Banyan Tree-CIMB

• Below expectations. Despite our below-consensus earnings estimates, Banyan
Tree’s 4Q08 earnings still came in 41% below our expectation because of higherthan-
expected costs. Net loss was S$7.0m in 4Q08 on a 40% drop in revenue to
S$90.9m. EBITDA fell by 79% yoy to S$10.9m on lower contributions from hotel
investments and property sales, slightly offset by higher EBITDA from hotel
management and design fees. Full-year revenue slipped 2% yoy to S$412.6m while
earnings fell 91.4% yoy to S$7.0m.
• Weak hotel investment and property revenue. The revenue decline in 4Q08
could be blamed on hotel investment revenue and property sales, which were
victims of Thailand’s political uncertainties, including the 8-day Bangkok airport
closure. Hotel investment revenue decreased 16% yoy to S$52.6m, largely led by
hotels in Thailand while EBITDA fell 60% yoy to S$7.4.m on the lower revenue and
higher overhead costs. Thailand hotels’ overall occupancy fell by 25% pts to 52%,
beating our expectation of 45%. Hotels in the Maldives continued to perform well,
with occupancy rate rising by 20% pts to 66%. Branded residence sales fell by 64%
yoy to S$13.0m in 4Q08 on slower sales and progressive revenue recognition of
villas at some locations. EBITDA fell by 55% yoy to S$7.6m on the lower revenue.
Unbranded residence sales also fell by 86% yoy to S$4.8m.
• 2009 outlook. Given the global recession, we believe that revenue will remain weak
in 2009 though there could be upside should Thailand’s political situation improve.
Based on hotel owners’ projected dates, Banyan Tree expects to open six resorts in
Mexico, Indonesia, UAE and China within the next 12 months.
• Maintain Underperform and sum-of-the-parts target price of S$0.40. While the
hotel business has improved in Jan 09 thanks to promotions and marketing efforts
by the Thai Authority of Thailand, we believe that the environment remains
challenging for luxury hoteliers, as people continue to scale back discretionary
spending. We have introduced FY11 estimates.