• 1Q16 numbers within expectations
• Stable recurring hotel income
• Maintain BUY with S$4.83 FV estimate

1Q16 PATMI up 0.3% YoY to S$14.3m

HPL reported that its 1Q16 PATMI increased 0.3% YoY to S$14.3m while its topline for the quarter dipped 9.6% to S$143.7m, mostly due to lower contributions from the Tomlinson Heights development and the group’s resorts in Maldives.

In addition, management highlighted that two hotels were also closed intermittently over the quarter; Four Seasons Resort Bali at Jimbaran Bay is currently undergoing a major refurbishment while Holiday Inn at Vanuata has been closed for repairs since a cyclone in Mar 2015.

We also note that HPL’s share of results of JV and associates improved to S$3.0m in 1Q16 from a loss of S$3.9m in 1Q15 primarily because of stronger numbers from Four Seasons Seychelles and Four Seasons Hotel The Westcliff in Johannesburg and reduced losses from Four Seasons Hotel Shanghai which was divested in Jul 2015.

Overall, we had judged these stable set of 1Q16 results to be within expectations and FY15 PATMI now constitutes 18.0% of our full year forecast.

Maintain BUY at unchanged fair value estimate of S$4.83

We are heartened by the stable set of results over the latest quarter which reflects resilience of the recurring income generated by the group’s diversified hotel segment. That said, management indicates that the global economic outlook remains uncertain and expects the year ahead to be a challenging one across various business sectors.

With a healthy balance sheet with S$113.1m in cash and a net gearing of 46.4% as at end Mar 16, the group remains well positioned to capitalize on investment opportunities should we see any severe dislocations ahead. Maintain BUY with an unchanged fair value estimate of S$4.83.

Source: OCBC Research - 17 May 2016