Fujita Kanko (9722 JP) (Buy) Q3: our forecast unchanged, but we lower TP
Fujita Kanko announced Q1-Q3 (Jan-Sep) results on 7 November. While the company posted operating losses of ¥0.1bn, the result marks a y-y improvement of ¥0.9bn and is generally on pace with 16/12 guidance. We make no changes to our forecasts. However, we lower our fair-value market cap from ¥106.8bn (equates to target price of about ¥880) to ¥92.3bn (¥770). We still calculate it based on the sum of our end-17/12 shareholder equity forecast, unrealized gains on Hotel Chinzanso Tokyo and Taiko-en, and the value of the WHG business (Washington Hotels/Gracery Hotels). However, upside for average daily room rate (ADR) seems limited as hotel occupancy rates have topped out. We therefore lower the earnings multiple we use to value the WHG business to 14x, from 20x. The average P/E of the TSE First Section is 14-15x. Our fair-value market cap calculation breaks down as ¥28.3bn from our shareholders' equity forecast, ¥38.5bn from unrealized gains, and ¥25.5bn (¥1.82bn x 14) for the value of WHG business.