20 February 2017

Amara- Interesting reward risk proposition!!!

For a more detailed report on this, please let me know.




Think it presents good risk reward, buy now, pray for breakout, cut loss at S$0.385
TP : S$0.52-0.58

Play on earnings growth- with operational and interest rate savings plus contribution and ramp up of china and thailand hotels that come on board in 2017 and 2015 respectively. (although not sure y interest expense is falling - maybe lower interest rate nego)

With 4 hotels now, and possibly 1 more with JV at Myanamar- spinoff in future as REIT?

Trading in a tight range of S$0.395-0.425 for 11 months.   Noted that since Jun 16- Oct 16, abit of heightened volume. Last week, heightened volume again. Currently on the verge of breakout at S$0.425, 
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Amara (Price: 0.425, mkt cap: S$244m)- 4 hotels (2 in Sg, 1 in Shanghai, 1 in Bangkok) + 1 retail mall in sg

Properties include:
1)      Amara hotel at Tanjong Pagar-388 guest room
2)      343 guest room at Shanghai + adjoining office and retail mall- to be opened soon,
3)      Amara Sentosa 140 guest room,
4)      Amara BangKok-250 guestroom- opened in mid 2015
5)      Freehold 2-storey terrace house at Hoot Kiam Road
NAV: S$0.6457, P/B: 0.66x; RNAV: S$1.356, P/RNAV: 0.31x – Stock trading near an all time low in terms of P/B.
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Investment highlights:
1)      NAV: S$0.6457, P/B: 0.66x; RNAV: S$1.356, P/RNAV: 0.31x – Stock trading near an all time low in terms of P/B.
2)      More diversified earnings + earnings boost with 2 new hotels – opening of Amara Bangkok in Apr 15 (gradual rampup?), opening of Amara Shanghai (expected in early 2017)
3)      2.8% dividend yield (DPS: S$0.012)
4)      Operational efficiency to start showing for next 3 quarters? Of note 3Q16, showed other expenses dropping 25% yoy (S$1.7m savings)- this was not evident in 2Q16. Interest expense also continue to fall for 2 consecutive quarters. With a 4% growth in sales and cost savings from other expenses, net profit for 3Q16 rose 44% yoy. – annualized 3QFY16- net profit = S$15.8m (PE about 15.4x, have not included China yet which is not yet operational)
5)      Vote of confidence from management
·         CEO bought 100,000 shares at S$0.42 on Aug 16- family owns 72.3% of co. (remuneration not overly high though, with just 1 director with remuneration of S$750k-1m, the rest are below)
·         Management has also constantly state that co. is undervalued (back in 2015, engaged in active buybacks, and price then was S$0.545, now is S$0.425)
Risks:
1)      Increased competition for crown jewel (Tanjong Pagar Hotel) with opening of Clermont hotel
2)      High net D/E of 75% (although we do note, it is backed by properties)

Technicals
·         Trading in a tight range of S$0.395-0.425 for 11 months.
·         Noted that since Jun 16- Oct 16, abit of heightened volume. Last week, heightened volume again. Currently on the verge of breakout at S$0.425,


P/B
TP
upside
0.60
0.39
-8.8%
0.65
0.42
-1.3%
0.70
0.45
6.3%
0.75
0.48
13.9%
0.80
0.52
21.5%
3 year average
0.85
0.55
29.1%
0.90
0.58
36.7%
5 year average
0.95
0.61
44.3%
1.00
0.65
51.9%






//amazon