Central Plaza Hotel
1Q14F: Expect drop YoY but rise QoQ -1Q14F net profit at Bt460mn, down 29% YoY but up 58% QoQ - Hotels in Bangkok are improving with rising occupancy rate - Maintain BUY; share price underperformance implies negatives priced in
1Q14F net profit Bt460mn, down 29% YoY but up 58% QoQ. The decline YoY is due to: 1) flat revenue from the weak hotel business and 2) lower EBITDA margin, mainly at the Quick Service Restaurant (QSR) business. The rise QoQ in net profit comes from improving EBITDA margin off the exceptional low in 4Q13 due to year-end adjustment.
- Hotel business. We estimate average RevPar at Bt4,612/room/night, up 7% YoY and 21% QoQ, mainly from an increase in ARR of 19% YoY and 29% QoQ; occupancy rate has fallen to 76% (-9% YoY and -5% QoQ). Backing the strong ARR growth is the good operations at resorts in Maldives (15% of hotel revenues). The fall in occupancy rate comes primarily from the two hotels in Bangkok (Centara Grand at Central World and Centara Grand Ladprao, 32% of hotel revenues) that were hurt by the political turbulence. CENTEL said the occupancy rate of these two hotels was 48% in 1Q14 vs. 78% in 1Q13. While we expect RevPar growth YoY and QoQ, we expect total hotel revenue to slip 5% YoY and 2% QoQ due to lower revenues from food at hotels and events as organizers postponed events due to the political tension.
- QSR business. We estimate same-store sales growth (SSS) of -1.8% in 1Q14, down from +3.2% in 1Q13 but improving from -2.9% in 4Q13. CENTEL reports that all food brands except KFC reported negative SSS due to weak consumption, hit by the slowed economy and politics. Despite the negative SSS, we expect total QSR revenue growth of 6% YoY (but -2% QoQ) thanks to the addition of 71 outlets since 1Q13 to bring total outlets to 752 in March 2014. With negative SSS and continuing outlet expansion, we expect the cost burden on the QSR business to lead to a lower EBITDA margin.
2Q14 outlook better, with hotels in Bangkok improving after tourism prospects were improved by the lifting of the state of emergency and a reduction in the protest rally areas in Bangkok. This is already being seen, with occupancy rate of Centara Grand at Central World hotel climbing to 65% in April and 70% in the first five days of May. Events that had been postponed from 1Q14 are expected to take place in 3Q14. CENTEL is maintaining its 2014 targets: 3-4% RevPar growth with a 76% occupancy rate and 6-7% ARR increase for the hotel business and SSS at 1-2% and 75 new outlets (+10% YoY) for the QSR business.
Maintain BUY with unchanged TP at Bt38/share. In the hotel sector, CENTEL is a laggard, with a sharp 21% fall in share price vs. -17% for ERW, -10% for MINT and -2% for SET since Nov 1, 2013 when politics took over. We believe CENTEL’s poor share price performance indicates the negatives are priced in and anticipate a strong earnings uptrend upon the expected recovery of Thai tourism in 2H14.
