Hotel Properties Ltd’s FY16 PATMI increased 27% to S$103.5m mainly due to disposal gains from the sale of two land sites in Bangkok and lower interest costs, partially offset by lower gross margins and weaker share of results of JV/associates (smaller contributions from the Interlace and d’Leedon condominiums).

In terms of the topline, FY16 revenues were almost flat at S$577.6m (versus S$579.5m in FY15), with the slight drop attributed to lower contributions from the group’s hotels and resorts, particularly those in the Maldives which were impacted by softer demand and refurbishment works. Adjusting for one-time items, we judge this set of results to be broadly within expectations.

Looking ahead, the management team sees a challenging year due to economic and political uncertainties but expects recurring income streams from the group’s hotel and resort assets to buttress earnings.

In addition, the group also reports that its Holland Park Villas and Burlington Gate developments in London are expected to be completed in 2017. The group has proposed a final dividend of 8.0 S-cents per share.

Maintain BUY with an unchanged fair value estimate of S$4.83.

Source: OCBC Research - 28 Feb 2017