Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)  

 

- CENTEL keeps revenue growth target at 10% yoy in 2015 

CENTEL has expected its FY2015 revenue to grow 10%yoy to B19bn, close to our projection, mostly from the hotel business, especially revenues from hotels in Bangkok that have recovered from last year, while revenues from hotels in other provinces and Maldives could show only flat growth. Average occupancy rate in 2015 is projected to rise 5%yoy to 80%, while RevPar would grow 7%yoy. In addition, the company will recognize more revenues from a hotel management business and an increase of its shareholding in Kata Phuket Hotel to 100% since 4Q14 onward, which would generate a full-year revenue of B170-180m (previously recognized only shared profit), possibly boosting revenues from the hotel business to B9bn or a growth of 11%yoy. Revenues from the food business are estimated at B10bn or a growth of 4%yoy due to new outlets, while same-store-sales would only stabilize. Although revenues from the food business may not show a good growth, the company has tried improve its profit by controlling cost, closing unprofitable outlets, and carefully choosing good locations for opening new outlets; these strategies have started to benefit CENTEL’s profit, as EBITDA margin of the food business has risen from 9.4% in 1H14 to 13.3% in 1H15, and would remain good in 2H15. 

- Bombing only has short-term effect. Situation back to normalcy 

The bomb explosion at the Ratchaprasong Intersection on August 17 affected only Centara Grand Hotel at Central World. Cancellation of room booking at the hotel was less than 1% of CENTEL’s total revenues; occupancy rate after the bombing dropped to 70%, versus 80% in August 1-16, yet average occupancy rate in August was 77%. On the other hand, Centara Grand Hotel at Central Plaza Ladprao was not affected by the bombing and also had increasing occupancy rate; average occupancy rate at the hotel after the bombing increased to 92%, versus 80% before the bombing. Moreover, revenues from hotels in other provinces and Maldives have been good. Overall, average occupancy rate of every hotel in August was 84% (85.8% for hotels in Bangkok), close to 85% in July; RevPar in July and August still grew 7%yoy, while advance booking in September is 57%. CENTEL’s management believed the situation is already back to normalcy and its earnings would show good growth again in 4Q15 owing to a high season and because one of its hotels in Maldives will finish a renovation of the first phase in September and be able to increase the room rate by 8-10%. For the food business, same-store-sales growth in July was -2%, versus -6% in June. However, with the company’s cost control strategy, EBITDA margin still reached a target of 13.5%; FY2015 profit is estimated at B1.8bn or a growth of 56% yoy. 

- Buy. 25% upside