Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)

 

We estimate 4Q15 core profit at Bt320mn, down 14% YoY but up 9% QoQ. The YoY fall drop is steeper than we had anticipated and is likely due to low revenue, mainly off weak hotel operations at Maldives, and higher costs. Meeting our 4Q15 forecast would bring 2015 core earnings in 4% below our current forecast. Looking beyond the weak 4Q15, we see improvement in CENTEL’s operations in Jan–Feb and keep our BUY call on CENTEL with TP at Bt44/share. 

 

4Q15 preview. Guidance provided at the analyst meeting suggests 4Q15 core profit of Bt320mn, down 14% YoY but up 9% QoQ. The YoY fall is steeper than we anticipated; this comes from poorer revenue from its hotel business plus higher costs. If it meets our 4Q15 preview, 2015 core earnings will come in at Bt1.7bn, 4% below our current forecast. Our 4Q15 assumptions:  

 

1) Hotel business: Revenue per available room (RevPar) was Bt4,024/room/night, flat 

 

YoY but up 22% QoQ, with an 80% occupancy rate (down from 81% in 4Q14 and flat QoQ) and an increase in average room rate of 2% YoY and 22% QoQ. This gives hotel revenue of Bt2.4bn, flat YoY but up 26% QoQ. The stagnant revenue YoY is due to weaker operations at Maldives as renovations at Centara Grand Island Resort & Spa Maldives hotel are taking longer than expected, winding up in December 2015 not the planned October.  

 

2) Food business: We expect revenue of Bt2.6bn, up 2% YoY and 5% QoQ. Same-store sales growth (SSS) was 0.2%, up from -3.1% in 3Q15, driven by key brands such as KFC and Mister Donut. It has 792 outlets as of December 2015, up 1% YoY and QoQ.  

 

3) We expect EBITDA margin to fall to 21.7% from 23.6% in 4Q14 (but is still better than the 19.6% in 3Q15). The reason for the fall in 4Q15 is the recording of higher staff costs and Bt30mn in provision expenses for the planned closure of 28 food outlets this year. 

 

Improving operations in Jan–Feb. Operations are better. RevPar was flat YoY since its Maldives facilities are not yet not back to normal. However, positive momentum is being seen in February with occupancy rate at its Maldives hotel from February 1-11 was above 80% and overall RevPar shows double-digit YoY growth. For its food business, SSS was at 0.7% in January.  

 

2016 guidance. In 2016, CENTEL targets RevPar growth of 6% YoY based on 81% occupancy rate (flat YoY) and a 6% YoY increase in ARR and SSS at 1% (from -0.7% in 2015) with 35 new outlets. Our assumptions are slightly above the company’s targets: we expect RevPar growth of 8% YoY with SSS at 3% based on expectation of strong Thai tourism and an improving economy.  

Maintain BUY with TP of Bt44/share. Looking past the weak 4Q15 shows improvement in operations with better earnings ahead. We maintain our BUY with TP at Bt44/share.