Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)

Strong earnings growth prospects. Although there are concerns that consumption
is slowing down and eating into CENTEL’s food business, which supplies 34% of net
profit, we believe its strong hotel operations – delivering 66% of net profit – will be
provide an offset and estimate 2Q13 core earnings growth of 48% YoY. CENTEL’s
earnings prospects are strong with core earnings growth of 33% CAGR in 2013-14.
CENTEL is trading at 0.7x 13PEG. We maintain BUY with 2013 TP at Bt43/share.
Strong Thai tourism, strong hotel business. May’s industry statistics continue to
confirm a bright picture for Thailand’s tourism, with 1.8mn international tourist
arrivals or 19% YoY growth. Major contributors to growth were China (+94% YoY),
Russia (+74% YoY) and Malaysia (+26% YoY). In 5M13, total international tourist arrivals
grew by 19% YoY to 10.7mn. A conversation with management revealed that CENTEL is
continuing to see strong momentum for its hotel business. In April-May, its RevPar
growth was 38% YoY, mainly from a rise in occupancy rate to 76% (from 65% in the
same period last year) plus consolidation of its first resort in Maldives; removing
Maldives from the equation shows RevPar growth of 12% YoY. For 5M13, RevPar growth
was 31% YoY, well above its 2013 target of 20% YoY.
Weak food business from the high base and slow consumption. CENTEL revealed
that SSS growth was weak at ~2% in April–May, just half its target of 4%, but off last
year’s high base brought by successful marketing and promotions and amplified by this
year’s slower consumption. Total system sales reported double digit growth of 11% (vs.
the target of 15%) driven by outlet expansion. CENTEL plans more active marketing by
way of promotions plus expansion in the provinces to boost sales in 2H13.
New food brand to announce this month. CENTEL plans to announce its latest food
brand – believed to be a Japanese restaurant - this month. Including this brand will
give CENTEL 13 food brands.
Q2 2013F preview. We preliminarily estimate 2Q13F core earnings of Bt250mn, up 48%
YoY but down 61% QoQ. YoY growth is provided by the strong hotel operations, which
are able to offset the weak food operations; the QoQ decline is due to seasonality.