CGS International Securities (Thailand) (CGSI) expects a positive impact on Sansiri Public Company Limited (SET: SIRI) following the divestment in Standard International Holdings for a one-time gain in 4Q24.
CGSI wrote in its analysis that SIRI completed the divestment transaction of Standard International Holdings (SIH) to Hyatt Corporation and Hyatt International Corporation for a total value of up to US$355 million.
This consists of: 1) upfront amount of US$150 million for existing hotel management contracts to be paid at the completion of transaction, 2) earnout amount of up to US$175 million to be paid for new hotels and branded residence under The Standard and Bunkhouse brands, 3) earnout bonus amount of up to US$10 million to be eligible for earnout payout, and 4) existing branded residence licence fee payment of US$20 million for specific existing pipeline of The Standard and Bunkhouse branded residence projects.
Of the US$150 million upfront payment from Hyatt to SIH, estimate that after the deduction of transaction costs, SIRI will receive c.US$100 million based on its 71% holding.
SIRI will use the proceeds to repay debt. This would reduce SIRI’s D/E ratio to 1.55x from 1.62x as of end-2Q24, in its estimate. SIRI will book the one-off gain (after tax) from the divestment of SIH in 4Q24F.
CGSI expected a positive impact on SIRI’s bottom line as SIH has been recognising pre-tax loss of THB90 million -100 million per quarter over 2021-3Q24. CGSI estimated the SIH divestment will lift its core net profit by c.THB80 million in 4Q24F and THB300 million in 2025F, implying 5% upside to FY25F net profit forecast.
In addition, expect potential upside as SIRI likely recognizes earnout and earn out bonus from Hyatt in the next few years.
CGSI maintained Add with a target price of THB2.04. The firm expected 4Q24F net profit is likely to be the highest quarter driven by higher transfers, no loss from SIH and the one-off gain from SIH divestment.
