Thursday, November 14, 2013

Amara : Muted 3Q2013 results, overall growth still intact (Phillip)

Amara Holdings Ltd
Target Price (SGD) 0.74
Closing Price (SGD) 0.550
Muted 3Q2013 results, overall growth still intact
Remains heavily undervalued

 Company Overview
Amara Holdings Limited is a home-grown integrated lifestyle group principally engaged in three business areas, namely, hotel investment and management, property investment and development, and specialty restaurants and food services.

• Muted financial performance in 3Q13. Although 3Q13 revenue, $18.5mn, recorded an 11.0% y-y dip, 3Q13 PATMI ($3.9mn), registered a 4.7% y-y growth.

• Overall growth still intact: 9M13 revenue increased 16.1% to S$61.0mn, 9M13 PATMI increased 54.4% to S$10.9mn.
• Increased rental revenue from 100AM should make up for the less-than-ideal revenue contribution from other business segments, moving forward.
• Expect current levels of strong recurring income to hold steady. Maintain watch on overseas ventures. Buy call with fair value at $0.74.

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.

Strong Fundamentals, Expansion Intact
Amara Singapore
Management has mentioned previously that the upcoming supply of hotel rooms in the neighbouring area would negatively impact the performance of its flagship asset in the short term. This would be largely true for the near term future. However, we reckon that this phenomenon should not impact the valuation of this asset. Amara Singapore would have to weather the slight dip in occupancy due to the euphoria surrounding the new hotel. Subsequently, we expect normalization of its RevPAR to continue. With insignificant changes to our estimated stabilized Net Property Income, we expect valuation for the hotel asset to remain at previous levels.

It is almost a year since the conclusion of the renovation works. With the assets fully leased, and early tenants fast reaching their one year term, we expect c.5% positive annual rental reversion for this asset. This retail asset will continue to provide growing recurring income. Additionally, there may be revaluation gains, originating from the full year earnings of this asset.

Overseas Assets
Its financial statements show Amara Holdings continue to made sizeable payments for the constructions of its Bangkok Hotel and Shanghai Mixed Developments assets. We expect construction for the Bangkok Hotel to complete in 4Q13, and official opening to be in 1H14. Additionally, the Shanghai asset is only slated for completion in 2015.

Accumulate with fair value at $0.74
There were no major transactions or change in the company major assets. We maintain the discount to RNAV at 40%. Consequently, Fair value remained unchanged at S$0.74. We remained positive with a recommendation to Buy. We expect the 100am to continue to boost its recurring income and the adjoining hotel (Amara Singapore) RevPAR to normalize, albeit slowly with the incoming supply glut. Additionally, opportunistic overseas development provides further upside.

Source/Extract/Excerpts/来源/转贴/摘录: Phillip-Research,
Publish date:14/11/13

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