Global Premium Hotels net profit up 61% YoY to $8.4m

On the back of a tax credit.

Results may look fine as of the moment, but the supply of new rooms will continue to put pressure on industry rates and occupancy.

According to a report by OSK-DMG, Global Premium Hotels (GPH)’s 4Q14 revenue rose 7.2% yoy, boosted by contribution from Parc Sovereign Hotel – Tyrwhitt, which started operating during the year. This was partially offset by lower contribution from its other hotels due to lower occupancy and room rates.

Net profit of SGD8.4m (+61% yoy) was boosted by a tax credit for over-provision of income in prior years.

At the pretax level, earnings fell 17% to SGD4.9m. For the full year, the group reported net profit of SGD21.2m, representing a growth of 10%. RevPAR fell from $93.9 in FY13 to $90.8 in FY14 on the back of a fall in occupancy from 90.8% to 85%.

OSK-DMG says the results reflected a more subdued hospitality market with international visitor arrivals to Singapore declining by 3.4% to 13.72 million for the period from January to November 2014 with especially sharp decline from the China market. 

Here’s more from OSK-DMG:

Looking ahead, we expect the supply of new rooms to continue to put pressure on industry rates and occupancy. GPH’s NAV/share grew 6.3% to $0.68 on the back of revaluation gains for its hotels. At current price, the stock trades at 48% discount to its NAV but given the lack of imminent catalysts, we would avoid the stock.

Our preferred exposure to the sector is via Hotel Properties Limited and Mandarin Oriental, the former for the redevelopment potential of its Singapore hotels and the latter for its diversified earnings stream and attractive yield of 5%.