Banyan Tree Holdings - RHB Invest 2021-05-05: Banking On Recovery In Leisure Travel


Banyan Tree Holdings - Banking On Recovery In Leisure Travel

  • Proxy to the recovery in high-end global leisure travel;
  • Property sales and fee-based income offset weakness in the hospitality segment;
  • Banyan Tree is trading at an attractive 0.5x P/BV.

Banyan Tree - Company Profile

  • Banyan Tree (SGX:B58) is one of the world’s leading independent, multi-branded hospitality groups. Its diversified portfolio of hotels, resorts, spas, galleries, golf courses and residences is centered on five award-winning brands (Banyan Tree, Angsana, Cassia, Dhawa, and Laguna) that offer exceptional design-led experiences for global travellers.
  • Globally, it has 46 new hotels and resorts under design and construction in the pipeline, in addition to 49 operating hotels in 24 countries as of Nov 2020.

Banyan Tree - Investment Highlights

Signs of a recovery in the hospitality sector in 2H20.

  • While global borders remain largely closed, there were some positive signs in 2H20, although the performance varied according to region and country. In 2H20, Banyan Tree’s overall revenue per available room (RevPAR) – excluding hotels that were opened less than two years ago – increased by 11% h-o-h to S$87.00, but fell by 40% y-o-y.
  • In China, the demand for hotels has been impacted to a lesser degree, due to a surge in domestic tourism. In the Asia-Pacific and, specifically, Thailand where the majority of the group’s owned hotels are located, international travel remains predominantly closed to foreign visitors.
  • In the Maldives, where the group runs three hotels, its properties booked a smaller RevPAR drop in 4Q20, vs 4Q19’s 43%. This was due to testing-only quarantine-free requirements for international arrivals.

Hotel room keys to nearly double in the next three years, boosting fee income.

  • Banyan Tree is targeting to open ~35 hotels in the next three years, with room keys estimated to grow to 13,000 by end-2023, from 7,000 currently. As most of the new room keys will be managed by the group (without any equity interest), this should help to improve its fee income-producing business. Banyan Tree signed 20 new hotel management agreements last year despite the COVID-19 pandemic – which is a testament to its strong branding.

Property sales segments.

  • Banyan Tree has a landbank of 127 ha, with an estimated GDV of S$4.7bn – which the group plans to develop in the next 10-15 years. This segment reported a core operating profit of S$16.6m for last year, which offset losses in other segments. The group currently has unrecognised property sales revenue of S$108.8m, of which about 30% should be recognised in 2021.

Banyan Tree - Company Report Card

FY20 core operating profit was at S$4.3m

  • excluding one-off losses, vs FY19’s S$65.1m, as Banyan Tree’s performance was dragged down by the pandemic. Adjusted operating cash flow (excluding non-cash items and working capital changes) was also positive, at S$8.2m, despite the severe impact of COVID-19.
  • Its operating loss for 2H20 narrowed down to S$9m, from S$26.1m in 1H20, due to the re-opening of most hotels in 2H20 and cost containment. Embedded in its FY20 operating loss were exceptional items amounting to S$39.4m, mainly relating to revaluation losses and expenses from its restructuring exercise.

Cost containment measures.

  • Banyan Tree implemented various strategic measures to contain cost and preserve cash liquidity. For FY20, it realised in excess of its S$70m cash conservation target. These measures pared down total operating costs and expenses by 59% y-o-y in 2H20.

Net gearing was at 65% (net debt over total equity) with cash and cash equivalents of S$51m.

  • Banyan Tree is also in talks with certain associates to execute an agreement to settle outstanding debts of approximately S$50m within 2021, which should boost its liquidity.

Banyan Tree - Investment Case

Well-positioned to tap into the recovery in high-end hospitality demand.

Vijay Natarajan RHB Securities Research | https://www.rhbinvest.com.sg/ 2021-05-05
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998 SAME 99998