Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)

Bt670mn, up 19% YoY and doubled QoQ. Key items for 1Q13F:
- Hotel business: We estimate RevPar at Bt4,323, up 29% YoY and 50% QoQ, backed by: 1) 84% occupancy rate, jumping from 75% in 1Q12 and 75% in 4Q12 and 2) ARR at Bt5,128, up 15% YoY and 33% QoQ ,which comes from the consolidation of the resort in Maldives, Centara Grand Island Resort & Spa Maldives, after it boosted its holding to 74% from 25% last year.
- Food business: We estimate food revenues at Bt2.1bn, up 14% YoY but down 4% QoQ, driven by: 1) 3.2% SSS growth, relatively flat from 3.8% in 1Q12 and in 4Q12 and 2) 64 additional outlets compared to 1Q12. Management said the 3.2% SSS growth in 1Q13 fell below company target of 5-7%. This is due to slow consumer spending especially in Bangkok where 60% of CENTEL’s food outlets are located. We estimate EBITDA margin for the food business at 13.5%, down from 14.1% in 1Q12 due to rising staff expenses, but up from 12.5% in 4Q12.
April-May operations good. CENTEL said April was good for both the hotel and food businesses. April’s RevPar growth was 28.4% YoY from high occupancy rate and rising ARR. The food business is improving, with April’s SSS growth at 3%; May is continuing the positive momentum, with management saying May SSS growth is likely to meet its target.
New food brand at the end of this year. CENTEL revealed that it has already finalized franchises for two international food brands. One is expected to be launched at the end of this year; the other has no specific timeframe. CENTEL is talking with another food brand to do a JV, but there are no concrete details yet. Currently CENTEL operates 12 food brands with 681 outlets.
Considering setting up REIT or property fund. CENTEL is studying setting up a real estate investment trust (REIT) or property fund to act as funding vehicle. If it does take this move, it plans to divest its first resort at Maldives - Centara Grand Island Resort & Spa Maldives into the REIT/property fund.
Maintain BUY with 2013 TP at Bt43/share. Earnings prospects are good with core growth of 33% CAGR in 2013-14. CENTEL is trading at 0.7x PE-to-earnings growth (PEG). The record earnings expected in 1Q13 (will announce on 15 May) will be a short-term catalyst for the share price. We maintain BUY with 2013 TP at Bt43/share.