What is the news?

Muted  financial  performance  in  3Q13.  Earnings  results revealed  a  3Q13  PATMI  of  S$3.9mn,  4.7%  y-y  increase, mainly  attributed  to  resilient  retail  segment  mitigating  the effects of  weaker contribution from other business segment. Management has guided that there  was a slight downward variance in revenue from Hotel Investment  &  Management and Property Development segments.  In view of the tough challenges  locally,  we  expect  management  to  continue  to explore overseas opportunities.

How do we view this?

While 3Q13  financial performance  is  a no-show, we expect a  better  4Q13,  a  traditional  better  period  for  the  hotel industry.  The  company  has  slightly  underperformed  our estimates.  9M13  revenue  formed  58.5% of FY13  estimates. While  9M13  PATMI  accounts  for  a  mere  41.3%  of  FY13 estimates,  the  traditionally  stronger  second  half  financial performance should make up for it.  We remain positive as current conservative RNAV-valuations are still cheap.

Investment Actions?

With  fundamentals  intact,  strong  recurring  income  is expected.  Expect  their  hotel  to  weather  the  upcoming supply glut  and RevPAR to recover. Fair value  maintained at $0.74. Maintain Buy.

Source: PhillipCapital Research - 14 Nov 2013