Background: Banyan Tree is a leading developer and operator of premium resorts, hotels and spas around the world, where its signature brands, Banyan Tee and Angsana, are best known. Equally impressive is its ability to emerge almost unscathed as a recession-proof business. The company has been profitable every year since its listing in 2006.
Recent development: In 2Q11, Banyan recorded a 3% increase in revenue to $63.6m but a net loss of $8.9m (+28.0% YoY). This was due to the run-up to the Thai elections, which affected hotel operations and property sales. However, it was partially offset by good performance in the management fee-based segment.nal Ne
Key ratios…
Price-to-earnings: 18.2x
Price-to-NTA: 0.8x
Dividend per share / yield: $0.01 / 6.9%
Net cash(debt) per share: S$(0.12)
Net cash as % of mkt cap: -16.1%
Share price S$0.72
Issued shares (m) 761.402
Market cap (S$m) 548.209
Free float (%) 27.8
Recent fundraising activities Nil
Financial YE 31-Dec
Major shareholders Bibace investments (36.8%), Qatar Investments (26.95%), Citigroup (19.58%)
YTD change -39.5%
52-wk price range S$0.68-1.2
Our view
China Hospitality Fund. Through the establishment of the China Hospitality Fund, Banyan was able to raise RMB1.07b (S$560m) worth of capital. To-date, the fund has been invested in five projects in various parts of China and one integrated resort in Vietnam. Sixty per cent of the group’s new projects will have a significant focus on China, which will quadruple the number of resorts to 25 by 2014. The number of spas will be set at the same pace and expand from 12 to 33. Cash reserves stand at $150m, which will be deployed to such projects accordingly.
Pipeline growth on track. All except one of Banyan’s projects are on track. Banyan Tree in Portugal is stalled by difficulties in obtaining financing from the owner’s side and will be launched two years later. Three resorts and 11 spa outlets are expected to be rolled out in the next 12 months. The company has also signed three extra management contracts.
Third-quarter outlook. Management has cautioned that 3Q, traditionally a quiet season for the company, could also record a loss. In addition, various external and internal factors would come into play given the company’s global exposure – key markets such as Europe are facing crisis while Sheraton Phuket is closed for renovation and will be rebranded as Angsana Phuket in December. Though Thailand’s political situation appears to have stabilised, property sales remain slow. The stock currently trades at a PER of 18.2x.
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