• FY14 results below view
• RevPAR down YoY to S$90.8
• Competitive outlook ahead

FY14 earnings below view

Global Premium Hotels (GPH) reported FY14 PATMI of S$21.2m, which increased 9.7% mostly due to contributions from the new Parc Sovereign Hotel and lower income taxes as the group reversed over-provisions in prior years and also made a smaller provision in FY14. We judge these results to be a miss versus our expectations; FY14 PATMI makes up 94.0% of our full year forecast and, if adjusted for the one-time tax items, would have constituted a significantly lower 76.0% of the forecast. We attribute this to the lower-than-anticipated portfolio RevPAR which decreased from S$93.9 to S$90.8 YoY and higher than expected administrative costs. GPH announced a final ordinary cash dividend of 0.5 S-cents per share, up versus the 0.26 S-cents paid for FY13.

Boost from newly opened Parc Sovereign

In terms of the topline, we saw hotel room revenue increase 1.5% mainly due to contributions from the new Parc Sovereign Hotel – Tyrwhitt which opened in Jun-14 but this was partially offset by lower numbers from other hotels. We also note that administrative expenses rose 13.4% to S$24.9m due to higher staff costs and property taxes, higher depreciation charges and recognition of one-off expenses in relation to a voluntary unconditional cash offer by DBS Bank on behalf of Mr Koh Wee Meng in 1Q14.

Subdued outlook for group’s hotel portfolio

The group’s average occupancy rate (AOR) dipped from 90.8% in FY13 to 85.0% in FY14 and consequently RevPAR also fell from S$93.9 in FY13 to S$90.8 in FY14. This is not surprising given that international visitor arrivals in Singapore fell 3.4% YoY to 13.7m from Jan to Nov 2014, with visitors from China accounting for most of the shortfall with a 25.7% decline. Looking ahead to 2015, the group expects a competitive environment given the supply of hotel rooms which is likely to further depress the occupancy and room rates. Maintain HOLD with an unchanged fair value estimate of S$0.33.

Source: OCBC Research - 3 Feb 2015