Guocoleisure

Guocoleisure: OSKDMG Special situations team calling for a buy, coming a day after Lim & tans initiation. Noting that since its new CEO came on board of GuocoLeisure’s hotel operations about two years ago, the group has embarked on an overhaul of its business model, retrofitting its flagship hotels to revitalise earnings while introducing new brands to serve niche segments more effectively. Underpinning the overall strategy is a vision to become a global hotel operator with a presence in 100 major cities by 2023. With his experience in brandbuilding coupled with GLL’s portfolio of prime hotel properties, the shift towards an asset-light hotel management model will enhance returns on capital as well as catalyse the stock’s re-rating. London’s hospitality market is poised for strong gains in 2014-15, with RevPar (revenue per available room) projected to grow 4-5% over 2014-15 as hoteliers regain pricing power, driven by rising corporate demand. As one of the largest hotel operators in London, expect GuocoLeisure to benefit from the upswing. While retrofitting cost will weigh on earnings in the current year, this will be offset by interest savings from expiring high-cost mortgage bonds. OSKDMG reducing its holding company discount from 30% to 20%. Maintain BUY, with a higher TP of $1.43.