20160129-高盛-Look_for_earnings_growth_with_high_visibility_amid_still-soft_RevPAR_backdrop__Buy_HTHT_18页_567kb

Asia: Hotels Summary

Core Content

This document is an equity research report on the Asia hotel sector, focusing on the performance and outlook of several hotel operators and REITs. It highlights the impact of economic conditions, FX volatility, and market trends on the sector, with a particular emphasis on China and Hong Kong.

Main Points

• RevPAR Trends:

  • In China, RevPAR stabilized further in 11M15, but there was a small percentage decline yoy.
  • In Hong Kong, RevPAR for high tariff A hotels declined by 11% yoy in 11M15, and the trend is expected to continue with a further decline of 5% in 2016E.
  • For HTHT (China Lodging), same-hotel RevPAR declined by -2.9% yoy in 4Q15, but the pace of decline moderated compared to 9M15 (-4.0% yoy).

• Earnings Growth and Visibility:

  • HTHT is highlighted as a key name for EBITDA and margin growth yoy in 4Q15, driven by franchise additions, despite negative same-hotel RevPAR.
  • The economy hotel segment is recommended to be approached defensively due to ongoing demand headwinds.
  • The report suggests that HTHT has a strong development pipeline of 696 hotels (91% of net openings in 2015), which supports its growth potential.

• Valuation and Ratings:

  • HTHT is rated Buy with a 12-mo TP of USD 33.00, implying a 17.7% implied growth.
  • HK & Shanghai Hotels and Shangri-La Asia are rated Neutral.
  • Mandarin Oriental and Jinmao Investments are rated Sell due to valuation concerns, exposure to the weakening HK market, and potential earnings pressure.
  • The report notes that HTHT has strong free cash flow (FCF) and is a top pick in the sector.

• Key Risks:

  • Competition for franchise fees.
  • Worse-than-expected Chinese macroeconomic and FX conditions.
  • Faster-than-expected ramp-up of new hotels.
  • FX volatility affecting the sector in 2016E.

Key Information

EBITDA and RevPAR Performance (4Q15E)

Valuation Summary

Upcoming Events

• HTHT/Accor alliance to commence in early 2016E.
• March 2016 reporting season for FY15.
• Home Inns shareholders' voting on the BTG merger agreement in 1H16.
• Opening of Shanghai Disney Resort on June 16, 2016.

Conclusion

The report emphasizes the importance of selective investment in the Asia hotel sector, with HTHT as the top pick due to its strong EBITDA and margin growth potential, despite challenges in the HK market. It also highlights the risks associated with the economy hotel segment and the need to monitor FX volatility and competition for franchise fees. Overall, the report suggests that while some companies show positive growth, others face significant headwinds and are rated as Sell.