Central Plaza Hotel
Central Plaza Hotel Outperform (18E TP Bt44.25)
Company Update
Close Bt40.00
Tourism & Leisure August 17, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged
A tough job for food business and hotels in Bangkok Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS Bt)
1.487
1.650
KT ZMICO vs. consensus Share data
8.9%
7.3%
Reuters / Bloomberg
CENT.BK/CENTEL TB
Paid‐up Shares (m)
1,350.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
54.00/1,622.00
Foreign limit / actual (%)
40.00/14.08
52 week High / Low (Bt)
42.75/34.00
Avg. daily T/O (shares 000) NVDR (%)
2,085.00 3.37
Estimated free float (%)
51.66
Beta
0.76
URL
www.centarahotelsresorts.com
CGR
Anti‐corruption
Level 4 (Certified)
Anapat Wanuschaiyapruk Analyst, no. 57076 [email protected] 66 (0) 2-624‐6289
Slight cut in earnings CENTEL reported net profit growth of 13% in 2Q17 but we are rather unexcited since it was due to lower tax. Overall, the operation remains quite soft, especially for hotels in Bangkok and food business. However, the management said that hotels in 2H17 will be stronger while they also expect stimulus to save its food business. We did a bit of fine‐tuning on our forecasts, resulting in 2%‐3% lower profit for 17E – 19E. Our TP is rolled over to 18E at Bt44.25, providing upside of around 11%. Our recommendation is downgraded from Buy to Outperform. 2Q17 earnings at Bt398mn, +13%YoY on lower tax Overall, the operation was not very strong in 2Q17, with YoY flat hotel revenue and 3% lower food revenue. Total revenue dropped 1.4% while EBITDA also declined by 1.6%. The EBITDA margin was well maintained at 18.1%. However, CENTEL reported tax expenses of Bt18mn, implying an effective tax rate at 4.4% against its normal 20%. Net profit consequently grew 13%YoY while core profit (excluding extra items of Bt32mn in 2Q16) grew 24%YoY. Stronger hotel outlook in 2H17 In 2Q17, Bangkok hotels dropped 4.2% and the Maldives dipped 2.2% while upcountry rose by 9.5%. Management sees stronger bookings in 2H17, especially hotels outside Bangkok. The Maldives should recover as the 5‐star segment already saw growing revenue in 2Q17. We forecast that hotel revenue will edge up 1% in 17E based on RevPAR growth of ‐2.7%, +6.5% and ‐2.0% for Bangkok, upcountry and the Maldives, respectively. Food business is highly challenging SSS growth was quite disappointing in 2Q17 as the four main brands declined by 4.2% while the total portfolio dropped 3.9%. Even though management maintained its SSSG guidance at 0%, we think it will drop by 1.5% while food revenue will expand by only 2%, mainly from branch expansion (about 3%). Roll over TP to 18E at Bt44.25…Outperform We slightly revised down our bottom line forecasts by 2% ‐ 3% for 17E – 19E as we tone down our expectations. Our TP is rolled over to next year at Bt44.25, still providing upside of around 11%. CENTEL’s stock price looks undemanding in our view as it is trading at average PER for 17E. We hence change our recommendation from Buy to Outperform. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Core profit (Btmn) Core EPS (Bt) Core E S growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 17,851 1,188 0.88 ‐10.1% 0.40 6.00 2014 45.44 14.32 6.67 1.0% 12.8% 109%
2015 18,823 1,676 1.24 41.0% 0.50 6.86 2015 32.23 12.62 5.83 1.3% 19.3% 82%
2016 19,448 1,876 1.37 10.4% 0.55 7.71 2016 29.20 12.61 5.19 1.4% 18.8% 59%
2017E 19,802 1,964 1.62 18.2% 0.59 8.64 2017E 27.00 12.28 4.63 1.5% 18.1% 42%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 7
2018E 20,729 2,279 1.77 9.3% 0.68 9.73 2018E 23.69 11.28 4.11 1.7% 18.4% 22%
2019E 21,393 2,556 1.89 7.0% 0.76 10.95 2019E 21.13 10.58 3.65 1.9% 18.3% 1%
2Q17 earnings grew 13%YoY on lower tax CENTEL reported net profit of Bt398mn, +13%YoY. Overall, the operation was not very strong in 2Q17, with YoY flat hotel revenue and 3% lower food revenue. The hotel business saw a strong decline of RevPAR in Bangkok at ‐4.2%. Grand Centara at Central World was affected by the opening of Marriott Marquis Queen’s Park while Grand Centara Ladprao was impacted by road closures. However, upcountry hotels had very strong RevPAR growth at 9.4% on the recovery of hotels in Pattaya and Phuket. Maldives hotels showed a decrease in RevPAR at ‐ 2.2% but this was a significant improvement from 1Q17. Food revenue dropped from the decline in SSS at ‐3.9%, led by the four main brands. Total revenue dropped by 1.4% while EBITDA also declined by 1.6%. The EBITDA margin was well maintained at 18.1%. However, CENTEL reported tax expenses of Bt18mn, implying an effective tax rate at 4.4% against its normal 20%. Net profit consequently grew 13%YoY while core profit (excluding extra items of Bt32mn in 2Q16) grew 24%YoY.
Figure 1: CENTEL’s 2Q17 earnings review Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit EBITDA Interest expense Other income Income tax Other extraordinary items Gn (Ls) from affiliates Net profit (loss) Core profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt / equity (x) BVPS (Bt) ROE (%)
2Q16 4,771 1,909 885 (79) 97 (92) 32 6 354 322 0.26 40.0 18.5 6.8 0.4 5.0 0.7 7.2 3.6
1Q17 5,167 2,319 1,328 (59) 143 (189) 36 14 783 747 0.58 44.9 25.7 14.5 0.9 15.2 0.5 8.2 7.3
2Q17 4,702 1,909 827 (57) 97 (18) 0 6 398 398 0.30 40.6 17.6 8.5 0.9 6.5 0.5 8.0 3.6
% YoY (1.4) (0.0) (6.6) (27.9) (0.1) (80.6) n.m. 12.4 12.5 23.5 12.5
% QoQ (9.0) (17.7) (37.8) (3.0) (32.2) (90.6) n.m. (55.3) (49.1) (46.7) (49.1)
6M17 9,869 4,227 2,155 (115) 240 (207) 36 21 1,181 1,145 0.88 42.8 21.8 11.6 0.9 10.9 0.5 8.0 11.0
% YoY (0.9) (0.8) (6.6) (28.3) 1.8 (21.8) n.m. 4.3 6.3 6.0 6.3
YTD
2017E 19,802 8,194 4,426 (260) 447 (450) 36 20 2,000 1,964 1.48 41.4 22.4 9.9 0.5 8.9 0.4 8.6 18.1
% YoY 1.8 2.5 3.3 (12.8) (2.3) 8.6 (236.5) (40.5) 8.1 4.7 8.1
(% 17E) 49.8 51.6 48.7 44.3 53.7 46.0 101.1 102.5 59.1 58.3 59.1
Sources: CENTEL, KT Zmico Research
Stronger hotel outlook in 2H17 Management sees stronger bookings in 2H17, especially in Pattaya and Phuket. Hua Hin, which has dragged down the overall performance, has started to recover as well. In Bangkok, we think the slowdown will continue for a few more years. First, the management expects that the effect from the Marriott Marquis might continue for several years. Second, road closures that have impacted Grand Centara at Ladprao will last until the construction is done or customers get used to the situation, and it is very hard to get a sense of the timing. For Maldives, there should be a recovery as the 5‐star segment already saw growing revenue in 2Q17. Another factor that might help is airport renovations that will be complete next year, as this will support more flights and allow a greater number of tourists to visit the islands. Accordingly, we forecast hotel revenue to edge up 1% based on RevPAR growth of ‐2.7%, +6.5% and ‐2.0% for Bangkok, upcountry and Maldives, respectively. For 18E, we think the situation will be more favorable in Thailand as the coming election might help boost confidence in tourism. We expect hotel revenue to grow by 3.8% on a 1.5% increase in RevPAR. We have not included the expansion of hotels in the Middle East (which should come as shared profit) or COSI hotel (3‐star segment) in our model. CENTEL also plans to set up a REIT for its hotels under management, which is part of the plan to accelerate income from management contracts. REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 7
Figure 2: Hotel operation 1.1) Bangkok occupancy rate 100%
85% 84%
80%
1.2) Bangkok RevPAR
85%
79% 73%
77%
(Baht) 3,500 3,000
‐0.7% +8.3%
+5.7% ‐4.2%
+3.3%
+0.1%
Q3
Q4
2,500
60%
2,000 40%
1,500 1,000
20%
500 0%
0 Q1
Q2 2014
Q3
2015
2016
Q4
Q1
2.1) Upcountry occupancy rate 100%
88% 86%
80%
82%
2015
2016
2017
2.2) Upcountry RevPAR (Baht)
81% 78%
Q2 2014
2017
79%
5,000
+3.8% +0.7%
4,000 60% 40%
+2.9%
2,000
20%
1,000
0%
0 Q1
Q2 2014
Q3
2015
2016
Q4
Q1
85%
92% 81%
80%
82% 77%
Q2 2014
2017
3.1) Maldives occupancy rate 100%
‐2.2%
+9.4% +0.7%
3,000
2015
Q3 2016
Q4
2017
3.2) Maldives RevPAR 88%
(Baht) 25,000 20,000
60%
+6.6% ‐11.8%
15,000
40%
+5.0%
+8.2% ‐2.2%
0.0%
10,000
20%
5,000
0%
0 Q1
Q2 2014
Q3
2015
2016
Q4 2017
Q1
Q2 2014
2015
Q3 2016
2017
Source: CENTEL, KT Zmico Research
Food business is highly challenging SSS growth was quite disappointing in 2Q17 as the four main brands declined by 4.2% while the total portfolio dropped 3.9%. There are various explanations for the decline, for example, fewer holidays compared to last year, a high base from the stimulus in Apr‐16, and an unfavorable economy. We saw the same performance across all restaurant operators in Thailand. Even though management maintained its SSSG guidance at 0%, we think this is still challenging and expect that it will drop by 1.5%. Food revenue will expand by only 2%, mainly from branch expansion (about 3%). For 18E, we expect food revenue to grow by 5.4% on 1% SSSG and 120 new stores. We are also looking forward to inorganic growth for the food business, as its low debt level has readied the company for M&A opportunities. REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 7
Q4
Figure 3: Food operations 1) Food same‐store‐sales growth
2) Food outlet (Outlet)
15.0%
Top 4
Other
Top 4
Total
Other
Source: CENTEL, KT Zmico Research
Roll over TP to 18E at Bt44.25…Outperform We slightly revised down our bottom line forecasts by 2% ‐ 3% for 17E – 19E, mainly from lower Bangkok RevPAR and lower SSSG (from +1% to ‐2% for the four main brands). Our TP is rolled over to next year at Bt44.25, still providing upside of around 11%. CENTEL’s stock price looks undemanding in our view, trading at 17E PER of 27x or at its historical average. Our recommendation is downgraded from Buy to Outperform as the recent stock rally lowers the upside.
Figure 4: Assumptions
Hotel Occupancy rate Bangkok Upcountry Maldives RevPAR growth Bangkok Upcountry Maldives Food Outlets Top 4 brands Other SSS growth Top 4 brands Other Revenue breakdown Hotel Growth Food Growth EBITDA margin Hotel Food
2013 77.5% 80.3% 84.8%
2014 61.6% 78.9% 90.6%
2015 81.3% 79.6% 86.2%
‐20.2% +0.8% +21.3% 660 83
9,059
32.3% 13.1%
Sources: CENTEL, KT Zmico Research
33.0% 9.4%
760 120
+1.0% +1.0%
+1.5% +1.5%
9,014 1.1% 10,788 1.8%
31.7% 13.0%
760 120
+2.0% +2.0% +0.0%
‐2.0% +0.0%
8,919 2.2% 10,597 4.2%
32.6% 12.4%
2019E 82.0% 82.5% 85.0%
+7.0% +0.4% +0.0%
745 110
‐1.2% +3.7%
8,728 9.8% 10,170 2.7%
2018E 82.0% 82.5% 85.0%
‐2.7% +6.5% ‐3.9%
730 100
‐1.4% +6.1%
7,950 ‐1.1% 9,901 9.3%
2017E 78.2% 83.8% 85.0%
+4.3% +0.5% +1.2%
701 91
+1.8% ‐2.8%
8,037
+37.8% +1.6% +4.3%
699 82
+1.6% ‐7.2%
2016 81.2% 81.8% 86.7%
9,353 3.8% 11,375 5.4%
9,506 1.6% 11,887 4.5%
31.7% 13.1%
31.7% 14.1%
31.7% 14.9%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 7
2Q17
1Q17
4Q16
3Q16
2Q16
1Q16
4Q15
3Q15
2Q15
1Q14
2Q17
1Q17
4Q16
3Q16
2Q16
1Q16
4Q15
3Q15
2Q15
1Q15
4Q14
3Q14
2Q14
1Q14
‐15.0%
1Q15
‐5.0% ‐10.0%
4Q14
0.0%
3Q14
5.0%
2Q14
800 708 730 721 724 670 684 690 699 697 693 693 696 702 704 700 600 500 400 300 200 82 83 83 82 80 81 81 89 98 97 98 100 99 100 100 0
10.0%
Figure 5: CENTEL’s PER band
Figure 6: CENTEL’s PBV band
(X)
(X) +2 S.D.
10.0
45
8.0
35
+2 S.D.
7.0 Avg.
+1 S.D.
6.0 5.0
25
Avg.
4.0 -1 S.D.
3.0 2.0
Source: Bloomberg, KT Zmico Research
Source: Bloomberg, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 7
Jul-17
Jan-17
Jul-16
Jan-16
Jul-15
Jan-15
Jul-14
Jul-17
Jan-17
Jul-16
Jan-16
Jul-15
Jan-15
Jul-14
Jan-14
0.0
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
-2 S.D.
1.0
Company Update
Close Bt40.00
Tourism & Leisure August 17, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged
A tough job for food business and hotels in Bangkok Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS Bt)
1.487
1.650
KT ZMICO vs. consensus Share data
8.9%
7.3%
Reuters / Bloomberg
CENT.BK/CENTEL TB
Paid‐up Shares (m)
1,350.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
54.00/1,622.00
Foreign limit / actual (%)
40.00/14.08
52 week High / Low (Bt)
42.75/34.00
Avg. daily T/O (shares 000) NVDR (%)
2,085.00 3.37
Estimated free float (%)
51.66
Beta
0.76
URL
www.centarahotelsresorts.com
CGR
Anti‐corruption
Level 4 (Certified)
Anapat Wanuschaiyapruk Analyst, no. 57076 [email protected] 66 (0) 2-624‐6289
Slight cut in earnings CENTEL reported net profit growth of 13% in 2Q17 but we are rather unexcited since it was due to lower tax. Overall, the operation remains quite soft, especially for hotels in Bangkok and food business. However, the management said that hotels in 2H17 will be stronger while they also expect stimulus to save its food business. We did a bit of fine‐tuning on our forecasts, resulting in 2%‐3% lower profit for 17E – 19E. Our TP is rolled over to 18E at Bt44.25, providing upside of around 11%. Our recommendation is downgraded from Buy to Outperform. 2Q17 earnings at Bt398mn, +13%YoY on lower tax Overall, the operation was not very strong in 2Q17, with YoY flat hotel revenue and 3% lower food revenue. Total revenue dropped 1.4% while EBITDA also declined by 1.6%. The EBITDA margin was well maintained at 18.1%. However, CENTEL reported tax expenses of Bt18mn, implying an effective tax rate at 4.4% against its normal 20%. Net profit consequently grew 13%YoY while core profit (excluding extra items of Bt32mn in 2Q16) grew 24%YoY. Stronger hotel outlook in 2H17 In 2Q17, Bangkok hotels dropped 4.2% and the Maldives dipped 2.2% while upcountry rose by 9.5%. Management sees stronger bookings in 2H17, especially hotels outside Bangkok. The Maldives should recover as the 5‐star segment already saw growing revenue in 2Q17. We forecast that hotel revenue will edge up 1% in 17E based on RevPAR growth of ‐2.7%, +6.5% and ‐2.0% for Bangkok, upcountry and the Maldives, respectively. Food business is highly challenging SSS growth was quite disappointing in 2Q17 as the four main brands declined by 4.2% while the total portfolio dropped 3.9%. Even though management maintained its SSSG guidance at 0%, we think it will drop by 1.5% while food revenue will expand by only 2%, mainly from branch expansion (about 3%). Roll over TP to 18E at Bt44.25…Outperform We slightly revised down our bottom line forecasts by 2% ‐ 3% for 17E – 19E as we tone down our expectations. Our TP is rolled over to next year at Bt44.25, still providing upside of around 11%. CENTEL’s stock price looks undemanding in our view as it is trading at average PER for 17E. We hence change our recommendation from Buy to Outperform. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Core profit (Btmn) Core EPS (Bt) Core E S growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 17,851 1,188 0.88 ‐10.1% 0.40 6.00 2014 45.44 14.32 6.67 1.0% 12.8% 109%
2015 18,823 1,676 1.24 41.0% 0.50 6.86 2015 32.23 12.62 5.83 1.3% 19.3% 82%
2016 19,448 1,876 1.37 10.4% 0.55 7.71 2016 29.20 12.61 5.19 1.4% 18.8% 59%
2017E 19,802 1,964 1.62 18.2% 0.59 8.64 2017E 27.00 12.28 4.63 1.5% 18.1% 42%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 7
2018E 20,729 2,279 1.77 9.3% 0.68 9.73 2018E 23.69 11.28 4.11 1.7% 18.4% 22%
2019E 21,393 2,556 1.89 7.0% 0.76 10.95 2019E 21.13 10.58 3.65 1.9% 18.3% 1%
2Q17 earnings grew 13%YoY on lower tax CENTEL reported net profit of Bt398mn, +13%YoY. Overall, the operation was not very strong in 2Q17, with YoY flat hotel revenue and 3% lower food revenue. The hotel business saw a strong decline of RevPAR in Bangkok at ‐4.2%. Grand Centara at Central World was affected by the opening of Marriott Marquis Queen’s Park while Grand Centara Ladprao was impacted by road closures. However, upcountry hotels had very strong RevPAR growth at 9.4% on the recovery of hotels in Pattaya and Phuket. Maldives hotels showed a decrease in RevPAR at ‐ 2.2% but this was a significant improvement from 1Q17. Food revenue dropped from the decline in SSS at ‐3.9%, led by the four main brands. Total revenue dropped by 1.4% while EBITDA also declined by 1.6%. The EBITDA margin was well maintained at 18.1%. However, CENTEL reported tax expenses of Bt18mn, implying an effective tax rate at 4.4% against its normal 20%. Net profit consequently grew 13%YoY while core profit (excluding extra items of Bt32mn in 2Q16) grew 24%YoY.
Figure 1: CENTEL’s 2Q17 earnings review Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit EBITDA Interest expense Other income Income tax Other extraordinary items Gn (Ls) from affiliates Net profit (loss) Core profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt / equity (x) BVPS (Bt) ROE (%)
2Q16 4,771 1,909 885 (79) 97 (92) 32 6 354 322 0.26 40.0 18.5 6.8 0.4 5.0 0.7 7.2 3.6
1Q17 5,167 2,319 1,328 (59) 143 (189) 36 14 783 747 0.58 44.9 25.7 14.5 0.9 15.2 0.5 8.2 7.3
2Q17 4,702 1,909 827 (57) 97 (18) 0 6 398 398 0.30 40.6 17.6 8.5 0.9 6.5 0.5 8.0 3.6
% YoY (1.4) (0.0) (6.6) (27.9) (0.1) (80.6) n.m. 12.4 12.5 23.5 12.5
% QoQ (9.0) (17.7) (37.8) (3.0) (32.2) (90.6) n.m. (55.3) (49.1) (46.7) (49.1)
6M17 9,869 4,227 2,155 (115) 240 (207) 36 21 1,181 1,145 0.88 42.8 21.8 11.6 0.9 10.9 0.5 8.0 11.0
% YoY (0.9) (0.8) (6.6) (28.3) 1.8 (21.8) n.m. 4.3 6.3 6.0 6.3
YTD
2017E 19,802 8,194 4,426 (260) 447 (450) 36 20 2,000 1,964 1.48 41.4 22.4 9.9 0.5 8.9 0.4 8.6 18.1
% YoY 1.8 2.5 3.3 (12.8) (2.3) 8.6 (236.5) (40.5) 8.1 4.7 8.1
(% 17E) 49.8 51.6 48.7 44.3 53.7 46.0 101.1 102.5 59.1 58.3 59.1
Sources: CENTEL, KT Zmico Research
Stronger hotel outlook in 2H17 Management sees stronger bookings in 2H17, especially in Pattaya and Phuket. Hua Hin, which has dragged down the overall performance, has started to recover as well. In Bangkok, we think the slowdown will continue for a few more years. First, the management expects that the effect from the Marriott Marquis might continue for several years. Second, road closures that have impacted Grand Centara at Ladprao will last until the construction is done or customers get used to the situation, and it is very hard to get a sense of the timing. For Maldives, there should be a recovery as the 5‐star segment already saw growing revenue in 2Q17. Another factor that might help is airport renovations that will be complete next year, as this will support more flights and allow a greater number of tourists to visit the islands. Accordingly, we forecast hotel revenue to edge up 1% based on RevPAR growth of ‐2.7%, +6.5% and ‐2.0% for Bangkok, upcountry and Maldives, respectively. For 18E, we think the situation will be more favorable in Thailand as the coming election might help boost confidence in tourism. We expect hotel revenue to grow by 3.8% on a 1.5% increase in RevPAR. We have not included the expansion of hotels in the Middle East (which should come as shared profit) or COSI hotel (3‐star segment) in our model. CENTEL also plans to set up a REIT for its hotels under management, which is part of the plan to accelerate income from management contracts. REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 7
Figure 2: Hotel operation 1.1) Bangkok occupancy rate 100%
85% 84%
80%
1.2) Bangkok RevPAR
85%
79% 73%
77%
(Baht) 3,500 3,000
‐0.7% +8.3%
+5.7% ‐4.2%
+3.3%
+0.1%
Q3
Q4
2,500
60%
2,000 40%
1,500 1,000
20%
500 0%
0 Q1
Q2 2014
Q3
2015
2016
Q4
Q1
2.1) Upcountry occupancy rate 100%
88% 86%
80%
82%
2015
2016
2017
2.2) Upcountry RevPAR (Baht)
81% 78%
Q2 2014
2017
79%
5,000
+3.8% +0.7%
4,000 60% 40%
+2.9%
2,000
20%
1,000
0%
0 Q1
Q2 2014
Q3
2015
2016
Q4
Q1
85%
92% 81%
80%
82% 77%
Q2 2014
2017
3.1) Maldives occupancy rate 100%
‐2.2%
+9.4% +0.7%
3,000
2015
Q3 2016
Q4
2017
3.2) Maldives RevPAR 88%
(Baht) 25,000 20,000
60%
+6.6% ‐11.8%
15,000
40%
+5.0%
+8.2% ‐2.2%
0.0%
10,000
20%
5,000
0%
0 Q1
Q2 2014
Q3
2015
2016
Q4 2017
Q1
Q2 2014
2015
Q3 2016
2017
Source: CENTEL, KT Zmico Research
Food business is highly challenging SSS growth was quite disappointing in 2Q17 as the four main brands declined by 4.2% while the total portfolio dropped 3.9%. There are various explanations for the decline, for example, fewer holidays compared to last year, a high base from the stimulus in Apr‐16, and an unfavorable economy. We saw the same performance across all restaurant operators in Thailand. Even though management maintained its SSSG guidance at 0%, we think this is still challenging and expect that it will drop by 1.5%. Food revenue will expand by only 2%, mainly from branch expansion (about 3%). For 18E, we expect food revenue to grow by 5.4% on 1% SSSG and 120 new stores. We are also looking forward to inorganic growth for the food business, as its low debt level has readied the company for M&A opportunities. REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 7
Q4
Figure 3: Food operations 1) Food same‐store‐sales growth
2) Food outlet (Outlet)
15.0%
Top 4
Other
Top 4
Total
Other
Source: CENTEL, KT Zmico Research
Roll over TP to 18E at Bt44.25…Outperform We slightly revised down our bottom line forecasts by 2% ‐ 3% for 17E – 19E, mainly from lower Bangkok RevPAR and lower SSSG (from +1% to ‐2% for the four main brands). Our TP is rolled over to next year at Bt44.25, still providing upside of around 11%. CENTEL’s stock price looks undemanding in our view, trading at 17E PER of 27x or at its historical average. Our recommendation is downgraded from Buy to Outperform as the recent stock rally lowers the upside.
Figure 4: Assumptions
Hotel Occupancy rate Bangkok Upcountry Maldives RevPAR growth Bangkok Upcountry Maldives Food Outlets Top 4 brands Other SSS growth Top 4 brands Other Revenue breakdown Hotel Growth Food Growth EBITDA margin Hotel Food
2013 77.5% 80.3% 84.8%
2014 61.6% 78.9% 90.6%
2015 81.3% 79.6% 86.2%
‐20.2% +0.8% +21.3% 660 83
9,059
32.3% 13.1%
Sources: CENTEL, KT Zmico Research
33.0% 9.4%
760 120
+1.0% +1.0%
+1.5% +1.5%
9,014 1.1% 10,788 1.8%
31.7% 13.0%
760 120
+2.0% +2.0% +0.0%
‐2.0% +0.0%
8,919 2.2% 10,597 4.2%
32.6% 12.4%
2019E 82.0% 82.5% 85.0%
+7.0% +0.4% +0.0%
745 110
‐1.2% +3.7%
8,728 9.8% 10,170 2.7%
2018E 82.0% 82.5% 85.0%
‐2.7% +6.5% ‐3.9%
730 100
‐1.4% +6.1%
7,950 ‐1.1% 9,901 9.3%
2017E 78.2% 83.8% 85.0%
+4.3% +0.5% +1.2%
701 91
+1.8% ‐2.8%
8,037
+37.8% +1.6% +4.3%
699 82
+1.6% ‐7.2%
2016 81.2% 81.8% 86.7%
9,353 3.8% 11,375 5.4%
9,506 1.6% 11,887 4.5%
31.7% 13.1%
31.7% 14.1%
31.7% 14.9%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 7
2Q17
1Q17
4Q16
3Q16
2Q16
1Q16
4Q15
3Q15
2Q15
1Q14
2Q17
1Q17
4Q16
3Q16
2Q16
1Q16
4Q15
3Q15
2Q15
1Q15
4Q14
3Q14
2Q14
1Q14
‐15.0%
1Q15
‐5.0% ‐10.0%
4Q14
0.0%
3Q14
5.0%
2Q14
800 708 730 721 724 670 684 690 699 697 693 693 696 702 704 700 600 500 400 300 200 82 83 83 82 80 81 81 89 98 97 98 100 99 100 100 0
10.0%
Figure 5: CENTEL’s PER band
Figure 6: CENTEL’s PBV band
(X)
(X) +2 S.D.
10.0
45
8.0
35
+2 S.D.
7.0 Avg.
+1 S.D.
6.0 5.0
25
Avg.
4.0 -1 S.D.
3.0 2.0
Source: Bloomberg, KT Zmico Research
Source: Bloomberg, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 7
Jul-17
Jan-17
Jul-16
Jan-16
Jul-15
Jan-15
Jul-14
Jul-17
Jan-17
Jul-16
Jan-16
Jul-15
Jan-15
Jul-14
Jan-14
0.0
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
-2 S.D.
1.0
