Central Plaza Hotel
Central Plaza Hotel Buy (15E TP Bt42.00)
Company update
Close Bt37.25
Tourism & Leisure August 3, 2015
Earnings upgrade/Earnings downgrade/Overview unchanged
Improving profitability
Source: SET Smart
FY15
FY16
Consensus EPS (Bt)
1.247
1.481
KT ZMICO vs. consensus Share data
1.0%
6.7%
Reuters / Bloomberg
CENTEL.BK/CENTEL TB
Paid‐up Shares (m)
1,350.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
50.00/1,438.00
Foreign limit / actual (%)
40.00/10.75
52 week High / Low (Bt)
42.00/26.75
Avg. daily T/O (shares 000) NVDR (%)
2,185.00 3.24
Estimated free float (%)
46.63
Beta
1.26
URL
www.centarahotelsresorts.com
CGR
Pornsawat Jirajarus Analyst no. 18228 [email protected] 66 (0) 2624‐6257
Maintain Buy rating Apart from better hotel occupancy, CENTEL’s profitability in the restaurant business seems to be improving at a faster pace than we previously thought. With a better tourism outlook, continued improvement in the profitability of restaurants and the higher room rates of Maldives hotels after renovations, we raise our ‘15E DCF TP by 5% to Bt42 (WACC 10%, terminal growth 3%). With the stock price at 24x PE in ’16 and PE/EPS growth at 0.9x looking attractive, we maintain our Buy call. Expect 2Q15 net profit to jump 395% YoY We expect CENTEL’s 2Q15 net profit at Bt206mn (EPS of Bt0.15), up 395% YoY but down 75% QoQ (seasonal), with the recovery of hotel occupancy when compared with the political impact last year and improving profitability in the restaurant business as the key drivers. Hotel’s RevPar should rise 11% YoY, largely boosted by hotels in Bangkok (+58% YoY vs. +4% upcountry and +9% in the Maldives). Average hotel occupancy should rise 7% YoY. For the restaurant business, the decrease in raw material costs and closures of loss‐ making outlets should significantly improve profitability. This should be the case despite the economic slowdown dragging same‐store‐sales growth down by 1% YoY, resulting in total restaurant sales increasing just 1.3% YoY. The improving profitability of both the hotel and restaurant business should raise the EBITDA margin by 470 bps YoY to 18.6%. Revise up profit forecasts and raise 15E TP to Bt42 Growing tourist volume should maintain the good performance of domestic hotels in 2H15. Revenue from Grand Maldives should decline in 3Q15 from renovating 30% of its room capacity, but we should see increasing rates in the Q4 high season, resulting in the full‐year revenue from the Maldives rising 8‐9% YoY. Restaurants’ profitability should continue improving despite weak sales. We raise the hotel occupancy rate by 2% to 80% in ‘15E and 1% to 82% in ‘16E and lower the same‐store‐sales growth of restaurants from 2% to 0% this year; however, improving profitability causes us to revise up the profit forecasts by 19% in 15E and 3% in 16E. Our ‘15E DCF TP is raised by 5% to Bt42. To develop more hotels in Maldives This month, CENTEL expects to sign a lease contract with the government of the Maldives for developing five hotels in the islands. For the first phase, it plans to develop two 4‐star hotels, which should add around 300 rooms to its capacity by 2018. We have not yet included these projects in our forecasts. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Core net profit (Btmn) Core EPS (Bt) Core EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2013 17,096 1,334 0.98 24.2% 0.39 7.35 2013 27.8 11.6 3.7 1.42% 13.69% 112.08%
2014 17,992 1,188 0.88 ‐11.7% 0.40 8.09 2014 36.2 12.3 3.8 1.29% 11.14% 86.93%
2015E 19,252 1,704 1.26 43.4% 0.50 8.86 2015E 29.5 12.0 4.2 1.36% 14.90% 65.44%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2016E 21,062 2,136 1.58 25.3% 0.63 9.85 2016E 23.6 10.2 3.8 1.70% 16.90% 43.70%
2017E 22,815 2,569 1.90 20.2% 0.76 11.04 2017E 19.6 9.0 3.4 2.04% 18.19% 23.24%
Figure 1: Earnings results preview Profit and Loss (Btmn) FY Ended 31 Dec Revenue Gross profit EBITDA Interes t expens e Other i ncome Income ta x Forex ga i n (l os s ) Other extra ordi na ry Items Gn (Ls ) from a ffi l i a tes Net profit (loss) Normalized profit (loss) Reported EPS (THB) Gros s ma rgi n (%) EBITDA ma rgi n (%) Net ma rgi n (%) Current ra ti o (x) Interes t covera ge (x) Debt /equi ty (x) BVPS (Bt) ROE (%)
2Q14 4,267 1,605 590 (115) 85 (105) 0 0 1 42 42 0.03 37.6 13.8 1.0 0.3 5.2 1.0 8.2 9.3
3Q14 4,285 1,667 843 (111) 103 (39) 0 0 1 168 168 0.12 38.9 19.7 3.9 0.4 7.6 0.9 8.3 8.9
4Q14
1Q15
4,897
5,047
2Q15E % YoY % QoQ 4,489
5.2
(11.1)
1H14 8,811
1H15E % YoY 9,536
8.2
19,252
2015E % YoY % YTD 7.0
49.5
1,950
2,273
1,728
7.7
(24.0)
3,603
4,001
11.0
8,032
11.2
49.8
1,193
1,567
833
41.2
(46.8)
1,817
2,400
32.0
4,450
15.5
53.9
(110)
(99)
(97)
(15.3)
(2.4)
(234)
(196)
(16.0)
(392)
(13.8)
50.1
200
134
100
17.1
(25.3)
191
234
22.2
460
(6.9)
50.8
(92)
(115)
(92)
(12.2)
(20.0)
(235)
(207)
(12.2)
(457)
24.9
45.2
0
0
0
0.0
0.0
0
0
0.0
0
nm
nm
34
0
0
n.m.
0.0
0
0
n.m.
0
nm
nm
24 (155.6)
102.7
(70)
20
5
n.m.
(74.6)
25
25
n.m.
477
834
206
395.2
(75.3)
544
1,040
91.4
1,704
43.4
443
834
206
395.2
(75.3)
544
1,040
91.4
1,704
47.5
61.0
0.35
0.62
0.15
395.2
(75.3)
0.40
0.77
91.4
1.26
43.4
61.0
39.8
45.0
38.5
40.9
42.0
41.7
24.4
31.0
18.6
20.6
25.2
23.1
9.7
16.5
4.6
6.2
10.9
8.9
0.5
0.5
n.a.
0.3
n.a.
0.5
10.8
15.8
8.6
7.8
12.2
11.3
0.8
0.8
n.a.
1.0
n.a.
1.3
8.1
8.7
n.a.
8.2
n.a.
8.9
10.6
13.6
n.a.
9.3
n.a.
14.9
61.0
Source: CENTEL, KT ZMICO Research
Figure 2: Key operating figures ‐ Hotel
Avg. Room Rate (Bt /night) Avg. Occupancy Rate (%)
Avg. RevPar (Bt /night)
# of outlets
5,000
Same-store-sales growth
16.0%
100%
14.0%
800
12.0%
80% 60%
2016F
2015F
2014
2013
2012
2011
2010
2009
10.0%
600
8.0%
40%
400
20%
200
0%
2008
4,000 3,000 2,000 1,000 ‐
New outlets
1,000
Bt per night
2007
Figure 3: Key operating figures ‐ Restaurant
6.0% 4.0% 2.0%
0
0.0% 2010
2011
2012
2013F 2014F 2015F 2016F
Source: CENTEL, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: Forecast changes
Figure 5: DCF valuation ###
2014 17,992
Revenue %change Gross margin EBITDA %change EBITDA margin Net profit %change Normalized profi %change Net margin
40.1% 3,820 21.2% 1,188 1,155 6.6%
New 2015e 19,252 ‐5.1% 41.7% 4,450 10.3% 23.1% 1,704 18.7% 1,704 18.7% 8.9%
2016e 21,062 ‐6.6% 42.0% 5,134 9.5% 24.4% 2,136 2.9% 2,136 2.9% 10.1%
Old 2015e 20,285
2016e 22,540
40.7% 4,035
40.8% 4,688
19.9% 1,436
20.8% 2,075
1,436
2,075
7.1%
9.2%
2015F
2016F
2017F
2018F
Free cash flow to firm (FCFF)
####
2,965
NPV of FCFF during adjustment period NPV of Terminal value less: net interest bearing debt Equity value No. of shares outstanding (mn)
19,817 43,006 - 5,813 57,010 1,350
3,505
3,930
4,459
Market risk premium Beta Terminal growth rate Cost of equity Targeted D/E
10.1%
Source: CENTEL, KT ZMICO Research
Figure 6: PE Band
Figure 7: PBV Band (X)
(X)
8.0
60 +2 S.D.
+1 S.D.
6.0
+2
5.0
+1
4.0 30
2.0 -1 S.D.
-1 S.D.
1.0 -2 S.D.
10
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-11
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
0.0 Jan-13
Jul-12
Jan-12
Jul-11
0
Jan-11
-2 S.D.
Company update
Close Bt37.25
Tourism & Leisure August 3, 2015
Earnings upgrade/Earnings downgrade/Overview unchanged
Improving profitability
Source: SET Smart
FY15
FY16
Consensus EPS (Bt)
1.247
1.481
KT ZMICO vs. consensus Share data
1.0%
6.7%
Reuters / Bloomberg
CENTEL.BK/CENTEL TB
Paid‐up Shares (m)
1,350.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
50.00/1,438.00
Foreign limit / actual (%)
40.00/10.75
52 week High / Low (Bt)
42.00/26.75
Avg. daily T/O (shares 000) NVDR (%)
2,185.00 3.24
Estimated free float (%)
46.63
Beta
1.26
URL
www.centarahotelsresorts.com
CGR
Pornsawat Jirajarus Analyst no. 18228 [email protected] 66 (0) 2624‐6257
Maintain Buy rating Apart from better hotel occupancy, CENTEL’s profitability in the restaurant business seems to be improving at a faster pace than we previously thought. With a better tourism outlook, continued improvement in the profitability of restaurants and the higher room rates of Maldives hotels after renovations, we raise our ‘15E DCF TP by 5% to Bt42 (WACC 10%, terminal growth 3%). With the stock price at 24x PE in ’16 and PE/EPS growth at 0.9x looking attractive, we maintain our Buy call. Expect 2Q15 net profit to jump 395% YoY We expect CENTEL’s 2Q15 net profit at Bt206mn (EPS of Bt0.15), up 395% YoY but down 75% QoQ (seasonal), with the recovery of hotel occupancy when compared with the political impact last year and improving profitability in the restaurant business as the key drivers. Hotel’s RevPar should rise 11% YoY, largely boosted by hotels in Bangkok (+58% YoY vs. +4% upcountry and +9% in the Maldives). Average hotel occupancy should rise 7% YoY. For the restaurant business, the decrease in raw material costs and closures of loss‐ making outlets should significantly improve profitability. This should be the case despite the economic slowdown dragging same‐store‐sales growth down by 1% YoY, resulting in total restaurant sales increasing just 1.3% YoY. The improving profitability of both the hotel and restaurant business should raise the EBITDA margin by 470 bps YoY to 18.6%. Revise up profit forecasts and raise 15E TP to Bt42 Growing tourist volume should maintain the good performance of domestic hotels in 2H15. Revenue from Grand Maldives should decline in 3Q15 from renovating 30% of its room capacity, but we should see increasing rates in the Q4 high season, resulting in the full‐year revenue from the Maldives rising 8‐9% YoY. Restaurants’ profitability should continue improving despite weak sales. We raise the hotel occupancy rate by 2% to 80% in ‘15E and 1% to 82% in ‘16E and lower the same‐store‐sales growth of restaurants from 2% to 0% this year; however, improving profitability causes us to revise up the profit forecasts by 19% in 15E and 3% in 16E. Our ‘15E DCF TP is raised by 5% to Bt42. To develop more hotels in Maldives This month, CENTEL expects to sign a lease contract with the government of the Maldives for developing five hotels in the islands. For the first phase, it plans to develop two 4‐star hotels, which should add around 300 rooms to its capacity by 2018. We have not yet included these projects in our forecasts. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Core net profit (Btmn) Core EPS (Bt) Core EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2013 17,096 1,334 0.98 24.2% 0.39 7.35 2013 27.8 11.6 3.7 1.42% 13.69% 112.08%
2014 17,992 1,188 0.88 ‐11.7% 0.40 8.09 2014 36.2 12.3 3.8 1.29% 11.14% 86.93%
2015E 19,252 1,704 1.26 43.4% 0.50 8.86 2015E 29.5 12.0 4.2 1.36% 14.90% 65.44%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2016E 21,062 2,136 1.58 25.3% 0.63 9.85 2016E 23.6 10.2 3.8 1.70% 16.90% 43.70%
2017E 22,815 2,569 1.90 20.2% 0.76 11.04 2017E 19.6 9.0 3.4 2.04% 18.19% 23.24%
Figure 1: Earnings results preview Profit and Loss (Btmn) FY Ended 31 Dec Revenue Gross profit EBITDA Interes t expens e Other i ncome Income ta x Forex ga i n (l os s ) Other extra ordi na ry Items Gn (Ls ) from a ffi l i a tes Net profit (loss) Normalized profit (loss) Reported EPS (THB) Gros s ma rgi n (%) EBITDA ma rgi n (%) Net ma rgi n (%) Current ra ti o (x) Interes t covera ge (x) Debt /equi ty (x) BVPS (Bt) ROE (%)
2Q14 4,267 1,605 590 (115) 85 (105) 0 0 1 42 42 0.03 37.6 13.8 1.0 0.3 5.2 1.0 8.2 9.3
3Q14 4,285 1,667 843 (111) 103 (39) 0 0 1 168 168 0.12 38.9 19.7 3.9 0.4 7.6 0.9 8.3 8.9
4Q14
1Q15
4,897
5,047
2Q15E % YoY % QoQ 4,489
5.2
(11.1)
1H14 8,811
1H15E % YoY 9,536
8.2
19,252
2015E % YoY % YTD 7.0
49.5
1,950
2,273
1,728
7.7
(24.0)
3,603
4,001
11.0
8,032
11.2
49.8
1,193
1,567
833
41.2
(46.8)
1,817
2,400
32.0
4,450
15.5
53.9
(110)
(99)
(97)
(15.3)
(2.4)
(234)
(196)
(16.0)
(392)
(13.8)
50.1
200
134
100
17.1
(25.3)
191
234
22.2
460
(6.9)
50.8
(92)
(115)
(92)
(12.2)
(20.0)
(235)
(207)
(12.2)
(457)
24.9
45.2
0
0
0
0.0
0.0
0
0
0.0
0
nm
nm
34
0
0
n.m.
0.0
0
0
n.m.
0
nm
nm
24 (155.6)
102.7
(70)
20
5
n.m.
(74.6)
25
25
n.m.
477
834
206
395.2
(75.3)
544
1,040
91.4
1,704
43.4
443
834
206
395.2
(75.3)
544
1,040
91.4
1,704
47.5
61.0
0.35
0.62
0.15
395.2
(75.3)
0.40
0.77
91.4
1.26
43.4
61.0
39.8
45.0
38.5
40.9
42.0
41.7
24.4
31.0
18.6
20.6
25.2
23.1
9.7
16.5
4.6
6.2
10.9
8.9
0.5
0.5
n.a.
0.3
n.a.
0.5
10.8
15.8
8.6
7.8
12.2
11.3
0.8
0.8
n.a.
1.0
n.a.
1.3
8.1
8.7
n.a.
8.2
n.a.
8.9
10.6
13.6
n.a.
9.3
n.a.
14.9
61.0
Source: CENTEL, KT ZMICO Research
Figure 2: Key operating figures ‐ Hotel
Avg. Room Rate (Bt /night) Avg. Occupancy Rate (%)
Avg. RevPar (Bt /night)
# of outlets
5,000
Same-store-sales growth
16.0%
100%
14.0%
800
12.0%
80% 60%
2016F
2015F
2014
2013
2012
2011
2010
2009
10.0%
600
8.0%
40%
400
20%
200
0%
2008
4,000 3,000 2,000 1,000 ‐
New outlets
1,000
Bt per night
2007
Figure 3: Key operating figures ‐ Restaurant
6.0% 4.0% 2.0%
0
0.0% 2010
2011
2012
2013F 2014F 2015F 2016F
Source: CENTEL, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: Forecast changes
Figure 5: DCF valuation ###
2014 17,992
Revenue %change Gross margin EBITDA %change EBITDA margin Net profit %change Normalized profi %change Net margin
40.1% 3,820 21.2% 1,188 1,155 6.6%
New 2015e 19,252 ‐5.1% 41.7% 4,450 10.3% 23.1% 1,704 18.7% 1,704 18.7% 8.9%
2016e 21,062 ‐6.6% 42.0% 5,134 9.5% 24.4% 2,136 2.9% 2,136 2.9% 10.1%
Old 2015e 20,285
2016e 22,540
40.7% 4,035
40.8% 4,688
19.9% 1,436
20.8% 2,075
1,436
2,075
7.1%
9.2%
2015F
2016F
2017F
2018F
Free cash flow to firm (FCFF)
####
2,965
NPV of FCFF during adjustment period NPV of Terminal value less: net interest bearing debt Equity value No. of shares outstanding (mn)
19,817 43,006 - 5,813 57,010 1,350
3,505
3,930
4,459
Market risk premium Beta Terminal growth rate Cost of equity Targeted D/E
10.1%
Source: CENTEL, KT ZMICO Research
Figure 6: PE Band
Figure 7: PBV Band (X)
(X)
8.0
60 +2 S.D.
+1 S.D.
6.0
+2
5.0
+1
4.0 30
2.0 -1 S.D.
-1 S.D.
1.0 -2 S.D.
10
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-11
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
0.0 Jan-13
Jul-12
Jan-12
Jul-11
0
Jan-11
-2 S.D.
