Hotel Properties Limited - OCBC Investment 2018-02-28: Blockbuster Set Of Results

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HOTEL PROPERTIES LTD H15.SI

Hotel Properties Limited - Blockbuster Set Of Results

• Neglected proxy to hospitality upcycle.
• Undemanding valuations.
• Fair Value at S$4.74.

FY17 core PATMI increased 52.8% y-o-y 

• Hotel Properties Limited (HPL)'s FY17 revenue increased 14.1% y-o-y to S$659.2m, mainly attributable to the sale of Tomlinson Heights units as well as better performance from the group’s hospitality segment. Correspondingly, gross profit increased 19.8% y-o-y to S$169.6m.
• Share of results of associates and jointly controlled entities increased from S$34.7m in FY16 to S$128.9m in FY17, mainly due to profits from the Burlington Gate and Holland Park Villas in London which completed development this year. 
• The increase in gross profit as well as the contributions from associates and JVs translated into a 52.8% higher core PATMI of S$161.7m.
• Hotel Properties Limited declared 4 S cents for its first and final dividend, and an additional 6 S cents for a special dividend. This translates to an FY17 dividend yield of 2.7% against yesterday’s closing price of S$3.74. 
• As of end-FY17, the group’s NAV stands at S$3.71 per ordinary share, up from S$3.45 as at end-FY16.

Positive operational outlook for both segments 

• We believe Singapore is at the early stage of a rebound in the domestic hospitality market and see the pick-up in global economic growth as a boon for luxury hotels and resorts around the world. We see HPL as a proxy to these growth drivers with its sizeable hotel portfolio. 
• The group’s hospitality assets, captured under PPE in the balance sheet, are valued at a blended cap rate of ~5.4%, which we continue to find attractive given that a substantial portion of the assets are either freehold or long leasehold. 
• For the property segment, we look forward to contributions from the sale of remaining units at Burlington Gate and Holland Park Villas, which the group has a 65% and 50% interest in, respectively. 
• With a change in covering analyst, our fair value decreases 3% from S$4.83 to S$4.74 as we update our model. 
• Hotel Properties Limited (HPL) is currently trading at a ~20% discount to our RNAV, which we find undemanding relative to its hospitality peers. We maintain BUY on HPL.

Deborah Ong OCBC Investment | http://www.iocbc.com/ 2018-02-28

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 4.74 Down 4.830