CENTEL Shares Threatening To Break Down As Earnings Disappoint

Witawat (Ed) Wijaranakula, Ph.D.
Wed Mar 1, 2017

Central Plaza Hotel PCL (SET:CENTEL), is a Thailand-based hotel, food and ice cream outlet operator and one of the subsidiaries of the Central Group, a family-owned holding company, which has interests in several retail businesses, including Central Pattana PCL (SET:CPN) and Robinson Department Store PCL (SET:ROBINS). As of May 12, 2016, Mr. Tiang Chirathivat, founder of the Central Group, and families, hold about 15.48% of CENTEL shares. Hotel business generates about 47% of the total consolidated revenues.

CENTEL owns and operates hotels and resorts, as well as managing hotels and resorts under management agreements, across Thailand and other countries, including Centara Grand at CentralWorld, Sofitel Centara Grand Bangkok, Centara Grand Beach Resort & Villas Krabi, Centara Villas Phuket and Novotel Centara Hat Yai, among others. As of December 31, 2016, the company has a total of 52 hotels and resorts in its portfolio with a total of 10,980 rooms, in which 15 hotels with 3953 rooms are still under development.

It also operates fast casual restaurants and dining, which are KFC, Mister Donut, Auntie Anne’s, Pepper Lunch, Beard Papa’s, Chabuton, and Cold Stone Creamery, and others. Its subsidiaries include Centara Learning Centre Company Limited and Kata Phuket Hotel Company Limited.

Central Plaza Hotel said on February 28, 2017 that its fourth quarter 2016 revenues were 4.87 billion baht, down 2.38% year-on-year, missing the 4.90 billion baht consensus estimate of 2 analysts, according to Thomson Reuters. CENTEL posted fourth quarter 2016 earnings of 0.31 baht per share, up 40.91% year-on-year, but below the 0.35 baht per share estimate of one analyst. For the full year 2016, the revenues were 19.56 billion baht, up 3.3% year-on-year, missing the 19.87 billion baht consensus estimate of 17 analysts. The full year 2016 EPS was 1.37 baht, missing the 1.38 baht consensus estimate of 19 analysts.

The company blamed the revenue shortfall in the fourth quarter on a three week shut down due to flood damages in Phuket, an increase in the Thai visa fee, and temporary suspension of entertainment events during the royal mourning period for the late King.

For 2016, the company reported a dividend of 0.55 baht per share, a 10.0% increase from 2015. The 18 analysts covering the company expect dividends of 0.63 baht per share for the upcoming fiscal year, representing a year-over-year increase of 14.73%. 

In a company press release, Central Plaza Hotel said the company’s hotels in Thailand achieved an average occupancy rate of 78.6% in the fourth quarter 2016, down 1.1% year-on-year. During the quarter, the company added another 24 quick service restaurant (QSR) outlets to the network and now has a total of 830 QSR outlets, with same-store-sales (SSS) growth of -5.6%.

From our technical viewpoint, CENTEL has been range-bound between the 28 baht and 43 baht levels since 2013. The stock tried, but failed, to break out of the trading range in December 2015. Since then, CENTEL has been bumping into the trendline resistance and is now threatening to break down the long-term trendline support of the symmetrical triangle chart pattern. The stock could head back down to retest the 28 baht level, if the trendline support can’t hold. 

According to Thomson Reuters, the consensus amongst 21 polled investment analysts covering CENTEL gave the company an Outperform rating, with the median 12-month price target of 45 baht a share, as of February 25, 2017.

Disclosure: No position and no recommendation for any companies mentioned.


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