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
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