Dividend Chaser on Global Premium Hotel Results

(From Article)

Tuesday, 6 August 2013

Global Premium Hotels

OCBC on 5 Aug 2013

The 2Q13 results for Global Premium Hotels (GPH) were generally in line with our expectations. Revenue climbed 1.0% YoY to S$15.4m and gross profit rose 1.1% to S$13.4m. Administrative expense fell 19.4% to S$5.5m mainly due to one-off recognition of IPO expenses of S$1.4m in 2Q12. Interest expense was 9.8% higher at S$1.9m due to the restructuring exercise undertaken by GPH pursuant to the IPO in 2Q12. 2Q13 net profit climbed 36.2% to S$4.9m. 2Q13 hotel room revenue increased 1.3% YoY to S$15.1m. RevPAR was 2% higher at S$95.7, chiefly due to higher average occupancy rate of 93.1%, up 3.4 ppt. We expect 2H13 to be slightly better than 1H13 because we understand from industry sources that the sector as a whole has seen some stabilisation in 3Q13. Using a 10% discount to RNAV, we maintain our fair value of S$0.33 and BUY rating on GPH.

2Q13 results in line
The 2Q13 results for Global Premium Hotels (GPH) were generally in line with our expectations. Revenue climbed 1.0% YoY to S$15.4m and gross profit rose 1.1% to S$13.4m. Administrative expense fell 19.4% YoY to S$5.5m mainly due to one-off recognition of IPO expenses of S$1.4m in 2Q12. Interest expense was 9.8% higher at S$1.9m due to the restructuring exercise undertaken by GPH pursuant to the IPO in 2Q12. 2Q13 net profit climbed 36.2% to S$4.9m. 1H13 revenue and net profit came to 48% and 51% of our prior respective full-year estimates, which we are adjusting slightly.

Higher occupancy drove RevPAR growth
2Q13 hotel room revenue increased 1.3% YoY to S$15.1m. RevPAR was 2% higher at S$95.7, chiefly due to higher average occupancy rate of 93.1%, up 3.4 ppt. GPH's operational performance figures were stronger than its peer group's. RevPAR for Singapore hotels in the Economy and Mid-tier categories saw RevPAR in each month of 2Q13 fall by low to high single-digit percentages. GPH's rental income for 2Q13 dropped by 13.4% YoY to S$246k due to the disposals of the Changi Road property and Pasir Panjang commercial property in 2Q12.  

Expect 2H13 to be stronger than 1H13
We expect 2H13 to be slightly better than 1H13 because we understand from industry sources that the sector as a whole has seen some stabilisation in 3Q13. Management continues to believe that with the increasing prevalence of budget airlines in the region, the performance of GPH's economy-tier and mid-tier hotels will continue to be resilient, despite increasing hotel room supply for the industry.

Maintain BUY
Using a 10% discount to RNAV, we maintain our fair value of S$0.33 and  BUY  rating on GPH.