Excerpts from analysts' report

CIMB analysts: Roy Chen & William Tng, CFA

Thistle Marble ArchGuocoleisure's 692-room Amba Hotel Marble Arch in London.

Guocoleisure: Encouraging hotel performance 
■ 1QFY16 headline net profit rose 89.2% yoy on the back of strong hotel operations and a one-off gain. Excluding one-offs, 1QFY6 core net profit increased 24.6% yoy. 

■ Hotel core operating profit expanded by 14% yoy in 1Q on 11% RevPar growth. 

■ There were reduced losses from the non-core property development and gaming businesses, which management plans to dispose of in future 

■ We roll over to end-CY16 and raise our target price to S$1.26. Reiterate Add. 


Stellar 1QFY16 boosted by strong hotel operations and one-offs
Headline net profit rose 89.2% yoy to US$31.4m in 1QFY16 (1QFY15: US$16.6m). Excluding a one-off compensation of US$13.1m for the cessation of 19 managed hotels, core net profit rose 24.6% yoy, on the back of: 1) strong hotel performance, 2) reduced losses from the gaming segment, and 3) lower interest cost from the refinancing of a 10.75% mortgage debenture (completed in Dec 2014). The strong hotel performance was partly offset by lower oil & gas royalty income from Bass Strait.

Hotel development bearing fruit; 11% RevPar growth beats market
1QFY16 hotel core operating profit rose 14% yoy to US$23.5m (1QFY15: US$20.6m). The strong 1QFY16 RevPar growth of 11% was particularly encouraging, in view of the generally slower UK hospitality sector as the weaker Euro turned the UK into a more expensive destination for Eurozone travellers. Hotel operating margin expanded 2.7% pts yoy to 22.3% in 1QFY16, thanks to better cost management under the group’s newly adopted VCGM model that focuses on operating efficiency at individual hotel level.

Earnings volatility from non-core businesses
Non-core businesses continued to add volatility to the group’s bottomline. In 1QFY16, oil & gas royalty income from Bass Strait fell 50% yoy to US$6.5m (1QFY15: US$13m) due to the significant decline in global oil prices and weaker A$ against the US$. The Clermont Club, GLL’s only casino, posted reduced operating loss of US$0.5m in 1QFY16 (1QFY15: US$3.8m loss). The property development business in Molokai also reported lower operating loss of US$0.1m in 1QFY16 (1QFY15: US$0.4m loss).

roychen9.14"Reiterate Add, with higher target price of S$1.26
We raise our FY16-18F EPS by 5.9-7.6% to reflect the stronger hotel operations. The new target price of S$1.26 is based on 25% discount to CY16 RNAV (previously 25% discount to CY15 RNAV).

"Key potential re-rating catalysts for GLL include organic earnings growth of the group’s core hotel business, new hotel management contract wins and monetisation of its non-core businesses."

-- Roy Chen (photo) & William Tng, CFA

Refurbishment on track, FY16 to be earnings sweet spot for hotels
We expect GLL’s FY16 hotel earnings to continue to benefit from RevPar growth of the Amba Hotel Charing Cross (239 rooms) and the Every Hotel Piccadilly (82 rooms) that were refurbished and relaunched in FY15.

The Amba Hotel Marble Arch (692 rooms), slated to be relaunched in 2QFY16, would also contribute positive earnings. In FY16, we estimate that refurbishment will take c.25k room nights out of room inventory, half the number of room nights (c.50k) taken out in FY15.


Full report here. 

You may also be interested in:


You have no rights to post comments

Counter NameLastChange
AEM Holdings2.2600.120
Avi-Tech Electronics0.265-
Best World1.6800.050
Broadway Ind0.0990.012
China Sunsine0.4000.010
ComfortDelGro1.3700.020
Delfi Limited0.965-
Food Empire1.440-
Fortress Minerals0.280-
Geo Energy Res0.330-
GSS Energy0.026-0.001
Hong Leong Finance2.470-0.010
Hongkong Land (USD)3.240-0.140
InnoTek0.445-0.005
ISDN Holdings0.315-0.005
ISOTeam0.035-
IX Biopharma0.045-
Jiutian Chemical0.0260.001
KSH Holdings0.250-
Leader Env0.050-0.001
Medtecs Intl0.131-0.001
Nordic Group0.3400.005
Oxley Holdings0.089-0.002
REX International0.1350.002
Riverstone0.6900.015
Sinostar PEC0.138-0.002
Southern Alliance Mining0.600-
Straco Corp.0.500-0.030
Sunpower Group0.220-0.010
The Trendlines0.085-
Totm Technologies0.023-
Uni-Asia Group0.815-0.025
Wilmar Intl3.3500.030
Yangzijiang Shipbldg1.7700.020
 

We have 821 guests and no members online

rss_2 NextInsight - Latest News