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

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.

Management updates 

  • 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.

Maintain BUY 

  • 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