TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
EQUITY RESEARCH
st
8 July 2013
Recommendation: BUY
Fair Value: KES 63.50
Upside/ (downside): 32%
Trading Data
Current price
KES
48.25
YTD change
(%)
22.3%
Market Cap
KES (m)
8,790
USD (m)
102.21
Daily Value traded
KES (k)
816.25
YTD
Anchor shareholder
USD (m)
AKFED
0.009
45%
(%)
55%
Free float
Operating
Performance
FY12A
EPS
FY13F
FY14F
3.60
4.68
5.25
-20.2%
30.0%
12.3%
1.30
1.50
1.71
36.1%
32.1%
32.5%
EV/EBITDA (x)
8.82
6.38
5.66
PE (x)
PB (x)
13.4
10.3
9.2
0.88
1.01
0.94
% growth
DPS
Payout
Analyst:
Brenda Kithinji
[email protected]
Tel: +254 (20) 22 20 225
Standard Investment Bank Research is also
available to our clients on:
Bloomberg: SIBX <GO>
Standard Investment Bank
We initiate coverage on TPSEAL with a BUY recommendation (fair value KES
63.50, upside 32%). Our recommendation is driven by improving margins (339bp
margin improvement over our forecast period) based on expected increase in
occupancy levels (57.2% in FY12 to 64% FY17F) and decline in operating costs. On
a relative basis, TPSEAL trades at an EV/EBITDA of 9.2x, a 25% discount to sector
average of 11.33x. While we think the discount is fair based on TPSEAL’s low
EBITDA margins relative to sector (at 22% vs. sector 29%), we expect TPSEAL to
register improvement in margins over our forecast period and thus have assumed
an exit EV/EBITDA multiple of 8.10x leading to a fair value of KES 63.42.
Earlier in the year (FY13), TPSEAL concluded the acquisition of a majority stake
(50.26%) in TPS Uganda through a share swap with AKFED. Following the
transaction, AKFED’s stake in TPSEAL increased to 45% from 32.44%. NSSF
Uganda (the other key party in the share SWAP) is yet to conclude the
transaction (on completion NSSF Uganda will have acquired 3.85% in TPSEAL and
in return TPSEAL’s stake in TPS Uganda will increase to 79.19%). So what does
TPS Uganda bring to the table? Higher margins (27% EBITDA margin compared to
TPSEAL’s 22%), 17% increase in TPSEAL’s room capacity and diversification of
business risk.
While competition for the business traveller and conference facilities is expected
to intensify with the entry of international hotel chains (e.g. Radison, Crown
Plaza, Best Western, Kempinski) we believe TPS is well positioned to maintain its
market share - given its strong brand name and diversified product offering.
Industry Performance. In Kenya, the industry has posted 16% CAGR in revenue
over the past decade. Bed occupancy has averaged 40%, touching a high of 47% in
2007 and a low of 26% in 2008 due to post election violence. Bed nights have
increased by 8.7% CAGR over the past decade, driven by new entrants, primarily
international chains targeting the business traveller and investments by local
enterprises targeting the high-end market. Arrivals have increased 5% CAGR mainly
driven by rise in travellers from new source markets (mainly from Asia). In line with
expanding middle income population, increase in discretionary incomes and
change in lifestyles, the role played by local tourists has increased with local
tourists now accounting for 40.6% of bed nights occupied up from 25.2% in
2005.Overall, combined East Africa revenue over the past 5 years has increased
6.12% (CAGR), with Rwanda (11%) and Uganda (12%) leading the pack and Kenya
trailing (3%).
Medium term earnings drivers. We forecast increased occupancy levels (driven by
continued diversification of source markets and increase in domestic tourism) and
reduced operating expenses (driven by increased use of solar energy for heating
and lighting which accounts for approximately 12% of total operating expenses)
Longer-term, we expect TPSEAL’s growth to stem from continued integration of
associate companies & acquisitions, as well as Greenfield expansion. TPSEAL has
three associates TPS Rwanda, TPS Dar es salaam and Mountain lodges which are all
targets for integration.
Key Risks. The slow recovery in the European economy stands out as a key risk
since the market accounts for 37% of bed nights occupied. Volatility in currencies
also remains a key risk since TPSEAL revenues are mainly foreign currency
denominated while cost base is local currency driven. Though market dynamics are
changing, especially with Kenya increasingly becoming the hub for international
companies and government agencies, the tourism sector remains one of the most
exposed sectors when travel advisories are issued.
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
COMPANY SNAPSHOT
TPS East Africa Limited (TPSEAL) is the holding company of a portfolio of hotels within East Africa under the Serena brand. TPSEAL operates
in Kenya, Uganda Tanzania, Rwanda, Zanzibar and Mozambique, with 24 hotels in its portfolio. The past three years have seen TPS undergo
significant changes all geared towards reinforcing the company’s Premier East African Brand. In 2010 TPS raised KES 1.19bn by way of a
rights issue in order to refurbish its existing properties, strengthen the East African circuit, de-risk its balance sheet and provide new funds
for expansion. Subsequently, TPSEAL acquired, 100% stake in Jaja Limited, a special purpose vehicle by Tourism Promotion Services (Kenya)
Limited, to undertake development of three properties in Nanyuki, Nakuru and Elementaita. It also acquired 51% ownership of Upekee
Lodges Limited, which owns and operates two properties in southern Tanzania (Mivumo River Luxury Lodge and Selous Wildlife Camp), and
through TPS Tanzania, the assets of two lodges located in northern Tanzania - Mountain Village (Arusha) and Mbuzi Mawe Tented Camp
(Serengeti).
In 2011 Lake Elementaita Serena camp was commissioned in a view to strengthen the western circuit through linkage with the Mara Serena
Safari Lodge. In the same year TPSEAL acquired a minority stake in Dar es Salaam Serena Hotel through the acquisition of a 20% stake in TPS
(D). Lastly, the company increased its stake in TPS Rwanda to 20%.
In 2012, TPSEAL entered into an agreement to acquire a 79.19% stake in TPS Uganda via a share swap with AKFED and NSSF Uganda. Part
of the transaction was completed in 2013 with TPSEAL issuing 33.96m new shares to AKFED for its 65.20% stake in TPS U. TPS is expected to
allot a further 7.29m shares to NSSF Uganda for its 13.99% stake in TPS U. TPSEAL will begin to consolidate TPS U as a subsidiary in its FY13
financials.
TPSEAL subsidiaries and properties.
Company
Hotels owned
TPS Kenya
Nairobi Serena Hotel
Serena Beach Hotel and Spa
Amboseli Serena Safari Lodge
Mara Serena Lodge
Kilanguni Serena Lodge
Sweetwaters Tented camp
Ol Pejeta House
Lake Elementaita Serena Camp
Zanzibar Serena Inn
Kirawira luxury Tented Camp
Lake Manyara Serena Lodge
Serengeti Serena Lodge
Mountain Village Hotel, Arusha
Ngorongoro Serena Safari Lodge
Mbuzi Mawe Tented Camp
Mivumo River Lodge
Selous Luxury Camp
Kampala Serena Hotel
Lake Victoria Serena Resort
TPS Zanzibar
TPS Tanzania
TPS Uganda
Associates & managed hotels
Mountain Lodges Ltd (30%)
TPS Dar es Salaam (20%)
TPS Rwanda (20%)
Other properties managed
Capacity
(Rooms)
183
164
92
73
56
39
6
25
51
25
67
66
46
75
16
12
12
152
122
Serena Mountain Lodge
Dar es Salaam Serena Hotel
Kigali Serena Hotel
Lake Kivu Serena Hotel
42
230
104
66
Polana Serena Hotel -Mozambique
142
(Source: Company)
Standard Investment Bank
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
KEY THEMES
Margins improvement key valuation driver.
Driven by better occupancy levels and stable but declining costs, we forecasts operating profit margins to improve over our forecast period
from 16.1% FY12 to 21.5% FY17.
>Occupancy to drop FY13 due to Uganda integration, though improvement expected going forward. Last year TPS suffered
from reduced tourist numbers driven by travel advisories issued by key markets, as well as the slow recovery of the European market.
Occupancy rate slipped to 57.2% FY12 vs. 62.1% FY11 leading to 2.2% decline in revenue. We expect occupancy rate to remain subdued at
58% FY13 due to integration of its Ugandan subsidiary. The 5yr average occupancy rate in Uganda has been 40% due to underperformance
of the lake Victoria Serena Resort. Despite subdued occupancy levels for FY13, we forecast revenue growth of 24%y/y driven by the
addition of TPS Uganda and improved occupancy in Kenya following a peaceful election.
We forecast occupancy to improve to 64% by FY17 driven by increase in international arrivals (government targets 75% increase in arrivals
to 3 million tourists by 2017) and refurbishment of hotels so as to better compete with new entrants. In order to supplement the gap
created by the drop in business from the European source markets, management has adopted an “Alternative Market Strategy, targeted
at tourists from Middle East, India, China, Russia and Brazil.
In addition to diversifying tourist source markets, management has expanded its city hotel circuit to tap into the growing Meetings,
Incentives, Conference and Events (MICE) segment. In 2011, the group expanded its city hotel circuit with the acquisition of a 20% stake in
TPS (D) (and later increased its stake to 25%) which owns the Dar es Salaam Serena Hotel (previously Movenpick Royal Palms Hotel). TPS is
in talks with the Burundi government to acquire one of its city hotels, Hotel du nil, in a bid to further expand its regional “within city”
footprint. Management has indicated that city hotels are more profitable in the long-term because they are not subject to seasonality.
Revenue vs. Overall occupancy
Revenue (KES 000)-LHS
Occupancy rate-RHS
10,000,000
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
8,000,000
6,000,000
4,000,000
2,000,000
2017F
2016F
2015F
2014F
2013F
2012
2011
2010
2009
2008
(Company, SIB estimates)
Occupancy per country of operation
Kenya
Tanzania
Zanzibar
Uganda
2007
2008
2009
2010
Rwada
Mozambique
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Standard Investment Bank
2011
2012
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
>Focus on efficiency. In their Management discussion and analysis statement, management stated that one of their goals in 2013
would be improving efficiency and productivity. Staff costs and other operating expenses, which include heat, lighting, power and water,
repairs and maintenance and repairs and replacements, account for 36.5% and 40% of total operating costs respectively. Management
has been able to reduce other operating expenses from 41.3% of sales in FY08 to 33.8% of sales in FY12 driven by increased use of solar
power for heating. Management plans to install more solar heating systems in other viable hotels. Though we expect other operating
costs as a percentage of sales to increase in 2013 due to one off credits in 2012(decrease in provision for impairments, as well a net
foreign currency exchange movements), we forecast other Opex to decline to 33% of sales FY17 leading to a 537bp EBIT margin
improvement over our forecast period.
Costs vs. Margins
Staff costs as % of sales-LHS
Opex as % of sales-LHS
EBIT Margin-RHS
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2017F
2016F
2015F
2014F
2013F
2012
2011
2010
2009
2008
(Company, SIB estimates)
TPS (T) still struggling…
Since acquiring a 51% stake in Upekee Lodges in 2010 (through its 100% owned subsidiary TPS Tanzania) which owns two lodges
Mivumo River Lodge and Selous Luxury Camp, TPS is yet to see its subsidiary turn profitable. The lodges are located in the under
developed Southern Tanzania circuit which has poor infrastructure and fewer game than its Northern Counterpart. Management guides
the business will continue to struggle in the short term.
Expanding circuits….
TPS is in the process of fully integrating its Uganda business into the group. We expect most of Serena’s growth to continue coming from
integration of other hotels where it holds a stake. Candidates for possible integration include; TPS Rwanda where it has a 20.15% stake,
TPS Dar es Salaam 25.10% stake and Mountain lodges with a 29.90% stake. Though the balance sheet is not highly geared (debt to equity
25.8% FY12) going by historical trend, share SWAPs will likely be the most preferred, and therefore risk of further dilution.
TPSEAL is also planning a mixed development, including a mall and serviced apartments, in Kampala, to cater for the growing middle
income class in the area and demand for serviced apartments.
With the continued expansion and integration we expect TPSEAL to not only reduce its reliance on the Kenyan market, but to enhance its
marketing proposition.
Standard Investment Bank
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
Revenue contribution
Kenya Hotels
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Kenya Lodges
Tanzania Lodges
Others
7%
1%
1%
2%
41%
32%
39%
40%
39%
19%
19%
18%
21%
22%
40%
42%
41%
37%
37%
2008
2009
2010
2011
2012
(Company, SIB estimates)
Another rights issue in the offing…..
Management has indicated that they plan to expand the Nairobi Serena hotel by adding 70 more rooms (currently 183) and refurbishing
common areas in order to compete effectively with the entrance of new international hotel chains. Management expects the project to
cost KES 3.0bn and intends to raise half of the money through a rights issue and borrow the rest. During the period of renovation
management is considering closing down the hotel which accounts for approximately 20% of bottom line. Management indicated that
they are considering breaking ground in FY14.
Target to increase direct bookings
TPS has been investing in its IT infrastructure in order to improve its online booking platform. Management indicates that FY12 they
recorded impressive growth in direct bookings as a result of partnering with online booking platforms. This will enable the company to
reduce its reliance on commission based travel agents who account for 95% of bookings for lodges, 65% for its coastal hotels and 20% for
its city hotels. Increase in direct bookings will have a positive impact on margins.
Standard Investment Bank
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
Industry Overview
The Tourism industry in East Africa is highly fragmented mostly dominated by small independently owned hotels and lodges. In broad
terms, the tourism market is divided into three categories: coastal, safari and business/corporate. In Kenya these segments are covered
by the Coast (including Mombasa), the Southern Safari Circuit of Tsavo, Amboseli and Maasai Mara, the Northern Safari Circuit taking in
Mount Kenya, Samburu and northern Kenya, and the corporate/business segment centred around Nairobi. In Tanzania the segments are
Coastal (including Zanzibar), a relatively less-developed Southern Safari Circuit (Ruaha and Selous) and the famous Northern Safari Circuit
encompassing the Serengeti, Ngorongoro Crater, Lake Manyara and Arusha (including Mount Kilimanjaro).
Traditionally, tourist arrivals have been from the key markets of North America, the United Kingdom and Western Europe (particularly
Germany and Italy). In recent years, the tourism market has become more diversified with new business being sourced from intra-Africa
destinations, domestic demand from within Kenya and Tanzania and also from the emergent markets of Eastern and Central Europe,
Japan and other Far East destinations such as China.
Tourism Revenue (USD M)
2005
2006
2007
2008
2009
2010
2011
1
1
1
1
2
2
2
Tanzania
823
950
1,037
1,354
1,163
1,255
1,353
Uganda
327
375
449
590
564
662
805
Kenya
647
779
972
762
806
929
1,102
1,798
131
2,236
151
2,610
186
2,893
175
2,710
200
3,048
252
3,514
Burundi
Rwanda
Total East Africa
(Source: EAC facts and figures)
The past, a story of under investment and adverse advisories…
The tourism industry in Kenya has in the past suffered from terrorist attacks, political violence and under investment in marketing the
country as the preferred tourism destination in Africa. Under investment in infrastructure has also played a role in reducing attractiveness
of the country.
In 1998 and 2001 the country witnessed two terrorist attacks, one against the US embassy and the other a coastal hotel which sparked a
raft of travel advisories form the US and the UK. In addition to this, the post election violence in 2008 worsened the situation with most
tourists preferring other destinations in East Africa such as Tanzania and Zanzibar.
The Kenyan market had also witnessed poor marketing of its tourism products in the past, getting strong competition from South Africa
which has successfully marketed its self as the premier destination for game and leisure tourism in Africa.
In order to curb the negative perception and to market the country effectively to international visitors and local tourists, the government
created the Kenya Tourism Board in 1997. This saw arrivals grow at an average of 13% between 2002 and 2007 before declining in 2008,
due to the post election violence witnessed that year. By 2011 the industry improved remarkably with arrivals growing back to pre 2008
levels at 1.82m arrivals with 72% of those being holiday makers.
Arrivals by purpose of visit
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Holiday
742
733
684
886
1,063
1,087
1,279
936
1,061
1,101
1,320
1,219
Business
93
87
182
246
206
226
242
109
181
229
232
236
Source:
Kenya National Bureau
Transit
134of Statistics
163
Other
Total Arrivals
% growth
22
19
219
61
162
67
80
130
137
150
131
165
62
96
98
150
140
140
73
198
92
164
991
1,002
1,146
1,361
1,479
1,601
1,817
1,203
1,490
1,609
1,823
1,711
1%
14%
19%
9%
8%
14%
-34%
24%
8%
13%
-6%
(Source: Kenya National Bureau of Statistics)
Source: Kenya National Bureau of Statistics
Standard Investment Bank
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
Out with the old in with the new
The traditional source market for the Kenyan tourism sector has been Europe and in particular Germany UK and Italy accounting for 37%
of bed occupancy. As a result of the economic strife in Europe following the debt crisis, the local tourism sector has suffered from a
slowdown in visitors. This has forced the tourism board to diversify into new markets, aggressively marketing Kenya tourism to other
African countries, Asia and Far East as well as to local tourists.
Europe now accounts for 37% of bed occupancy compared to 58% in 2001, while Africa including Kenya accounts for 48% of bed
occupancy compared 30% in 2001 and Asia accounts for 5.6% compared to 4% in 2001. Local tourism has witnessed increased growth in
the last five years driven by an increase in middle class population as well as increased marketing by KTB. Hotels have also been forced to
entice locals through discounts and offers especially during the low season so as to bridge the gap created by the decline in bookings from
international tourists. Kenya residents currently account for 41% of total occupied bed nights compared to 27% in 2007.
Bed occupancy by country of residency
Europe
Africa
America
Asia & Others
100%
80%
25%
30%
36%
37%
29%
32%
33%
51%
60%
42%
42%
44%
48%
45%
44%
41%
37%
2009
2010
2011
2012
40%
64%
58%
53%
20%
53%
60%
55%
56%
36%
0%
2001
2002
2003
2004
2005
2006
2007
2008
(Source: Kenya National Bureau of Statistics)
Capacity growing at a slow pace as occupancy remains flat.
Available bed nights have grown at a slow pace of 7.8% over the past decade while occupancy has remained flat at 38.9%. The slow pace
in capacity growth has been occasioned by under utilisation of available bed nights due to the slow pace of growth of tourist numbers.
Revenues have however grown at a faster rate (10 yr CAGR of 16.2%) driven by increased room rates and increased length of stay.
Average revenue per night has grown by 8.2% over the last 10 years from KES 7,200 in 2002 to KES 14,000 as at 2012. Average length of
stay has been stable though increasing from 8 days in 2001 to 14.5 days in 2012.
We expect capacity growth to quicken going forward as international hotel chains open shop in Nairobi. Already Kempinski has opened up
a luxury 200 room hotel in Chiromo near the Central business district. Raddison Blue, Park inn, Hemmingway’s and Emaar hospitality are
all set to open up luxury hotel chains within the city in order to tap into the growing conferencing segment.
.
Industry Revenues (KES m)-LHS
Available bed nights (000)-LHS
Beds occupied (000)-LHS
Avg revenue per night (000)-RHS
Avg length of stay (days)-RHS
120,000
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
-
100,000
80,000
60,000
40,000
20,000
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
(Source: Kenya National Bureau of Statistics)
Standard Investment Bank
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
Valuation Methodology
We derive our fair value using on a discounted cash flow approach based on 5 year estimates. We assume a weighted average cost of capital
of 14.05% and a terminal growth rate of 7.0%. Our terminal growth rate implies an exit EV/EBITDA of 8.10x. Our exit EV/EBITDA is guided by;
improving margins (339bp margin improvement over our forecast period), on expected increase in occupancy levels (57.2% in FY12 to 64%
FY17F) and decline in operating costs.
Discounted Free Cash flow
Operating Profit
Add: Depreciation
2013
2014
2015
2016
2017
1,275,479
1,410,793
1,639,402
1,817,245
1,907,255
310,962
312,896
315,772
319,631
323,621
Less: Cash Taxes
(347,984)
(394,389)
(473,836)
(541,411)
(584,275)
Less: Net working capital change
(136,643)
(147,221)
(156,883)
(1,901)
(13,278)
Less: Capex
(528,529)
(370,767)
(401,864)
(435,143)
(443,055)
573,285
811,310
922,592
1,158,420
1,190,268
WACC
14.0%
14.0%
14.0%
14.05%
14.0%
Period
0.48
1.48
2.48
3.48
4.48
PV Factor
0.94
0.82
0.72
0.63
0.55
538,077
667,691
665,752
732,966
660,354
Free Cash flow Operations
PV Free Cash flow
Cumulative PV of Free Cash flow
PV of Terminal value
Terminal
2,230,876
18,071,706
10,026,084
3,264,841
10,026,084
Enterprise Value (KES)
13,290,924
Net Cash (debt)
(1,723,420)
Total Intrinsic Value of Equity
11,567,504
Number of Shares ('000)
182,174.11
Per Share Value
63.50
Current price
48.25
Upside/downside
32%
Source: Company filling, Standard Investment Bank estimates
Exit EV/EBITDA sensitivity to WACC and terminal growth rate
Fair Value sensitivity to WACC and terminal growth rate
Weighted Average Cost of Capital
13.0%
14.0%
15.0%
16.0%
17.0%
4.0%
6.90
6.14
5.53
5.03
4.61
4.26
5.0%
7.96
6.97
6.20
5.58
5.07
4.65
6.0%
9.36
8.03
7.03
6.26
5.63
5.12
7.0%
11.33
9.45
8.10
7.10
6.32
5.69
8.0%
14.26
11.43
9.54
8.19
7.17
6.37
9.0%
19.13
14.40
11.54
9.63
8.26
7.23
10.0%
28.77
19.31
14.53
11.64
9.72
8.34
Terminal growth rate
Terminal Growth Rate
Weighted Average Cost of Capital
12.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
4.0%
60.08
52.27
46.02
40.91
36.66
33.06
5.0%
67.85
58.14
50.58
44.53
39.58
35.46
6.0%
78.19
65.67
56.27
48.95
43.10
38.30
7.0%
92.64
75.70
63.50
54.47
47.38
41.71
8.0%
114.24
89.70
73.30
61.56
52.74
45.87
9.0%
150.04
110.64
86.88
70.99
59.61
51.07
10.0%
220.96
145.36
107.19
84.17
68.77
57.74
Source: Company filling, Standard Investment Bank estimates
Standard Investment Bank
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
Performance review
Income statement ending 31 December (KES 000)
2010
Revenue
4,480,128
Cost of sales
(874,595)
Gross profit
3,605,533
Staff costs
(1,335,351)
Other expenses
(1,589,742)
Other income
427,578
Depreciation
(257,617)
Operating profit
850,401
Interest paid
(210,783)
Interest received
52,227
Share of associates
1,088
Profit before tax
692,933
Taxation
(176,549)
Profit After Tax
516,384
Minority Interest
(14,669)
Profit attributable to equity
shareholders
531,053
Earnings per share
Dividend per share
2011
5,465,975
(929,234)
4,536,741
(1,576,219)
(1,963,175)
271,378
(330,834)
937,891
(163,847)
59,757
19,332
853,133
(237,242)
615,891
(52,880)
2012
5,343,960
(1,130,794)
4,213,166
(1,636,436)
(1,805,628)
393,724
(303,694)
861,132
(199,934)
17,496
42,822
721,516
(227,928)
493,588
(40,095)
2013F
6,606,609
(1,269,401)
5,337,208
(1,920,216)
(2,312,313)
481,762
(310,962)
1,275,479
(194,637)
13,038
66,066
1,159,946
(347,984)
811,962
(40,598)
2014F
7,415,349
(1,424,793)
5,990,555
(2,193,650)
(2,558,295)
485,078
(312,896)
1,410,793
(184,207)
13,893
74,153
1,314,631
(394,389)
920,242
(36,810)
2015F
8,037,281
(1,544,292)
6,492,989
(2,373,142)
(2,732,676)
568,003
(315,772)
1,639,402
(161,825)
21,501
80,373
1,579,452
(473,836)
1,105,616
(33,168)
668,771
533,683
852,560
957,052
1,138,785
4.51
1.30
3.60
1.30
4.68
1.50
5.25
1.71
6.25
2.10
2011
8,829,042
687,008
1,200,861
2012
9,090,486
933,202
1,390,111
2013F
9,308,052
999,268
1,390,111
2014F
9,365,924
1,073,422
1,390,111
2015F
9,452,016
1,153,794
1,390,111
375,588
1,636,227
145,279
257,835
13,131,840
369,306
1,443,766
257,205
13,484,076
449,021
1,670,254
234,876
14,051,582
508,390
1,932,863
289,452
14,560,161
556,457
2,176,070
522,025
15,250,473
58,251
362,506
31,720
1,205,488
63,070
403,624
9,585
1,139,017
209,555
562,365
16,010
1,258,031
565,730
16,010
1,427,590
560,973
16,010
1,602,347
505,285
16,010
1,736,738
148,211
3,032,431
2,500,751
1,717,779
7,399,172
97,213
1,564,263
1,204,524
148,211
3,032,431
2,506,576
2,262,751
7,949,969
96,855
1,810,348
1,659,372
148,211
3,032,431
2,305,871
2,638,137
8,124,650
56,760
1,929,985
1,326,720
148,211
3,032,431
2,305,871
3,217,026
8,703,539
16,162
1,929,985
1,392,566
148,211
3,032,431
2,305,871
3,863,035
9,349,548
(20,648)
1,929,985
1,121,946
148,211
3,032,431
2,305,871
4,619,188
10,105,701
(53,816)
1,929,985
1,010,570
11,923,137
13,131,840
13,484,076
14,051,582
14,560,161
15,250,473
3.58
1.25
Source: Company filling, Standard Investment Bank estimates
Balance Sheet as at 31 December (KES 000)
2010
Fixed Assets
8,248,664
Investments in associate
30,718
Other non-current assets
1,307,773
Cuurent Assets
Inventories
299,776
Trade and other receivables
986,959
Short term bank deposits
791,652
Cash & Bank Balances
257,595
Total Assets
11,923,137
Current Liabilities
Bank Overdraft
Short term debt
Taxation Payable
Trade and other payables
Source of Capital
Share capital
Share premium
Other reserves
Retained Earnings
Total shareholders’ funds
Minority Interest
Other noncurrent liabilities
Long term debt
Total liabilities and capital
Source: Company filling, Standard Investment Bank estimates
Standard Investment Bank
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
Ratio review
Ratios
Margins
Gross margin
EBITDA margin
EBIT margin
Net profit margin
Staff costs % of total costs
Other expenses % of total costs
2010
2011
2012
2013F
2014F
2015F
26%
25%
19%
12%
37%
44%
-7%
23%
17%
11%
35%
43%
27%
22%
16%
9%
37%
40%
12%
24%
19%
12%
36%
43%
8%
23%
19%
12%
37%
43%
8%
24%
20%
14%
37%
43%
13.47
0.97
8.54
0.03
10.69
0.90
8.36
0.03
13.40
0.88
9.18
0.03
10.31
1.01
6.64
0.03
9.18
0.94
5.90
0.04
7.72
0.87
4.98
0.04
Capital ratios
ROaE
ROaA
Capital intensity
Total debt to Equity
9%
6%
41%
22%
9%
5%
14%
27%
7%
4%
14%
26%
10%
6%
8%
23%
11%
7%
5%
18%
12%
8%
5%
15%
Growth % (y-o-y)
Sales growth
COGS growth
Salaries and Wages
Other Opex
EBIT
PAT
Attributable profit
10%
12%
21%
-4%
32%
36%
40%
22%
6%
18%
23%
10%
19%
26%
-2%
22%
4%
-8%
-8%
-20%
-20%
24%
12%
17%
28%
48%
65%
60%
12%
12%
14%
11%
11%
13%
12%
8%
8%
8%
7%
16%
20%
19%
0.38
125.11
80.41
503.09
0.42
147.53
109.26
447.40
0.40
119.21
98.61
406.07
0.47
129.11
92.28
410.49
0.51
130.24
95.14
410.49
0.53
131.52
98.82
410.49
Market
P/E
P/B
EV/EBITDA
Dividend yield
Efficiency
Asset turnover (x)
Inventory days
Debtor days
Creditor days
Source: Company filling, Standard Investment Bank estimates
Standard Investment Bank
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
Peer review
Country
P/E (x)
P/B (x)
ROA (%)
ROE (%)
EV/EBITDA
(x)
EV/Sales
(X)
EBITDA
Margin
TPS Eastern Africa Ltd
Kenya
13.40
0.88
4.01
6.64
9.18
2.00
21.80
Arab International Hotels
Jordan
29.29
0.85
2.27
2.92
23.48
5.71
27.35
Jordan Hotel & Tourism
Jordan
28.19
1.89
4.74
6.83
9.34
2.62
28.10
Gulf Hotels (Oman) co ltd
Oman
15.25
1.36
7.60
8.94
10.82
4.26
39.51
Company
Mediterranean Tourism
Jordan
37.96
1.78
4.46
4.71
14.89
4.86
32.62
Mauritius
19.36
0.88
1.97
4.66
13.60
2.91
21.41
South Africa
22.57
13.85
14.32
60.63
12.68
5.58
42.89
Country Heights Holdings
Malaysia
7.52
0.41
3.04
5.59
6.73
2.04
26.94
Meda Inc BHD
Average
Malaysia
10.76
18.27
1.74
1.46
9.55
4.74
17.39
8.12
8.74
11.41
1.89
3.23
23.24
28.50
New Mauritius Hotels Ltd
City Lodge Hotels Ltd
(Source: Bloomberg)
Standard Investment Bank
Important disclosures on the last page
TPS Eastern Africa Limited (TPSEAL)
Initiation of Coverage
KEY CONTACTS
Research
Francis Mwangi, CFA
[email protected]
Eric Musau
[email protected]
Brenda Kithinji
[email protected]
Head of Trading
Tony Waweru
[email protected]
Equity and Foreign Sales
Eric Ruenji
[email protected]
Associate Director
Boniface Kiundi, MCSI
[email protected]
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Standard Investment Bank
Important disclosures on the last page