Amara Holdings - RHB Invest 2017-11-14: 3Q17 Revenue Yet To Reflect Upcoming New Hotel

Amara Holdings - RHB Invest 2017-11-14: 3Q17 Revenue Yet To Reflect Upcoming New Hotel AMARA HOLDINGS LTD A34.SI

Amara Holdings - 3Q17 Revenue Yet To Reflect Upcoming New Hotel

  • Amara Holdings' 3Q17 earnings are in line with expectations. 3Q17 net profit of SGD3.2m was down 20% YoY mainly due to start-up costs for the upcoming Amara Signature Shanghai. Management is guiding for Amara Signature Shanghai to begin operating in Dec 2017, which will help drive revenue for 2018. 
  • In addition, lower supply of new hotel rooms in Singapore (amidst rising visitor arrivals) should help Amara improve its occupancy and room rates at Amara Singapore and Amara Sanctuary. 
  • Amara has an RNAV of SGD1.36/share, which implies P/RNAV of 0.41x. 
  • Maintain BUY with TP of SGD0.88, pegged to P/RNAV of 0.65x.

Amara Holdings (Amara) reported 3Q17 net profit of SGD3.2m, down 20% YoY. 

  • 3Q17 staff costs rose 19% to SGD7.0m, mainly due to an increase in start-up costs or the upcoming Amara Signature Shanghai hotel. 9M17 net profit of SGD6.3m accounted for 62% of our 2017 forecast of SGD10.1m. 
  • We view the results as in line.

Higher occupancy rate at Amara Singapore. 

  • Management indicated that the occupancy rate at Amara Singapore was at 89.1% as at 9M17, higher than 9M16’s 87.4%. Management is of the view that Amara Singapore’s occupancy rate in 4Q17 could exceed the rate achieved during 9M17. 
  • Amara Bangkok’s occupancy rate during 9M17 of 87.6% was also an improvement over 9M16’s 80.2%.

Reduction in new Singapore hotel room supply in 2018. 

  • According to an article in The Business Times last month, only 266 new hotel rooms are expected to be added in 2018 (2017: 3,174). The lower projected supply could help raise 2018 average room rate (ARR) amidst mid-single-digit 2018 visitor arrival growth.

Significant valuation surpluses. 

  • The group’s balance sheet reflects only the cost of its hotels. There are several significant valuation upsides for Amara Singapore, Amara Sanctuary Resort Sentosa, and Amara Signature Shanghai
  • Factoring in the unrealised valuation upsides, Amara has an RNAV of SGD1.36 per share, giving a P/RNAV of 0.41x.

2018 net profit to be driven by hotel in Shanghai. 

  • Our 2017 net profit forecast of SGD10.1m is flat vs 2016’s adjusted SGD10m – this is after stripping off the 2016 one-time joint venture gain of SGD28m. 
  • 2018F net profit is expected to expand by 35%, with stronger Singapore ARR and a full 12-month contribution from Amara Signature Shanghai.

Leng Seng Choon CFA RHB Invest | http://www.rhbinvest.com.sg/ 2017-11-14
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.880 Same 0.880