GUOCOLEISURE LIMITED
B16.SI
Steady hotel performance
- GLL’s FY15 core net profit was in line with our expectations, at 99% of our forecast. The 11.1% yoy core net profit growth was due to improved hotel operations and interest savings from mortgage debenture refinancing, partly offset by the lower Bass Strait oil and gas royalty income.
- We keep our FY16 core EPS estimate but cut our FY17 and FY18 estimates by 6.6% and 5.2%, respectively, to reflect delayed rebound in crude oil prices. Nevertheless, our target price of S$1.18 (25% discount to CY15 RNAV) is intact, thanks to a favourable FX translation gain in the last quarter.
- Maintain Add on GLL. Potential re-rating catalysts include organic earnings expansion for the core hotel business, bounce in oil price and monetisation of non-core assets.
Decent full-year results, led by strong hotel profit
- GLL’s core net profit rose 11% from S$43.3m in FY14 to S$48.1m in FY15 on the back of expanded hotel operating profit (FY15: S$62.5m vs. FY14: S$53.8m) and savings in interest expenses (FY15: S$21.0m vs. FY14: S$31.3m). However, the gains were partially offset by lower Bass Strait O&G royalty income (FY15: S$31.7m vs. FY14: S$41.5m) due to the depressed oil price and the outbreak of a labour strike (started in mid-Feb 15, resolved by Apr 15) in the Bass Straight oil field.
- At end-FY15, GLL’s net gearing remained benign at 26%. Management proposed DPS of 2.2 Scts for FY15 (FY14: 2.0 Scts).
Steady FY16 hotel profit marred by low O&G royalty income
- We expect GLL’s hotel business to remain upbeat in FY16, with a high single-digit revenue growth and improvement in margins, as the refurbished and rebranded hotels are added back to hotel room stock and a more efficient VCGM model is implemented across GLL’s London hotels.
- However, we note that FY16 group profitability may still be subdued by depressed O&G royalty income and possibly unfavourable FX translation from the weakened GBP against the US$. As such, we expect largely flat yoy FY16 profit.
Improving transparency to facilitate understanding
- Management said that GLL would provide segmental disclosures in the future quarterly financial reports, in contrast to the current yearly disclosure. This change would enable better monitoring of segmental performance.
- We reiterate our stance that investors should focus on the delivery of GLL’s core hotel business, rather than the non-core ones that could be disposed eventually.
- TP S$1.18.
Roy CHEN | William TNG CFA | http://research.itradecimb.com/ CIMB Securities 2015-08-30
1.18
Same
1.18
