Amara Holdings - RHB Invest 2017-05-17: Now Closer To The Shanghai Hotel Opening

AMARA HOLDINGS LTD A34.SI

Amara Holdings - Now Closer To The Shanghai Hotel Opening

We had a discussion with management after Amara’s recent quarterly results release.
On the surface, 1Q17’s net profit of SGD1.47m was sharply lower than 1Q16’s SGD28.48m. However, if we exclude the 1Q16 earnings impact of CityLife@Tampines, it would have doubled YoY in 1Q17. Overall, its 1Q17 results were also 29% higher QoQ.
Management has reaffirmed the target commencement of its 343-room Amara Signature Shanghai would be in 3Q17.

We see this commencement driving revenue and acting as a catalyst to push the company’s share price higher and closer to our SGD0.88 TP (54% upside).
Maintain BUY, with its TP pegged to 0.65x P/RNAV.

Amara’s recently released results showed a marginal 1Q17 revenue YoY reduction of 2%. Management attributed this weakness to the 100 AM mall’s retail rental, with some offsetting effects from the stronger office rental within this development.
The company’s 1Q17 net profit of SGD1.5m was up 29% QoQ. It was double YoY if we excluded 1Q16’s share of results from the CityLife@Tampines joint venture (JV) – a recently completed development project.
1Q17’s net profit accounts for 13% of our 2017 forecast of SGD11.8m. Its 1Q17 staff costs rose 14% YoY, due to a timing difference from the recognition of service points into salaries. Management indicated the higher cost (from hotel staff salaries) is expected to persist in the quarters ahead.
Management also reaffirmed the commencement of its Amara Signature Shanghai would be in 3Q17. We see this contributing to stronger revenue ahead, aside from it being a key share price catalyst.

We maintain our TP of SGD0.88, pegged to 0.65x P/RNAV. This is conservative when compared with its peers’ average P/BV of 0.8x.

Leng Seng Choon CFA RHB Invest | http://www.rhbinvest.com.sg/ 2017-05-17

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.880 Same 0.880