Central Plaza Hotel (CENTEL)

Transcription

1 OSK Research 04 Feb 2013 THAILAND EQUITY Investment Research The Research Team +66 (0) Ext Buy Target Previous Price Lodging THB THB42.9 THB23.5 THB32.0 CENTEL operates and manages a chain of hotels and resorts. It is also a pioneer in quick service restaurants (QSR) in Thailand Stock Statistics Bloomberg Ticker Market Cap CENTEL TB THB43,200m USD1,450m 52 wk H/L price (THB) m ADT THB94.7m YTD Returns 23.1% Beta (x) 0.83 Major Shareholders (%) Tiang Chirathivat Co.,Ltd 5.00 Mrs. Nattheera Boonsri 3.93 Share Performance (%) Month Absolute Relative 1m m m m month Share Price Performance Price Close Relative to Stock Exchange of Thailand Index (RHS) Company Update Central Plaza Hotel (CENTEL) Hitting The Right Spots We are switching our valuation approach for CENTEL from a basic PE to the sum-ofparts (SOP) to better reflect its assets value. Its hotels are valued with RNAV, and its food and hotel management businesses, the DCF method. As we become more positive on the company and the overall hospitality industry, we are upgrading our recommendation on CENTEL from a NEUTRAL to a BUY, and raising its FV from THB23.50 previously to THB42.90 based on its SOP valuation. 4Q12 results preview. Central Plaza Hotel (CENTEL) is expected to record positive results for its 4QFY12, driven by strong growth in its hotel and food businesses. In 4Q12, its hotel business had an average occupancy rate (OCC) and average room rate (ARR) of 74.8% and THB3844 respectively, compared to OCC and ARR of 64.3% and THB3679 in 4Q11. OCC and ARR for FY12 is estimated at 69.9% and THB3744, which translates to revenue per available room (RevPAR) of THB2617. This is a y-o-y increase of 11.8%, partly due to the low base in 4Q11 from the floods and driven by a solid increase in tourist arrivals. CENTEL s food business had same store sales growth (SSSG) and total sales system (TSS) of 6.2% and 27.1% respectively in FY12. For FY13, the company expects SSSG to be about 5%-7% and TSS to hover at 16%-17%. Opting for a new valuation method. Previously, we valued CENTEL based on a simple PE multiple, which we now believe does not fully reflect the value of its hotel assets. Thus, we are switching our valuation approach, using its SOP to better reflect its assets value as well as the earnings from its hotel management and food businesses. The value of its hotel assets are based on its RNAV to take into account any potential revaluation and the injection of the assets into a property fund or REIT. Meanwhile, its hotel management and food business are valued based on its DCF, at a WACC of 9%. Upgrade to BUY, FV THB Based on our SOP valuation, we have raised CENTEL s FV to THB42.90 from THB23.50 previously. Subsequently we upgrade our recommendation on the stock from a NEUTRAL to BUY, as we become more bullish on the company and the overall hospitality industry. We believe CENTEL, as one of Thailand s leading hospitality players, will benefit from the growing tourist arrivals, which will support its strong earnings growth momentum even as the growth of its food business will be underpinned by the Thai economy s robust growth Forecasts and Valuations Dec-10 Dec-11 Dec-12F Dec-13F Dec-14F Feb Apr-12 Source: Bloomberg 07-Jun Aug Oct Dec Total turnover (THBm) 9,400 11,474 13,957 16,169 17,447 Recurring net profit (THBm) (59) 421 1,107 1,376 1,719 Recurring net profit growth (212.0%) na 163.1% 24.3% 24.9% Core EPS (THB) (0.04) Core EPS growth (212.0%) na 163.1% 24.3% 24.9% DPS (THB) Dividend Yield 0.2% 0.5% 1.2% 1.5% 1.9% Core P/E (x) na Return on average equity (1.0%) 7.5% 17.7% 19.2% 21.3% P/B (x) EV/EBITDA (x) Net debt to equity 157.9% 160.5% 132.6% 101.1% 78.6% OSK vs consensus EPS 0.1% (4.3%) (10.3%) Source: Company data, OSK Research estimates OSK Research See important disclosures at the end of this report 1 Powered by Enhanced Datasystems EFA Platform

2 OSK Research 04 Feb 2013 Relatively conservative RNAV valuation. As we mentioned earlier, we are valuing CENTEL s hotel assets based on its revalued net asset value (RNAV) to take into account the potential revaluation of its assets as well as potential injections of its hotel assets into a property fund or REIT. While there is no firm plan to do so at this point, its management had mentioned mulling the idea in the past, for when legal and regulatory frameworks for REITs are finalized. Apart from unlocking value, the asset injections will also enable the company recycle capital for future expansion without straining its balance sheet while it moves towards an asset-light business model. Our RNAV valuation is derived from the replacement cost method, where we value its luxury hotel assets at THB10m/room (except for Centara Grand Central World and Maldives, which are valued at THB13m-THB15m/room due to its prime locations). We are valuing its midscale hotels at THB6m/room and THB3m/room, depending on their locations. To recap, CENTEL injected one of its hotel assets (Centara Grand Samui) into a property fund in 2008 where it retains a 25% holding. Despite the challenging market conditions in 2008, the assets were valued at around THB15m per room which suggests our current assumptions over the replacement cost are on the conservative side. Furthermore we have applied a 20% discount to our RNAV valuation; as such, we think there is a possibility for it to be upgraded in the future. Figure 1: SOP valuation for CENTEL Room Shareholdings THB m/room RNAV (THB m) Hotel (Owned & JV) Luxury Centara Grand at CentralWorld % Centara Grand Ladprao % Centara Grand Hua Hin % Centara Grand Phuket % Centara Grand Krabi % Centara Grand Mirage Pattaya % Centara Villas Phuket % Centara Villas Samui % Centara Grand Maldives % Market Value Centara Grand Samui % of PF Total Midscale Centara Kata Resort Phuket % Centara Karon Resort Phuket % Centara Mae Sot Hill Resort % Centara Hat Yai % Centara Maldives Total RNAV for hotel assets % discount to RNAV Hotel Management Business WACC 9% Food business WACC 9% Total SOP Net Debt SOP Value No. of shares (m) FV per share OSK Research See important disclosures at the end of this report 2 Powered by Enhanced Datasystems EFA Platform

3 OSK Research 04 Feb 2013 Figure 2: CENTEL s operating statistics and targets for FY13 4Q12E 4Q11 FY12 FY11 Average Occupancy rate 74.8% 64.3% 69.9% 63.9% Average room rate (THB) 3,844 3,679 3,744 3,663 RevPAR (THB) No of food stores Food- SSS (Total) 3.8% 10.6% 6.2% 14.8% Food-TSS (Total) 19.9% 24.5% 27.1% 23.7% Source: OSK, Company Data OSK Research See important disclosures at the end of this report 3 Powered by Enhanced Datasystems EFA Platform

4 OSK Research FINANCIAL Profit & Loss (THBm) Dec-10 Dec-11 Dec-12F Dec-13F Dec-14F Total turnover 9,400 11,474 13,957 16,169 17,447 Cost of sales (4,394) (5,435) (6,260) (7,419) (7,865) Gross profit 5,006 6,039 7,697 8,750 9,582 Gen & admin expenses (3,590) (4,190) (5,025) (5,821) (6,281) Selling expenses (21) Other operating costs (974) (824) (936) (910) (910) Operating profit 421 1,103 1,819 2,105 2,481 Operating EBITDA 1,654 2,238 3,084 3,365 3,729 Depreciation of fixed assets (1,233) (1,135) (1,266) (1,260) (1,247) Operating EBIT 421 1,103 1,819 2,105 2,481 Interest expense (308) (414) (460) (460) (400) Pre-tax profit ,359 1,645 2,081 Taxation (220) (255) (313) (329) (423) Minority interests 47 (14) Profit after tax & minorities (59) 421 1,107 1,376 1,719 Net income to ord equity (59) 421 1,107 1,376 1,719 Recurring net profit (59) 421 1,107 1,376 1,719 Balance Sheet (THBm) Dec-10 Dec-11 Dec-12F Dec-13F Dec-14F Total cash and equivalents ,179 1,772 Inventories Accounts receivable Total current assets 1,625 1,760 2,523 3,042 3,698 Other current assets Total investments 1,173 1,332 1,414 1,500 1,968 Tangible fixed assets 16,655 17,200 16,967 16,638 15,181 Intangible assets ,072 1,310 1,328 Total other assets ,037 1,119 Total non-current assets 18,813 19,991 20,347 20,485 19,596 Total assets 20,438 21,751 22,870 23,527 23,294 Short-term debt 3,199 4,108 4,464 3,100 3,100 Accounts payable 1,197 1,541 1,675 1,940 2,094 Other current liabilities ,240 1,583 1,683 Total current liabilities 5,222 6,579 7,380 6,623 6,877 Total long-term debt 6,224 5,917 5,504 6,028 5,504 Other liabilities 3,213 3,206 3,047 3,016 2,221 Total non-current liabilities 9,437 9,123 8,551 9,044 7,726 Total liabilities 14,659 15,702 15,931 15,667 14,603 Share capital 1,350 1,350 1,350 1,350 1,350 Retained earnings reserve 1,583 1,927 2,832 3,765 4,656 Other reserves 2,562 2,519 2,519 2,519 2,519 Shareholders' equity 5,495 5,796 6,700 7,634 8,525 Minority interests Other equity Total equity 5,779 6,049 6,939 7,860 8,690 Total liabilities & shareholders' equity 20,438 21,751 22,870 23,527 23,294 OSK Research See important disclosures at the end of this report 4

5 OSK Research Cashflow (THBm) Dec-10 Dec-11 Dec-12F Dec-13F Dec-14F Operating profit 421 1,103 1,819 2,105 2,481 Depreciation & amortisation 1,233 1,135 1,266 1,260 1,247 Change in working capital Other operating cashflow (1,062) Operating cashflow 2,046 2,735 3,462 2,584 3,756 Interest paid (308) (414) (460) (460) (400) Tax paid (139) (235) (158) - (423) Cashflow from operations 1,600 2,086 2,844 2,124 2,933 Other new investments (2,294) (1,492) (1,000) (900) (1,000) Other investing cashflow 78 (652) (86) (50) (50) Cashflow from investing activities (2,215) (2,144) (1,086) (950) (1,050) Dividends paid to ordinary shareholders (68) (68) (203) (443) (663) Shares repurchased 344 (16) 0-1,705 Proceeds from issue of shares (344) Increase in debt 2,575 3,293 (531) 224 (524) Other financing cashflow (1,708) (3,218) (574) (543) (1,943) Cashflow from financing activities (1,307) (762) (1,424) Cash at beginning of period ,179 Total cash generated Implied cash at end of period ,179 1,637 Source : OSK, Bloomberg OSK Research See important disclosures at the end of this report 5

6 OSK Research RECOMMENDATION CHART Price Close NR Recommendations & Target Price Feb-08 May-09 Aug-10 Nov-11 Source : OSK, Bloomberg Buy Neutral Sell Trading Buy Take Profit Unrated Date Recommendation Target Price Price Neutral Buy OSK Research See important disclosures at the end of this report 6

7 OSK Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but OSK does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. 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