• FY13 Revenue $80.70 mn (-11% yoy) due to slower residential sales and lower revenue from Hotel Investment and Management Segment; PATMI $27.2 mn (-7% yoy)
• Dividend of 1 cents per share
• Expect stronger rental income from 100AM with changes in tenant mix for higher yields
• Completion of Amara Bangkok in 2H14 to bring new earnings contribution
• Maintain BUY with new FY14 TP $0.70

What is the news?

FY13 Earnings results revealed FY13 Revenue at $80.70 mn (-11% yoy from $90.30 mn in FY12) and PATMI $27.2 mn (-7% yoy from $29.4 mn) with the higher rental income from 100Am mitigating the underperformance from the Hotel and residential segment. Management had guided that the performance of the Hotel and Investment Segment to be muted due to the increasing supply of the hotel in the surroundings. Retail rental contribution is expected to be improved with the active rebalancing of tenant mix for accretive yields. A first and final dividend of 1 cent was proposed.

How we view this

Amara’s results were slightly below our expectations (80% of our estimate FY13 revenue and 82% of our estimate FY13 PATMI) mainly due to slower residential sales and profit recognition of City@Tampines. Looking into FY2014, we expect the HIM business of Amara Holdings to remain resilient. Although there will be upcoming supply of hotels in the neighbouring area which may affect the occupancy rate of Amara Singapore hotel in near term, we believe that the management will continue its refurbishment of the hotel rooms to maintain its positioning with the new players. The development of new surrounding hotels will contribute to the 100AM retail’s footfall, boosting the recurring income of Amara’s commercial assets.

Amara’s first overseas asset Amara Bangkok, a 250-room business hotel is expected for completion in mid 2014. We predict Amara Bangkok’s maiden contribution to be 6.5% of FY2014E earnings and will continue to normalise. Following the completion of Amara Shanghai in 2015, the overseas projects would significantly improve the Amara’s earnings. We look forward to updates on the Myanmar Project to expand on Amara’s diversified portfolio.

Investment Action

As coverage is transferred from previous analyst, our forecasts are revised and FY14 estimates are introduced. Standing at the forefront of Amara’s earning momentum is (1) completion of Amara Bangkok and (2) positive annual rental reversion for renewal of lease for 100AM. We roll forward our RNAV from $1.23 to $1.18 to account for slower residential sales and trimmed earning forecast. We maintain our BUY rating with a lower TP $ $0.70 (previously $0.74) pegged at a deep 40% discount to our RNAV of S$1.17., offering a potential upside of 36.7%

Source: Phillip Securities Research - 3 Mar 2014