Shinhan Investment & Securities said on the 5th that GS P&L is expected to benefit from the Lunar New Year travel boom as foreign tourist numbers rise and the "Hanilryeong" spillover effect continues. It maintained a Buy rating and a target price of 70,000 won. GS P&L's closing price the previous day was 55,200 won.
Shinhan Investment & Securities analyzed that as foreign tourist numbers increase, an uptrend in average daily rate (ADR) is being confirmed across all sites. It also said the spillover benefit from Hanilryeong continues, raising expectations for a Lunar New Year special.
Kim Tae-hoon, an analyst at Shinhan Investment & Securities, said, "Although the Grand ballroom is slated for renovation in the first quarter of last year, the impact on earnings is limited," adding, "With a shortage of hotels in Seoul, ADR continues to rise, and the leverage effect from fixed costs is expected."
GS P&L posted revenue of 153.1 billion won and operating profit of 31.3 billion won in the fourth quarter of last year. That beat the consensus by 7%.
Kim analyzed, "Operating profit at Grand Parnas of 14.5 billion won driven by ADR gains and expense efficiencies, and a reduction in the Westin's operating loss to 1 billion won due to reopening, were the main drivers of the strong results."
By hotel, occupancy (OCC) was 88.3% at Grand Parnas, 71.9% at the Westin, 84.8% in Jeju, and 83.1% at Nine Tree.
Kim said, "Given the high OCC and earnings growth, there is no reason for a valuation discount versus global peers," adding, "After the Westin's renovation, capital expenditure (capex) burdens are not significant, and considering stable rental revenue from Parnas Tower and the hotel business's profit generation, the company should be able to maintain strong financial stability."