SINGAPORE (May 28): Phillip Securities Research is keeping its “accumulate” call on Banyan Tree Holdings (BTH) with an unchanged target price of 76 cents, despite 1Q19 results that came in under expectations.

The target price translates to FY19e price to net asset value (P/NAV) of 0.7 times, and represents a total return of close to 45%.

“Revenue and PATMI [were] below our expectations due to under-forecasted one-offs and continued weakness in Thailand,” says analyst Tara Wong.

Banyan Tree reported a 74% decline in 1Q19 earnings to $5.2 million, as revenue fell 17% to $81.2 million.

See: Banyan Tree's 1Q earnings decline fourfold on lower revenue, absence of one-off gains

However, Wong notes that excluding other income from the absence of gains from the dilution of the Banyan Tree’s interest in BTAC, the group’s PATMI would have risen close to 50% in 1Q19.

“Hotel investments segment [is] still suffering from Thailand underperformance, stemming from the inventory shortage from ongoing renovations at flagship resort Banyan Tree Phuket,” Wong says. “Thailand has been the drag, with Thailand RevPAR decreasing 17% y-o-y to $226 in 1Q19.”

But she opines that Banyan Tree’s long-term growth catalysts remain intact as the group transitions to an increasingly asset-light model.

“Based on the current inventory of management contracts secured by BTH, 53 hotels under the Banyan Tree umbrella of brands are slated to open from 2019 to 2022,” Wong says. “The securing of such management contracts, especially with strong partners such as Accor and Vanke, will be the main driver for BTH’s fee-based income.”

As at 3.25pm, shares in Banyan Tree are trading half a cent lower at 50 cents. This implies an estimated price-to-earnings (PE) ratio of 18.2 times and a dividend yield of 1.9% for FY19e.