SSSG) was low at
3.1% in 1H13, battered by the consumption slowdown, CENTEL is standing by its 2013
food target of SSSG at 4%, since it believes operations will recover in 2H13 from more
active marketing by way of promotions and the closure of outlets of some brands that
are in the red, such as Bread Papa. CENTEL said the improvement in operations is seen
in the rise in July SSSG from 2Q13’s 2.2%. CENTEL targets 15% total food revenue
growth in 2013 driven by the addition of 76 outlets, mainly in key food brands KFC,
Mister Donut and Auntie Anne’s.
Considering setting up REIT or property fund. CENTEL is studying setting up a real
estate investment trust (REIT) or property fund to act as funding vehicle and expects
to finalize this in 1H14. If it does take this move, it will divest its first resort at Maldives
into the REIT/property fund.
Earnings fine-tuned. We have revised down CENTEL’s net profit by 4% in 2013 and 6%
in 2014 to factor in: 1) higher RevPar growth assumption of 29% from 22% in 2013, in
line with the company’s target, 2) lower 2013 SSSG assumption of 3% from 6%, more
conservative than company’s 4% target and 3) higher tax expenses seen in 1H13. After
the earnings fine-tuning, we estimate strong core earnings growth at 29% CAGR in
2013-14.
Maintain BUY at mid-2014 TP at Bt44/share. Although there are concerns that
consumption is slowing down and eating into CENTEL’s food business, which supplies
40% of net profit, we believe its strong hotel operations – delivering 60% of net profit –
will provide an offset. We believe CENTEL’s earnings passed bottom in 2Q13 and will
begin to look up from 3Q13 and hit peak in 1Q14. We roll over TP to mid-2014 from
end-2013, which raises it to Bt44/share (from Bt43/share). BUY maintained.