The Positives
+ Property sales segment saw 32% increase in revenue. This is predominantly driven by the handover of 35 units of Cassia Phuket. Sales momentum is maintained with an 8% YoY increase in total sales value for units sold in the quarter. As a result, overall unrecognised revenue as at end 2Q18 remained stable at S$202mn, with about a quarter due to be recognised in 2H18. This could represent a close to 50% YoY jump for upcoming revenue from this segment for 2H18.
+ Increase in forward bookings suggest tourism sentiment still healthy. Forward bookings revenue is 6% above same period last year driven by hotels outside Thailand which jumped 18%. This was able to offset the 2% lower forward bookings in Thailand due to slower MICE and events business for Angsana Laguna Phuket.
+ Operating profit strengthened led by turnaround in property sales, fee-based segment and deconsolidation of China operations. Apart from higher revenue in the property sales segment, the standout segment driving earnings was the fee-based segment. Despite an 11% drop in revenue as a result of de-consolidation of China operations, EBITDA from this segment jumped 73% due to lower operating expenses such as lower provision for bonus and incentives and exchange gains.
+ Divesting of Seychelles assets and operating them on a management contract model. We note that management has in recent years been increasingly embracing an asset light model which leverages on their branding and hotel management expertise, with an increasing urgency to drive shareholder returns. These measures include: 1) signings of collaboration deals with Vanke and Accor, which include the divestments of China assets 2) Offer for Laguna Resorts with an increased urgency in redevelopment of Laguna Phuket land 3) Divesting of Seychelles assets and operating them on management contracts. These deals are positive for shareholder returns.
The Negatives
– Results of associates consisting of China operations still a drag on earnings. The Group’s China operations, which have been de-consolidated since August 2017, reported a loss of S$1.2mn in 2Q18.
– Hotel investments segment recorded slight drop in revenue. Excluding effect of China de-consolidation, revenue from this segment would have been down a slight -1%. Maldives continues to be weak even after the state of emergency was lifted in March 2018 following a political crisis in the country. RevPAR was down 24% YoY. With the presidential elections due in September and uncertainties over the political landscape, weakness in operations could persist despite a tapering supply of hotels and resorts. Thailand’s RevPAR was also down marginally at -2%, due to lower MICE and events business.
Outlook
There could be near term uncertainties for the Group’s resorts in Thailand after the Phuket boat accident in July which killed more than 40 Chinese tourists. Thailand accounted for 66% of Group’s FY17 revenue for the Hotel Investment segment and tourists from China makes up 40% of total Group revenue. We expect the Group’s operations to be negatively impacted near term from possible cancellations but expect the impact to be transitional for 1-2 quarters. Long term growth catalysts remain intact as the Group transitions to an increasingly asset light model, especially with the Accor/Vanke deals. Our forecasts and target price remains unchanged for now.
Maintain ACCUMULATE with unchanged target price of S$0.73.
Our target price translates to c.0.94x FY18e P/NAV.
Important Information
This report is prepared and/or distributed by Phillip Securities Research Pte Ltd ("Phillip Securities Research"), which is a holder of a financial adviser’s licence under the Financial Advisers Act, Chapter 110 in Singapore.
By receiving or reading this report, you agree to be bound by the terms and limitations set out below. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.
The information and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this report has been obtained from public sources which Phillip Securities Research believes to be reliable. However, Phillip Securities Research does not make any representation or warranty, express or implied that such information or Research is accurate, complete or appropriate or should be relied upon as such. Any such information or Research contained in this report is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith.
Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this report are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this report is not indicative of future results.
This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This report should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this report has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this report is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.
Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this report should take into account existing public information, including any registered prospectus in respect of such product.
Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this report, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this report.
Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment.
To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold an interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this report. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, which is not reflected in this report, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this report.
The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.
This report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.
This report is not intended for distribution, publication to or use by any person in any jurisdiction outside of Singapore or any other jurisdiction as Phillip Securities Research may determine in its absolute discretion.
IMPORTANT DISCLOSURES FOR INCLUDED RESEARCH ANALYSES OR REPORTS OF FOREIGN RESEARCH HOUSE
Where the report contains research analyses or reports from a foreign research house, please note:
Dehong covers primarily the REITs and property developer sector. He has close to 7 years experience in equities related dealing and research roles.
He graduated with a Masters of Science in Applied Finance from SMU and Bachelors of Accountancy from NTU.
