Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)  

 

-Aggressive expansion for both hotel and food businesses 

 

CENTEL's 2015-2020 investment plan focuses on aggressive expansion. The company plans to invest in two own-equity hotels in Maldives, two Cozy economy hotels, and joint ventures for hotels in Sri Lanka and Myanmar (not included in our forecast). CENTEL also aims to manage 10 new hotels each year, targeting to run over 100 within 2020 (managing 45 hotels at the end of 2014). For the food business, CENTEL plans to own over 1,000 branches within 2020 (having 781 branches at the end of 2014) as well as run new brands through acquisition or joint ventures. The company set B26bn budget for 2015-2020 investment plan, B19bn for the hotel business and B7bn for the food business; the capital would come from its own cash flow from operation or loans. 

 

- Potential high profit in 1Q15 

 

CENTEL's 1Q15 profit is projected to rebound significantly from B502m in 

 

1Q14. For the hotel business, average occupancy rate was 85% (rising 10.4%yoy) and RevPar grew by 7%yoy in 2M15. For the food business, thanks to average same store sales growth of 1.3% and branch expansion, January-February profit from the food business climbed by 7%yoy. We maintain FY2015 earnings forecast, estimating CENTEL's normalized profit to grow by 28.4%yoy to B1.48bn. For the hotel business, average occupancy rate is expected to rise from 75% to 80%, and average RevPar is projected to grow 8%yoy. We expect profit from the food business to grow by 9%yoy; same store sales growth to improve from 1.4% in 2014 to 2-3%in 2015, and the number of restaurant branch is targeted to increase by 4% or 30.  

 

- Positive sentiment in high season. 32% upside 

 

CENTEL has positive sentiment from high season and potential high profit in 

 

1Q15. We reiterate BUY. FY2015 fair value (DCF, 9% WACC) is B42.00, 

 

implying 32% upside.