Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)  

 

3Q15 net profit was Bt294mn (Bt0.22/share), up 75% YoY and 19% QoQ with lower tax expenses leading it to beat market and SCBS estimates by 8% and 13%, respectively. 9M15 core profit accounted for 78% of our full-year forecast, above the historical average of 72%. We believe CENTEL’s earnings momentum will continue in 4Q15 which is the high season for Thai tourism, and the food business will continue to improve. We maintain our BUY call on CENTEL with mid-2016 TP at Bt44/share. 

 

3Q15 highlights: 

 

- 3Q15 revenue was Bt4.4bn, up 3% YoY but down 3% QoQ. Hotel business (44% of revenue) was key to revenue growth (+8% YoY and +2% QoQ), making up for the weak food business (56% of revenue), which was down 1% YoY and 6% QoQ. 

 

- Hotel business: Revenue per available room (RevPar) in 3Q15 grew 9% YoY and 3% QoQ mainly backed by a high 80.2% occupancy rate, exceeding 73.2% in 3Q14 and 76.6% in 2Q15 despite the bomb at the Erawan Shrine on August 17. The bomb’s impact was minimal since it has only one hotel, Centara Grand at CentralWorld, in the area, and in any case, recovery was rapid. Average room rate was flat YoY and down 2% QoQ due to a higher proportion of rooms with lower rate. 

 

- Food business: Same-store sales (SSS) contracted by 3.1% in 3Q15, steeper than the 1% contraction in 2Q15; the larger pinch came from provincial food outlets (~40% of total outlets). The number of food outlets as of Sep 2015 was 785, up 2% YoY, on a more conservative outlet expansion in the presence of a weak economy. 

 

- EBITDA margin was 19.6%, down slightly from 19.8% in 3Q14 and 20.4% in 2Q15. 

 

- Tax expense was Bt62mn, up from Bt39mn in 3Q14 but down from Bt129mn in 2Q15, an effective tax rate of 17.4% in 3Q15 vs. 17.6% in 3Q14 and 36.5% in 2Q15. 

 

- Interest-bearing debt to equity was 0.7x, relatively stable from June 2015. 

 

Strong Outlook. We talked with the company recently and were told that occupancy rate was high in October at 81%, above the 78% in the same period last year. SSS in October was positive at ~2% backed by improving KFC and Mister Donut operations, the latter introducing the Doraemon donut. As for hotel expansion, CENTEL says it is seeking opportunities for investment in or acquisition of hotels in major tourist destinations such as London and obtaining more hotel management contracts in new markets in the Middle East, China and the Asia region.