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12-03-2013, 09:40 AM
Latest By UOB KH. Funny how come I didnt know that G Leisure has a WIP Hotel in Singapore...
Guocoleisure (GLL SP)
Taking A Deeper Look
NOT RATED
Price/Target
Mkt. Cap/ F. Float
S$0.73/N.A.
S$991.8m/33%
Fundamental View Technical View
The stock is currently trending up and has broken above its
previous high on 10 Feb 12. The stock has an immediate
support at around S$0.70 and watch to see whether it could
test S$0.80.
Financials
FYE 30 June
(US$m)
2010 2011 2012
Net Turnover 331.1 391.1 369.8
Gross Profit 161.6 201.8 186.6
EBITDA 96.5 143.1 121.1
EBIT 66.4 116.2 90.9
PATMI 49.5 80.6 77.7
EPS (cts) 3.70 6.10 5.90
PE (x) 15.7 9.5 9.9
P/B (x) 0.8 0.7 0.7
Dividend Yield (%) 2.0 2.7 3.4
PATMI Margin (%) 15.0 20.6 21.0
Net Gearing (%) 41.3 36.2 31.6
Source: Company, Bloomberg, UOB Kay Hian
Peer Comparison
Company Ticker
Price
(local
currency)
Market
Cap
(S$m)
PE
FY12
(x)
P/B
FY12
(x)
INTERCONTINENTAL
IHG LN
Equity 1947.00 9,925 15.54 25.65
MILLENNIUM &
COPTHORNE HOTELS
MLC LN
Equity 555.50 3,362 13.26 0.83
PAN PACIFIC HOTEL
PPAC
SP
Equity 2.32 1,392 19.56 1.51
HOTEL PROPERTIES
HPL SP
Equity 3.100 1,572 12.10 1.07
Average 19.55 0.76
GUOCOLEISURE LTD
GLL SP
Equity 0.725 992 10.36 0.69
Straits Times Index 3248.84 10.51 1.41
Source: Bloomberg, UOB Kay Hian
Background
Valuation
• Guocoleisure (GLL) is trading at 10.36x FY12 PE and 0.69x
FY12 P/B.
• Share catalysts include higher-than-balance sheet
valuation of GLL’s assets from the independent valuation
report.
Investment Highlights
• Market leader in the UK. Thistle Hotel is one of the
largest hotel chains in the UK with more than 8,000 rooms.
Over 5,000 of its rooms are in London, the country’s
capital that has traditionally been resilient to recession due
to its status as a global city. Despite the hangover from the
London Olympics, Price Waterhouse Coopers (PwC) is still
positive on the outlook for the London hotel industry, with
a 77.1% occupancy rate forecast for 2013 (the third
highest forecast for an European city).
• Oil and gas royalty - a steady cash generating
machine. For the last five FYs, GLL has been receiving a
steady cashflow stream of US$40m-50m. With the
resources in Bass Straits of Australia likely to last till 2048,
the royalty income will serve as a support for future
earnings. Royalty income represented approximately 63%
of FY12 net profit. In addition, using the DCF model, with a
projected cash flow of approximately US$35m over the
next 30 years at a discount rate of 9%, net present value
of the royalty income stream is approximately US$357m.
This is three times higher than the asset’s historical cost of
US$122.4m as at end-FY12 in the balance sheet.
• Properties held at deep discount to book value. GLL
carries its hotels and property, plant and equipment (PPE)
at historical cost less accumulated depreciation. According
to management, the last revaluation date was in 2005.
With an independent valuation report of GLL’s assets likely
to be issued in the near term (due to privatisation of Guoco
Group, the ultimate holding company of GLL), we believe it
will shed light on the highly undervalued property portfolio
of GLL, providing a powerful catalyst for the stock price.
• Future Plans:
1. Rationalise assets (Dispose some of its development
properties to focus on its core business - hotel
management).
2. Increase its foothold in Asia (Two additional hotels are
work-in-progress - one in Malaysia and one in
Singapore).
Our View
• GLL is trading at an attractive valuation at 0.69x FY12 P/B.
We believe the independent valuation report on GLL’s
assets will highlight GLL’s undervalued property portfolio to
the market that will serve as a short-term price catalyst.
• Steady income stream from oil and gas royalty and its
market leader position in London’s hotel operation also
make GLL an attractive investment to value investors.
• We believe the current depressed valuation is due to the
lack of market exposure by GLL. With recent news about
the privatisation of GLL’s parent Guoco Group and plans to
set up a hotel in Singapore, we believe there will be an
increase in investor interest in the stock. The stock has
already seen an increase in volume since the start of the
year.
Guocoleisure is an investment holding company with
businesses in hotel operation, oil and gas, property
development and gaming. The Group manages 37 hotels
across the UK and 2 hotels in Malaysia
Guocoleisure (GLL SP)
Taking A Deeper Look
NOT RATED
Price/Target
Mkt. Cap/ F. Float
S$0.73/N.A.
S$991.8m/33%
Fundamental View Technical View
The stock is currently trending up and has broken above its
previous high on 10 Feb 12. The stock has an immediate
support at around S$0.70 and watch to see whether it could
test S$0.80.
Financials
FYE 30 June
(US$m)
2010 2011 2012
Net Turnover 331.1 391.1 369.8
Gross Profit 161.6 201.8 186.6
EBITDA 96.5 143.1 121.1
EBIT 66.4 116.2 90.9
PATMI 49.5 80.6 77.7
EPS (cts) 3.70 6.10 5.90
PE (x) 15.7 9.5 9.9
P/B (x) 0.8 0.7 0.7
Dividend Yield (%) 2.0 2.7 3.4
PATMI Margin (%) 15.0 20.6 21.0
Net Gearing (%) 41.3 36.2 31.6
Source: Company, Bloomberg, UOB Kay Hian
Peer Comparison
Company Ticker
Price
(local
currency)
Market
Cap
(S$m)
PE
FY12
(x)
P/B
FY12
(x)
INTERCONTINENTAL
IHG LN
Equity 1947.00 9,925 15.54 25.65
MILLENNIUM &
COPTHORNE HOTELS
MLC LN
Equity 555.50 3,362 13.26 0.83
PAN PACIFIC HOTEL
PPAC
SP
Equity 2.32 1,392 19.56 1.51
HOTEL PROPERTIES
HPL SP
Equity 3.100 1,572 12.10 1.07
Average 19.55 0.76
GUOCOLEISURE LTD
GLL SP
Equity 0.725 992 10.36 0.69
Straits Times Index 3248.84 10.51 1.41
Source: Bloomberg, UOB Kay Hian
Background
Valuation
• Guocoleisure (GLL) is trading at 10.36x FY12 PE and 0.69x
FY12 P/B.
• Share catalysts include higher-than-balance sheet
valuation of GLL’s assets from the independent valuation
report.
Investment Highlights
• Market leader in the UK. Thistle Hotel is one of the
largest hotel chains in the UK with more than 8,000 rooms.
Over 5,000 of its rooms are in London, the country’s
capital that has traditionally been resilient to recession due
to its status as a global city. Despite the hangover from the
London Olympics, Price Waterhouse Coopers (PwC) is still
positive on the outlook for the London hotel industry, with
a 77.1% occupancy rate forecast for 2013 (the third
highest forecast for an European city).
• Oil and gas royalty - a steady cash generating
machine. For the last five FYs, GLL has been receiving a
steady cashflow stream of US$40m-50m. With the
resources in Bass Straits of Australia likely to last till 2048,
the royalty income will serve as a support for future
earnings. Royalty income represented approximately 63%
of FY12 net profit. In addition, using the DCF model, with a
projected cash flow of approximately US$35m over the
next 30 years at a discount rate of 9%, net present value
of the royalty income stream is approximately US$357m.
This is three times higher than the asset’s historical cost of
US$122.4m as at end-FY12 in the balance sheet.
• Properties held at deep discount to book value. GLL
carries its hotels and property, plant and equipment (PPE)
at historical cost less accumulated depreciation. According
to management, the last revaluation date was in 2005.
With an independent valuation report of GLL’s assets likely
to be issued in the near term (due to privatisation of Guoco
Group, the ultimate holding company of GLL), we believe it
will shed light on the highly undervalued property portfolio
of GLL, providing a powerful catalyst for the stock price.
• Future Plans:
1. Rationalise assets (Dispose some of its development
properties to focus on its core business - hotel
management).
2. Increase its foothold in Asia (Two additional hotels are
work-in-progress - one in Malaysia and one in
Singapore).
Our View
• GLL is trading at an attractive valuation at 0.69x FY12 P/B.
We believe the independent valuation report on GLL’s
assets will highlight GLL’s undervalued property portfolio to
the market that will serve as a short-term price catalyst.
• Steady income stream from oil and gas royalty and its
market leader position in London’s hotel operation also
make GLL an attractive investment to value investors.
• We believe the current depressed valuation is due to the
lack of market exposure by GLL. With recent news about
the privatisation of GLL’s parent Guoco Group and plans to
set up a hotel in Singapore, we believe there will be an
increase in investor interest in the stock. The stock has
already seen an increase in volume since the start of the
year.
Guocoleisure is an investment holding company with
businesses in hotel operation, oil and gas, property
development and gaming. The Group manages 37 hotels
across the UK and 2 hotels in Malaysia