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Banyan Tree kept at 'accumulate' on improved profitability across major business segments

PC Lee
PC Lee • 2 min read
Banyan Tree kept at 'accumulate' on improved profitability across major business segments
SINGAPORE (May 17): Phillip Securities expects 2H18 earnings at Banyan Tree to be driven by sustained strength in Thailand and less challenging conditions in Maldives.
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SINGAPORE (May 17): Phillip Securities expects 2H18 earnings at Banyan Tree to be driven by sustained strength in Thailand and less challenging conditions in Maldives.

New partnerships with Accor and Vanke should also offer opportunities for the group to scale up at a much faster pace.

In 1Q18, better operating performance from group-owned hotels in biggest market Thailand offset weakness in Maldives. Strong RevPAR growth in Thailand and Seychelles of 13% and 27% respectively more than offset weakness in Maldives.


See: Banyan Tree sees 1Q earnings soar to $20.2 mil on one-off gain

“Outlook is positive as we expect the strong RevPAR growth in Thailand to sustain given the low base effect last year,” says analyst Tan Dehong in a Thursday report.

Profitability in the segment also improved following the divestment and deconsolidation of the less profitable China operations. Given the state of emergency in the country, weakness in Maldives was largely expected and within Phillip’s expectations.

Despite lower revenue, operating margins for the fee-based segment improved as a result of write-back of provision for doubtful debts and non-consolidation of China operations. Operating margins improved y-o-y to 33% from 18% for the segment.

To recap, Banyan Tree’s property sales segment turned in losses even with 155% y-o-y increase in revenue. This is as a result of the write-off of deposit paid for land purchase in Thailand and higher expenses on projects where revenue recognition has not started.

There was also an increase in head office expenses by 53% or $1.4 million mainly due to higher travelling expenses and provision for founder’s grant.

“Maintain ‘accumulate’ with higher target price of 73 cents,” says Tan, “Our target price is raised after factoring in divestment gains and translates to 0.94 times FY18E P/NAV.”

As at 3.14pm, shares in Banyan Tree are trading at 58 cents or 17.6 times FY18 earnings.

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