Bright Horizons: Navigating Tourism's Growth Revival slide image

Bright Horizons: Navigating Tourism's Growth Revival

ROYAL PALM BEACH HOTELS PLC RPBH.N0000 Current Price: LKR 29.50 Fair Value: LKR 46.00 (FY25E) BUY P/E 31 March Estimates (LKR 'Mn) Revenue FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E 755 618 151 337 671 820 1,127 1,549 132 59 -159 -44 -63 86 192 294 127 69 -129 -22 -107 116 177 247 2.5 1.4 (2.6) (0.4) (2.1) 2.3 3.5 4.9 -45% -286% 83% 379% 208% 53% 40% 11.6x 21.3x N/A N/A N/A 12.8x 8.4x 6.0x 0.6x 0.6x 0.6x 0.5x 0.6x 0.6x 0.6x 0.5x 1.0 1.0 1.1 2.2 3.4% 3.4% 0.0% 0.0% 0.0% 0.0% 3.6% 7.5% Dividend Payout 39.4% 72.2% 0.0% 0.0% 0.0% 0.0% 30.0% 45.0% ROE 5.1% 2.8% -5.4% -0.8% -4.6% 4.7% 6.8% 9.1% Coastal indulgence in the south of Colombo Royal Palms Beach Hotels is located in Kalutara, the south of Colombo with exposure to the coastal region. The hotel has 136 rooms in a range of suits such as deluxe, heritage, executive, rajasthan royal, royal and penthouse. Revenue mainly stems from rooms and food & beverage sales. 28.41% stake of the hotel lies with Tangerine Beach Hotels PLC as at 30th Mar 2023. Top line take a positive turn as tourists arrivals surge RPBH recorded a loss of LKR 43.4Mn in 1QFY24 recording a 370.7% YoY downturn. The decline is mainly attributed by the higher admin expenses that recorded a 39.6% YoY increase to LKR 140.0Mn resulted by the inflationary pressure and poor economic sentiment. Despite the decline in the bottom line, the top line showcased a growth of 15.5% YoY recording LKR 147.6Mn influenced by the improved arrivals mainly attracting the coastal area. Gross Profit margin too showcased a decline of 460bps YoY on the back of increase in cost of sales by 30.6% YoY. However, on a positive note, RPBH recorded a net finance income of LKR 15.3Mn in 1QFY24. Location-specific advantage and upswing in arrivals to favour RPBH We expect occupancy levels of RPBH to significantly improve in the future given the positive developments on the tourism front with reviving arrivals. Accordingly, we estimate occupancy to improve to 55.0% and 60.0% in FY24E and FY25E, respectively while it is expected to gradually return to pre-pandemic levels in FY25E. Furthermore, location-specific advantage of RPBH considering its close proximity to the Colombo city and large attraction for coastal areas too shall favour in expanding the bottom-line of RPBH. As a result, we estimate earnings of RPBH to improve to LKR 115.7Mn (+208% YoY) in FY24E and LKR 177.0Mn (+53% YoY) in FY25E. EBIT Net Profit Adjusted EPS (LKR) YoY Growth (%) Valuations PER (x) PBV (x) DPS DY (%) Target Price PER based Valuation Earnings (LKR 'Mn) No. of Shares ('Mn) FY24E FY25E 116 177 50 50 EPS 2.3 3.5 Expected Average PER 15.0x 13.0x 35 46 First Capital A Janashakthi Group Company 34
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