Banyan Tree Holdings Limited - Phillip Securities 2017-12-18: Patience As Partnerships Bear Fruit

Banyan Tree Holdings Limited - Phillip Securities 2017-12-18: Patience As Partnerships Bear Fruit BANYAN TREE HOLDINGS LIMITED B58.SI

Banyan Tree Holdings Limited - Patience As Partnerships Bear Fruit

  • Partnerships with Vanke and AccorHotels will provide Banyan Tree Holdings (BTH) with a pipeline of management contracts and scale up at a much faster pace than before.
  • Sustained improvements in RevPARs for Banyan Tree Holdings’ biggest market Thailand (61% of FY16 revenue for Group-owned hotels). We expect RevPAR strength for Thailand to sustain and Maldives (23% of FY16 revenue for Group-owned hotels) to improve in FY18.
  • Maintain ACCUMULATE with a target price of S$0.71.



COMPANY BACKGROUND

  • Banyan Tree Holdings Limited (BTH) is a developer and operator of premium resorts, hotels, residences and spas with a presence in 25 countries. The group’s properties include 40 hotels and resorts (with equity interest: 19, without equity interest: 21), 64 spas, 77 retail galleries and three golf courses as of FY16. 
  • The group’s primary business is centred on four brands, namely Banyan Tree, Angsana, Cassia and Dhawa. 
  • Additionally, the Group operates three integrated resorts in Asia, in particular, Laguna Phuket via its 65.8% owned subsidiary, Laguna Resorts & Hotels.


INVESTMENT MERITS / Outlook


1. Partnerships with Vanke and AccorHotels 

  • Partnerships with Vanke and AccorHotels will enable Banyan Tree Holdings to take on management contracts and scale up at a much faster pace than before. Vanke and Accor will have the option to subscribe for up to 10% stake each in Banyan Tree Holdings and co-develop hotels across the world with Banyan Tree Holdings. 
  • The partnerships with one of the world’s largest hotel operator and China’s largest developer mark the start of a new era of growth globally for Banyan Tree Holdings.

2. Sustained improvements in RevPARs YTD17 for BTH’s biggest market Thailand (61% of FY16 revenue for Group-owned hotels). 

  • YTD17 RevPAR for Thailand grew 11% YoY, with growth sustained across all 3 quarters. 
  • We expect RevPAR strength for Thailand to sustain in FY18 given the low base caused by weak tourism numbers in the quarters following the King’s passing in Oct 2016.

3. Maldives a key drag in FY17 but expected to stabilise and improve from FY18. 

  • Maldives, 2nd largest market for Banyan Tree Holdings accounting for 23% of FY16 Group-owned hotel revenue, continue to be plagued by an oversupply of rooms with RevPAR dropping 18% YTD17. Recovery in tourist numbers for the Maldives was unable to offset the 14.7% growth in industry operational hotel beds in MYTD. 
  • We expect conditions in the Maldives to improve in 2H18 as new supply tapers off after 2018. (8.2% expected new supply in 2018 vs 1% in FY19).


RECOMMENDATION

  • Maintain ACCUMULATE with target price of S$0.71. 
  • We expect growth in earnings to be driven by sustained strength in the Group’s largest market in Thailand and less challenging conditions in the Maldives in FY18. The new partnerships with Accor and Vanke offer opportunities for Banyan Tree Holdings to scale up at a much faster pace than before. 
  • As the Group takes on more management contracts under these partnerships, improving EBIT margins should further drive earnings going forward. 
  • Our target price translates to 0.7x FY18e P/NAV.









Dehong TAN Phillip Securities | http://www.poems.com.sg/ 2017-12-18
Phillip Securities SGX Stock Analyst Report ACCUMULATE Maintain ACCUMULATE 0.710 Same 0.710



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