Mandarin Oriental: Daiwa downgrades to Hold from Outperform, citing limited share-price catalysts in the near-to-medium term despite its attractive high discount to NAV.
But house notes the company's asset-light business growth path, via management contracts, should enable it to reach its target of 10,000 rooms and strengthen its global franchise. Adds that the 35% Ebitda margin for its the hotel management contracts should improve given a pick-up in scale, but the positive earnings impact is likely incremental, especially as it cuts its 2012-112 RevPar growth forecast for the HK luxury hotel sector to 5% from 7%, in line with the city's visitor-growth outlook.
House cuts its price target to US$1.52 from US$2.44, based on 10.5x 2012 EV/Ebitda from 15.5x previously given decelerating RevPAR growth and flat 2012-13 Ebitda forecast.
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