Global Premium Hotels - OCBC Investment 2016-05-10: 1Q16 results below expectations

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GLOBAL PREMIUM HOTELS LIMITED PJ9.SI 

Global Premium Hotels: 1Q16 results below expectations 

• Revenue dropped 1.4% YoY 
• Occupancy fell 3.5 ppt 
• Lowered fair value 

1Q16 results below expectations 

• Revenue dropped 1.4% YoY to S$14.5m, making up 21.7% of our full-year forecast. The decrease was mainly due to lower room revenue recognized, but partially offset by greater contribution from three hotels post asset enhancement initiatives which were completed in 2015. 
• Net profit gained 4.4% to reach S$3.4m, but only made up 17.2% of our full-year forecast. 
• The group’s average occupancy rate dropped 3.5 ppt to 76.0% this quarter, contributing to a 3.8% YoY fall in REVPAR to S$79.4m. 

Uncertainties persist in the sector 

• Given headwinds in the hospitality segment, we lower our FY16 revenue to S$58.1m and PATMI to S$24.6m. 
• As noted by other hospitality firms, the government plans to invest S$70m over the next five years to boost tourism. 
• While we are optimistic about the investment, we continue to see uncertainties in outlook for the rest of the year. 
• Negative headwinds in the form of upcoming hotel room supply may offset the positive effect of an even-numbered year with more MICE events as well as the positive trends hinted at by double-digit YoY growth of tourist arrivals from China, Indonesia and Thailand for Jan and Feb. 
• Furthermore, rising interest costs remain a concern with regards to the group’s performance. 
• Finance costs for the group increased 11% YoY for the quarter due to higher interest rates on loans. 

Re-adjust FV on RNAV basis 

• For a one-year horizon, we derive a fair target P/B of 0.49x (based on assumptions of 0% long- term growth, ROE of 2.1%, and beta of 0.50x). This comes close to the 0.52x average 1Y price to book of GPH’s closest comp listed on the SGX, Hotel Royal. 
• For FY14 and FY15, GPH traded at an average discount to book of 50%. 
• Given GPH’s low proportion of free float at 28.4%, we apply a 55% discount to our RNAV to arrive at a fair value of 31 S cents, from 33 S cents previously. 
• While we keep to our long term valuation of 31 S cents, we advise investors to accumulate shares at 28 S cents and lower given recent market weakness. 
• Maintain HOLD.

Deborah Ong OCBC Securities | http://www.ocbcresearch.com/ 2016-05-09

OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.31 Down 0.33