Central Plaza Hotel
Play
To rebound in 4Q2014 BUY
Central Plaza Hotel Plc (CENTEL)
- 3Q14 profit to drop 26%yoy
3Q14 profit is estimated at B143m, dropping 26%yoy. RevPar from hotels in
Bangkok has dropped by 14.6%yoy as a result of the political unrest, while
RevPar from hotels in other provinces and Maldives has risen by 1.8%yoy
and 13.3%yoy, respectively. Thus, income from hotel business (43% of
total income) is projected to stay unchanged. Income from food business
(57% of total income) is expected to grow by 13%yoy. Same store sales
would grow by 4.9%, and 59 new branches have been opened, totaling 773
branches. However, income from hotel business is not likely to grow
significantly, operating expense is projected to increase from opening of
new branches, and B16m write-off expense would be booked from closing of
some branches. Thus, EBITDA margin is projected to fall to 16%, and net
profit margin is expected to drop from 4.8% in 3Q14 to 3.3% in 3Q14.
- 4Q14 profit to grow from hotel, food businesses
CENTEL is projected to grow in 4Q14. Hotel business has revived after the
political unrest receded. Thanks to high season, occupancy rate rose from
73% in 3Q14 to 80% in October, and RevPar rose by 4.5%yoy. Food
business is also projected to rebound due to high season and branch
expansion. Although CENTEL might has to set B50-60m more provision on
closing of unprofitable branches and impairment of Ootoya, it would be
negated by additional profit from appraisal of assets after CENTEL has
increased its shareholding in Kata Phuket Hotel from 50% to 99% and
larger profit from of high-margin hotel business. Overall, 4Q14 net profit is
projected to grow remarkably from 3Q14.
- BUY. 24% upside
Fair value (DCF, 9.3% WACC) is B40.00 in 2014 and B46.00 in 2015,
implying 24% upside. We reiterate BUY.
