SINGAPORE (Aug 21): RHB Research is remaining positive on Amara on stronger contributions from its Singapore and Shanghai hotel operations as well as contributions from its Singapore property developments.
After its January soft launch, all 343 rooms of the Amara Signature Shanghai are open for bookings. The hotel has been marketed to both corporate and individual travellers via various marketing channels to reach higher occupancy levels. Amara also expects an increase in hotel demand as Shanghai continues its leading position as a major tourist destination.
To recap, Amara’s 1H18 earnings accounted for 26% of its full-year net profit estimate, while 2Q18 revenue was up 30% y-o-y. The Shanghai hotel operation was a contributing factor, as seen in the higher revenue from the hotel investment & management and property investment & development businesses.
In a Tuesday report, analyst Leng Seng Choon expects a stronger 2H18 earnings on stronger contributions from Amara’s Singapore hotel operations, as well as more stabilised operations from Amara Signature Shanghai. The soft launch for 100 AM Shanghai -- scheduled for end 2018 -- should also contribute to 2018’s revenue.
“However, given the slight delay vs our previous assumption, we cut 2018-2019 net profits by 11% and 12%,” says Leng.
There could also be some contributions from its Singapore property development projects. Since May, Amara has been actively marketing the balance of its 33-unit M5 @ Jalan Mutiara which gained its temporary occupation permit in 1Q18.
Management hopes to launch its 56-unit Newton Road residential development by end 2018 although the government’s property cooling measures could possibly dampen sales over the short term.
“Our forecast of y-o-y weaker 2018 turnover is mainly due to expectations of lower fair value gains for investment properties,” says Leng.
RHB is maintaining its “buy” and 88 cents target price at 35% discount to RNAV.
As at 3.41pm, shares in Amara are up 0.5 cent at 48 cents.
