CLSA recommends Ambassador Hotel with a ‘buy’ rating

Staff writer, with CNA

Sat, Dec 18, 2010 - Page 11

CLSA Asia-Pacific Markets said yesterday it issued a “buy” recommendation on The Ambassador Hotel Ltd (國賓大飯店) on a “positive” outlook for the Taiwanese tourism sector because of an increase in Chinese visitors.

After initiating coverage of the hotel company, which has three properties in Taiwan, CLSA said it has set a 12-month target price of NT$56 on the stock. The company’s shares closed up 2.97 percent at NT$48.50 yesterday.

“We expect to see further breakthroughs in 2011, given the expected opening toward Chinese visitors not traveling in tour groups and higher daily visa quotas for Chinese tour groups,” CLSA said in a research note.

“The new policies could take place before the 2011 Chinese New Year holidays,” it added.

Currently, only Chinese traveling in tour groups are allowed to visit Taiwan, but Taipei and Beijing are discussing easing regulatory restrictions.

CLSA said it expects talks on the issue to conclude ahead of the upcoming Lunar New Year holiday, which falls in February.

The Ambassador Hotel is expected to post compound average growth rates for sales of 9.8 percent between next year and 2015, and 4.5 percent from 2016 to 2020, the brokerage said.

That compound average growth rate during the period of next year to 2020 will be substantially higher than the 0.9 percent rise seen from 2006 to this year, it said.

In terms of operating profit, the hotel is expected to post a compound average growth rate of 25.4 percent from next year to 2015, compared with a fall of 8.1 percent registered between 2006 and this year, it added.