• 3Q10 PATMI breakeven at S$0.1m
• Forward bookings slightly ahead; 4Q10 to book sale of Dusit Thani resort
• Maintain HOLD. TP revised to S$1.18 based on SOTP

3Q10 PATMI of S$0.1m.
Banyan Tree Holdings (“BTH”) broke even in 3Q10, lifted by one-off sale of land in Seychelles. Topline declined 7% yoy to S$66.3m as hotel operations in Thailand remained slow, albeit an improvement compared to a quarter ago while its Lijiang resort saw less visitors due to the Shanghai Expo. Average portfolio RevPAR was 3% lower yoy at S$143/night
(Room rate: S$278, Occupancy 54%). Property sales segment remained weak at S$4.3m (-67% yoy) as the group recognized sales for only 1 unit of BTH Lijiang Villa. The group also sold 3 more units (1 BTH Bangkok Suite and 2
Lijiang Villas). Earnings were also affected by higher operational costs due to removal of cost cutting measures, higher maintenance & utilities expenses – EBITDA margins declined to 6.0% (22% a year ago). The sale of land in Seychelles, which booked in S$4.4m gain, helped turn the group around.

4Q10 will be supported by improving forward bookings outlook.
Going into high season, forward bookings for the group are ahead by 6% yoy (Thailand resorts +7% yoy, non-Thailand resorts +4%). Property sales, however, are likely to remain slow, going forward. In addition, sale of Dusit Thani resort is expected to complete in 4Q10.

More divestment possible. As management continues to reduce its exposure in Thailand to c45-50% in the longer term, further asset divestments are possible. The group looks to re-invest its capital into its Indochina (BTH holds 18% stake) and China funds (5% stake), where BTH will earn advisory, design and fund management fees, as the general partner of the funds. We understand that BTH will also be selling a few parcels of land to the China fund for development into resorts/hotels.

TP S$1.18 on roll forward valuation, HOLD maintained.
We like the group capital recycling strategy but will like to see the group sign on more management contracts in order to make up for income vacuum from its divestments. TP is raised to S$1.18 based on SOTP (15x EV/Ebitda on hotel
segment and bk value on its property sales segment) as we roll forward valuations. HOLD call maintained given limited upside to TP.