Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)
In line with our expectation
CENTEL posted a core profit of Bt192m for 3Q13, up sharply from a profit of only Bt17m in 3Q12 and growth of 8% QoQ. The result was in line with our model, but was 16% above the consensus estimate. Net profit was Bt198m (a Bt6m FX gain), a turnaround from a net loss of Bt2m in 3Q12, but down 11% QoQ.
Results highlights
CENTEL posted QoQ core earnings growth, despite 3Q13 being hotel low season, driven by profit contributions from two hotels in the Maldives and a profit at the Food business. The YoY earnings jump was led by 19% top-line growth (45% Hotel, 55% Food) and a core margin that rose from 0.5% in 3Q12 to 4.7% in 3Q13. CENTEL reported YoY income growth of 35% for the Hotel operation and 8% for Food. Hotel RevPar jumped 42% YoY (occupancy was 80% versus 65% in 3Q12; the room rate rose 16% YoY). Food TSSG was 7.9% YoY; SSSG dipped 0.3% YoY. Hotel GM rose 3.2% YoY to 58.8% in 3Q13. Food GM declined 1.1% YoY to 52.8%.
The QoQ profit growth was due to a strong Hotel operation—a turnaround to a Bt76m profit from a net loss of Bt32m in 2Q13, led by contributions from the hotels in the Maldives. Food net earnings dived 46% QoQ. The net gearing ratio was stable QoQ at 1.3x at end-Sept.
Outlook
4Q13 core profit is set to increase YoY and QoQ on high season. The occupancy rate in October was almost 80% and the mean room rate rose 14% YoY. 1Q14 earnings will increase both YoY and QoQ.
What’s changed? 
9M13 core profit represents 65% of our forecast (and the consensus), which we maintain unchanged. Management cut its Food TSSG target from 17% to 12-13% for FY13. However, CENTEL has revised up its FY13 RevPar growth guidance from 29% to 33%, due to a higher mean occupancy rate for 9M13 than expected of 80%. Given a high occupancy rate and room rate increases during 4Q13-1Q14 high season, there may be scope for upside to our long-term earnings forecasts.
Recommendation
Existing shareholders should let profits run through 4Q13-1Q14 high season. However, we don’t believe the current valuation justifies taking new positions—an FY14 PER of 26.1x, 1SD above CENTEL’s FY06-12 mean. A good entry price would be Bt34, which would imply a PER of 22x (equal to MINT’s PER). Our YE14 target price stands at Bt44, a 15% discount to DCF value.