SINGAPORE (Nov 15): UOB KayHian is maintaining its “buy” call on Banyan Tree with a target price of 92 cents, after the group’s 3Q17 results came in largely in line.

The group registered a net profit in 3Q17 of $21.0 million, a reversal from $10.8 million losses last year, due to a $40.4 million one-off gain from the divestments to Vanke.

Revenue also improved 9.1% y-o-y on higher revenue recognition from property sales as Cassia Bintan (Phase 1) was completed, but this was offset by lower contribution from fee-based and hotel investments segments as well as higher forex loss during the period.

The group’s key market, Thailand, performed well as a market in terms of both its hotel investment and property sales segments.

Lower revenue and operating profit from the hotel investment segment was due to the sale of China assets earlier in August.

The group’s business in Maldives registered soft RevPAR, a 33% decrease y-o-y. But key Thailand market continued to show strong RevPAR growth of 10% y-o-y, as well as Seychelles which registered a 39% growth in RevPAR.

In a Monday report, analyst Edison Chen says, “Property sales supported revenue in the quarter and moved the segment into positive operating profit territory as compared to a year ago.”

The group received deposits for 23 units with total sales value of $20.4 million in its property sales segment for 3Q17, translating into unrecognised revenue of $132.4 million as at 3Q17.

Meanwhile, the group’s management is optimistic about Thailand as independent research has upgraded business growth forecasts for Banyan Tree's key market.

“We expect hotel investments and hotel management to bounce back in 4Q17 from seasonal weakness in 3Q17,” says Chen.

In addition, the group has eight new resorts and 11 spas set to open in the next year.

“With a bright outlook for Banyan Tree’s key Thailand market, we opine that Banyan Tree is only in the first innings of spectacular growth from its overture in achieving an asset-light model and leveraging on strategic partners’ core competencies,” says Chen.

As at 3.14pm, shares in Banyan Tree are trading at 59 cents or 0.9 times FY17 book with a dividend yield of 1.7%.

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