In this briefing:
- Yahoo Japan’s JV with OYO Could Be Big, If Tokyo Is Ready to “Co-Live”
- PRM: Thai Largest Tanker Fleets Assured of Consistent Growth
- China Tobacco Intl (HK) IPO: Proxy For the Chinese Cigarette Consumption
- New Century Hotel (浙江開元酒店) IPO Review – Higher ADR and RevPAR than Peers but Margins Fall Short
1. Yahoo Japan’s JV with OYO Could Be Big, If Tokyo Is Ready to “Co-Live”
- OYO, the largest budget hotel network in India, announced a JV with Yahoo Japan (4689 JP) to expand its co-living rental service, “OYO Living”, to Japan. OYO will own 66.1% while YJ will own the remainder of the JV, named “Oyo Technology & Hospitality Japan”.
- Rebranded as “OYO Life”, the service would be the first of its kind, in the virtually non-existent co-living market in Japan. In Japan, apartments are usually compact single-occupier units as opposed to shared spaces, which might pose a problem for OYO’s co-living model.
- Assuming the model is a success and OYO Life could ramp up its capacity to around 150,000 beds in Tokyo, which is around 5% of the total apartment stock in central Tokyo, this would contribute around ¥3bn (2% of net income in FY03/18) to Yahoo Japan’s net income. There is potential for further gains, however, this would depend on how ready Tokyo is to move into a “Co-Living” culture in masses.
2. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth
We initiate coverage of PRM with a BUY rating, based on a target price of Bt7.70, derived from a PEG ratio of 0.9x, which is the average for the Asia ex-japan transportation sector, implying 22.0x PE’19E.
The story:
- Secured revenue from domestic trading business
- IMO 2020 implementation to propel floating storage demand
- Recovery in T/C rate should prompt international trading turnaround
Risks: Lower-than-expected domestic oil consumption and trading activities in ASEAN, foreign currency and fuel cost fluctuations
3. China Tobacco Intl (HK) IPO: Proxy For the Chinese Cigarette Consumption
China Tobacco International (Hong Kong), a subsidiary of the China Tobacco International, is seeking a listing in Hong Kong. Per media reports, the company plans to raise USD 100 million. In this insight, we will discuss the following topics:
- What does China Tobacco International do?
- What is its relationship with China Tobacco?
- How did its different segments perform?
- The industrial backdrop
4. New Century Hotel (浙江開元酒店) IPO Review – Higher ADR and RevPAR than Peers but Margins Fall Short
Zhejiang New Century Hotel Management Group (1158 HK) (NCH) is looking to raise up to US$179m in its upcoming IPO.
NCH is riddled with related party transactions, from the sales of consumer goods, carpets and wine to having 24% of its hotel management revenue come from related parties. There had been a handful of small acquisitions and disposals but it all seemed to be just reshuffling of assets between NCH and the controlling shareholder with no clear strategy.
Key metrics show that even though NCH is operating at higher ADR and RevPAR compared to peers, it ultimately falls short in terms of EBITDA and net margins. It also has the lowest occupancy rate.
In this insight, we will focus on corporate governance issues, peer metric comparison, and relative valuation with listed hotel operators.
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