Central Plaza Hotel: Combating tourism headwinds
- Unexciting 1Q25F core profit of THB772mn (+3% y/y), weighed down by losses and pre-operating expenses of new Maldives hotels
- Hotels in Thailand and Japan to deliver firm performance, boosted by ARR amid tourism headwinds
- Food business remains boosted by food JVs
- Maintain BUY with lower earnings and TP of THB37.50, reflecting weaker-than-expected Thailand tourist arrivals
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Stripping out the impact from the Maldives hotels, we expect double-digit growth of the performance in this quarter. We also anticipate THB56mn in forex losses related to Japanese loans (vs. a forex gain in 1Q24), resulting in 1Q25F net profit of THB716mn (-5% y/y, +7% q/q).
Hotel performance was still firm despite unexciting RevPAR growth. Although we estimate total RevPAR growth at c.3% in 1Q25F, dragged by Maldives, hotel RevPar still saw robust growth in the Thailand and Japan operations. Overall RevPAR growth is yet expected to be supported by an increase in average room rate (ARR) in both Thailand and Japan. Net-net, we estimate the hotel revenue growth of 6% y/y in 1Q25F.
Bangkok assets may experience slight declines following a slowdown in inbound tourism from February 2025, particularly from China. Thailand’s upcountry assets still performed well after a completion of key assets and strong tourism demand in Southern assets. Japan hotels are still experiencing a gradual increase in occupancy rates this quarter, while ARR growth remains strong.
Maldives assets continued to face pressure, exacerbated by the opening of a new hotel in November last year. Dubai assets (recorded through associate income) also saw a y/y decline in performance, attributed to the Ramadan Festival’s shift from mid-March to mid-April in 2024 to encompassing the full month of March in 2025, impacting tourism and spending.
Food SSSG to come in at low single digit in 1Q25F. Food SSSG is expected to come in at 1% in 1Q25F with total food revenue growth of 2%. According to management, food SSSG is improving m/m, particularly key brands, during the quarter.
Nonetheless, the company’s focus on its food business JVs contributed to stronger revenue growth of c.9% during the quarter (including food JVs). The growth was driven primarily by proactive store expansion. The strong performance of food JVs should support the company’s associate income growth in 1Q25F.
EBITDA margin improving despite Maldives impact. In 1Q25F, we estimate both hotel and food gross margin to further expand by 2.3ppt and 0.5ppt y/y, respectively. The spike in hotel gross margin was mainly a result of rising average daily rate (ADR) in Thailand and Japan, while the food gross margin improvement was due to better cost leverage and cost savings.
In addition, we expect associate income to rise from THB1mn in 1Q24 to THB35mn in 1Q25F following the strong performance of food JVs and robust EBITDA margin in this quarter.
However, we note that selling, general, and administrative expenses (SG&A) to sales is expected to inch up due to pre-operating expenses at a new Maldives hotel and losses at the Maldives hotel that opened in November last year (c.THB50mn each). Net-net, we expect CENTEL’s EBITDA margin to improve 0.9ppt y/y to 32.2% in 1Q25F with EBITDA growth of 7% y/y.
Meanwhile, we also estimate high depreciation and amortisation (D&A) expenses this quarter compared to last year after the launch of new hotels and completion of renovations, with the higher D&A expenses expected to weigh down on EBIT growth, estimated at c.3% y/y in 1Q25F.
Finance costs are trending down but effective tax rate to normalise. We forecast a decrease in CENTEL’s finance costs in 1Q25F, both y/y and q/q, due to declining interest rates, as c.56% of the company’s outstanding loan portfolio is on floating interest.
On the other hand, we expect the effective tax rate to normalise close to c.20% in 1Q25F. Net-net, 1Q25 core margin is expected at 12.2% (-0.1ppt y/y and +2.2ppt q/q).
Outlook
Thailand tourism slows. The number of tourists during 1 January to 20 April 2024 was 11.3mn (+0.5% y/y), falling short of the government’s growth target of c.10% y/y in 2025. We note that inbound tourism growth started to slow in February (-7% y/y), especially from China, given the shift of the Chinese New Year to January in 2025 (from February in 2024) and concerns surrounding scam centres along Thailand’s borders early this year.
In March 2025, foreign tourist arrivals contracted 9% y/y following the early Ramadan festival and soft Chinese tourism ( c.30% of pre-COVID level, vs. 63% of pre-COVID level in December 2024). In addition to safety concerns relating to scam centres, we believe the recent earthquake in Thailand may also lead to short-term negative sentiment regarding tourism.
YTD, Chinese tourists were still the biggest market feeders, and contributed c.14% of total foreign tourists; followed by Malaysia (c.12%), Russia (c.7%), India (c.6%), and South Korea (c.5%).
Bangkok affected by tourism hiccups while other hubs saw firm performance in April 2025. Per discussions with management, Bangkok RevPAR in April contracted by a mid-teen percentage y/y while upcountry RevPAR remained strong at a high single-digit percentage. Nonetheless, room revenue in certain hubs like Japan and Dubai accelerated, showing growth of c.30% and c.20% y/y, respectively.
The company saw a significant increase in ARR, benefitting from the World Expo held in Osaka in April. Dubai’s improved performance was supported by a low base last year from the shift in the Ramadan Festival period. While Maldives performance is expected to remain soft, pre-operating expenses related to the new hotel opening in 2Q25 should decrease compared to 1Q25.
Regarding the food business, we anticipate SSSG in April to remain close to 1Q25 levels, with the food JV continuing its strong performance during the period.
In 2Q25, we expect EBITDA margin to expand, driven by hotel ARR growth, better cost leverage and control, as well as a growing share of profit from food JVs. Thus, core profit growth should improve y/y compared to 1Q25F, with stronger growth also expected in 2H25 alongside the resumption of growth in Thailand’s inbound tourism in 2H25.
Company targets robust hotel revenue growth in 2025, but we believe it warrants a revisit. During an analyst meeting in February 2025, management guided for hotel revenue of THB13bn in 2025, or c.23% y/y growth, with occupancy rates of 74%-77% (vs. 72% in FY24) and RevPAR between THB4,500-4,700 (vs. THB4,101 in 2024).
The strong hotel revenue growth projected for this year is primarily attributed to the full-year operation of renovated assets like Centara Grand Mirage and Centara Karon, contribution from two new hotels in Maldives, and organic growth of existing assets. It’s important to note that the guidance already accounts for the renovations of Centara Grand Karon and Centara Grand Huahin, which are expected to reduce hotel revenue by THB400mn in 2025.
Nevertheless, management is maintaining this guidance, but we believe there is a significant possibility of a downward revision to the 2025 guidance due to weaker-than-expected tourist arrivals YTD.
Recommendation
Maintain BUY with lower TP of THB37.50 (vs. THB42.00 previously). We cut our earnings forecast in FY25/26F by 10% after a slowdown in Thailand’s inbound tourism since February 2025. In our current forecast, we’ve lowered our RevPAR assumption, food SSSG, and EBITDA margin.
Our valuation assumes lower terminal growth of 1%, instead of 1.5% previously, to reflect less exciting growth for Thailand tourism. Thus, our DCF-based TP is down to THB37.50 (with a WACC of 8.9%). Given upside and firm profit growth, we maintain our BUY call.
| FY Dec | 4Q2023 | 3Q2024 | 4Q2024 | % chg yoy | % chg qoq |
|---|---|---|---|---|---|
| Revenue | 5,751 | 5,398 | 6,006 | 4.4 | 11.3 |
| Cost of Goods Sold | (2,486) | (2,488) | (2,501) | 0.6 | 0.5 |
| Gross Profit | 3,265 | 2,910 | 3,505 | 7.3 | 20.4 |
| Other Oper. (Exp)/Inc | (2,823) | (2,590) | (2,980) | 5.6 | 15.0 |
| Operating Profit | 443 | 320 | 525 | 18.5 | 63.9 |
| Other Non Opg (Exp)/Inc | 252 | 195 | 327 | 29.4 | 67.3 |
| Associates & JV Inc | 9.50 | (7.11) | 121 | 1,177.5 | (1,806.4) |
| Net Interest (Exp)/Inc | (268) | (264) | (268) | (0.1) | (1.7) |
| Exceptional Gain/(Loss) | 142 | (13.0) | 69.0 | (51.4) | (630.8) |
| Pre-tax Profit | 579 | 232 | 774 | 33.7 | 234.0 |
| Tax | (156) | (81.1) | (137) | (12.2) | 69.4 |
| Minority Interest | 2.39 | 12.5 | 30.8 | 1,188.1 | 145.5 |
| Net Profit | 425 | 163 | 667 | 57.1 | 309.0 |
| Net profit bef Except. | 283 | 176 | 598 | 111.6 | 239.6 |
| EBITDA | 1,474 | 1,263 | 1,780 | 20.8 | 41.0 |
| Margins | |||||
| Gross Margins (%) | 56.8 | 53.9 | 58.4 | ||
| Opg Profit Margins (%) | 12.3 | 9.4 | 16.2 | ||
| Net Profit Margins (%) | 7.4 | 3.0 | 11.1 |
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