Global Premium Hotels' gross profit dipped 2.9% to S$12.6m

Prevalence of budget airlines to boost future sales.

According to OCBC Investment Research, Global Premium Hotels' revenue fell 2.1% to S$14.6m and gross profit declined 2.9% YoY to S$12.6m.

OCBC noted that interest expense was S$1.3m higher (+211.2%) YoY due to the restructuring exercise undertaken by GPH pursuant to the IPO in 2Q12 and this was the primary reason that net profit contracted 32.0% to S$4.3m. Revenue and net profit came out to 23% and 24% of our full-year estimates respectively. 

Here's more:

Economy hotels resilient
1Q13 hotel room revenue decreased 1.1% YoY was mainly due to the lower average occupancy rate (AOR) of 89.6%, down 2.1ppt YoY. Revenue per available room (RevPAR) remained relative stable YoY at S$91.4.

Given that the vast majority of GPH's hotels are in the Economy tier, this matches with industry data, which shows that for 2M13, Economy tier hotels were the best performers with the lowest declines in RevPAR.

Rental income for 1Q13 dropped by S$0.2m, or 38.6% YoY due to the disposals of the Changi Road property and Pasir Panjang commercial property in 2Q12.

Administrative expenses for 1Q13 rose by S$0.7m (13.6%) YoY. This was mainly due to the general increase in wages and higher depreciation expenses from higher fair values on leasehold land and hotel buildings.

We expect slightly better YoY performance in the remaining quarters, especially because 1Q13 was slow for the industry because of the later occurrence of Chinese New Year, which pushed back corporate travel.

Management believes that with the increasing prevalence of budget airlines in the region, the performance of GPH's economy-tier and mid-tier hotels will continue to be resilient, despite increasing hotel room supply for the industry.