Date of Report
25 October 2024
Broker Name
UOB Kay Hian
Company Overview
The Erawan Group is a leading hotel investment company in Thailand. Its hotel portfolio ranges from luxury to mid-scale and economy across Thailand’s major tourist destinations.
Stock Data
- GICS Sector: Consumer Discretionary
- Bloomberg Ticker: ERW TB
- Shares Issued: 4,531.6 million
- Market Cap: Bt21,842.1 million (US$587.6 million)
- 3-Month Average Daily Turnover: US$1.8 million
- 52-Week High/Low: Bt5.80/Bt4.14
Recent Performance
- Share Price: Bt4.82
- Target Price: Bt6.50
- Upside Potential: +34.9%
Earnings Preview for 3Q24
- Expected Core Earnings: Bt128 million (down 17% YoY, down 16% QoQ)
- Total Revenue Forecast: Bt1,850 million (up 6.6% YoY, up 0.9% QoQ)
- Gross Profit Forecast: Bt783 million (up 4.9% YoY)
- Operating EBITDA Forecast: Bt549 million (up 3.5% YoY)
- Net Profit Forecast: Bt131 million (down 12% YoY)
Key Factors Impacting Earnings
- Weak Core Earnings: Anticipated decline due to occupancy rate drops from the Grand Hyatt incident, renovations at Holiday Inn Pattaya, and slow ramp-up of new hotels in the Philippines.
- Optimism for High Travel Season: Anticipated increase in travel activity in 4Q24 could improve performance.
- Interest Rate Downtrend: Expected to support expansion initiatives.
Key Financials (Year to 31 Dec)
| Metric |
2022 |
2023 |
2024F |
2025F |
2026F |
| Net Turnover |
4,714.6 |
7,039.5 |
8,124.3 |
8,623.2 |
8,891.0 |
| EBITDA |
1,055.0 |
2,166.6 |
2,498.3 |
2,744.3 |
2,926.2 |
| Net Profit (adj.) |
(224.2) |
742.7 |
841.5 |
923.5 |
966.6 |
| EPS (Bt) |
0.0 |
0.2 |
0.2 |
0.2 |
0.2 |
| PE (x) |
n.m. |
29.9 |
28.0 |
25.5 |
24.4 |
Operational Performance
- 3Q24 Occupancy Rates:
- Average Excluding Budget Hotels: 80%
- Average Including Budget Hotels: 77%
Stock Impact Factors
- Impact from Grand Hyatt Incident: Expected RevPAR of luxury hotels to drop by 4% YoY in 3Q24.
- Holiday Inn Pattaya Renovation: Full room inventory resumed from 1 October 2024, anticipated boost in average daily rate.
- Bank of Thailand Rate Cut: Lower interest costs expected to benefit ERW, with most loans in floating rates.
Valuation and Recommendation
- Recommendation: Maintain BUY with a target price of Bt6.50.
- Valuation Basis: Based on an EV/EBITDA multiple of 18x, reflecting a good opportunity for investment given the current price levels.
