Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL) 

 

Beats with record high net profit in 1Q15 of Bt834mn, up 66% YoY and 75% QoQ. Excluding an extra item in 4Q14 of Bt103mn for fair value adjustment of investment in Centara Kata Resort Phuket Hotel after CENTEL increased ownership to 99% (from 50%) shows a jump of 123% QoQ in core profit. SG&A and tax expenses were lower than estimates and led it to beat both SCBS and the market by 27%. 1Q15 accounts for 54% of our full-year forecast (before our upgrade) vs. a 47% historical average. 

 

1Q15 highlights: 

- Revenue was Bt5.0bn, up 11% YoY and 3% QoQ. Growth came mainly from the hotel business, which grew 17% YoY and 12% QoQ off the recovery in Thai tourism.  

- Hotel business (52% of revenue): RevPar grew 7% YoY and 24% QoQ on: 1) record-high occupancy rate of 85% vs. 75% in 1Q14 and 81% in 4Q14 as Bangkok hotels came back to life and 2) average room rate (ARR) declined by 5% YoY but increased 17% QoQ. The YoY decline in ARR was due to fewer high-spending Russian tourists. 

- Food business (48% of revenue): Same-store sales growth (SSS) was +0.6% (vs. -1.8% in 1Q14 and +1.6% in 4Q14) dragged down by weak SSS at provincial outlets (-1.1%) while SSS at outlets in Bangkok was healthier (+2.2%).  

- SG&A expenses were Bt1.3bn, flat YoY and down 5% QoQ, reduced by cost control and closure of loss-making food outlets as the snail’s pace of SSS recovery makes improving margin key to earnings growth for CENTEL’s food business. Lower SG&A expenses brought a strong EBITDA margin of 30.7% in 1Q15 vs. 26.5% in 1Q14 and 23.7% in 4Q14. 

- Low effective tax rate at 12% in 1Q15 vs. 19% in 1Q14 and 14% in 4Q14. 

- Financial heath was strong with interest-bearing debt to equity at 0.7x as of March 2015, down from 0.9x as of December 2014. 

 

Earnings upgrade. TP raised to Bt42/share. BUY maintained. We raise 2015 earnings by 13% to incorporate the lower SG&A expenses to revenue. We now put this at 28.3% (from 29%) to reflect better cost control and lower burden from loss-making food outlets after some closures. With Thai tourism recovering and the food business improving, this year is shaping up to be a far better one for CENTEL, with expected core earnings growth of 61% YoY. We maintain our BUY with a new TP of Bt42/share (from Bt40/share).