Comprehensive Analysis of Thai Tourism Sector and Leading Companies

Date: December 3, 2024

Broker: Maybank Securities (Thailand) PCL

Overview of the Thai Tourism Sector

The Thai tourism industry is on the brink of a remarkable recovery as it approaches the high season. According to Maybank Securities (Thailand) PCL, the sector is expected to see a significant increase in core profits for the fourth quarter of 2024 and throughout 2025. Despite a gradual recovery of Chinese tourists, the overall foreign tourist arrivals are anticipated to return to pre-Covid levels, driven primarily by the leisure travel segment.

The report highlights the attractive valuations within the sector, particularly among hoteliers, which are trading at a -1.5 standard deviation from the 5-year P/E average. As such, the outlook remains positive, albeit with the cautionary note regarding potential risks from increased hotel supply, which could impact average daily rates (ADR) and overseas operations like those in the Maldives.

Asset World Corp (AWC) – Top Pick

AWC stands as the top pick in the Thai tourism sector, set to benefit significantly from the anticipated influx of foreign tourists, estimated to reach 36 million in 2024. Despite facing challenges such as the major floods in Chiang Mai, which accounted for 6% of its revenue, AWC is poised for recovery. By November and December 2024, operations returned to normal levels, positioning AWC favorably for the cool season.

AWC is expected to witness robust growth in average daily rates (ADR) and maintain high occupancy rates, surpassing pre-Covid levels, making it an attractive investment opportunity.

Central Plaza Hotel Plc (CENTEL) – Second Pick

CENTEL emerges as the second strongest growth contender in earning projections for the fiscal years 2024-2026. Despite challenges from ongoing renovations at Centara Mirage Pattaya and Centara Karon Phuket, which are expected to be fully operational by December 2024, CENTEL is positioned for a strong rebound. The company is also absorbing pre-opening expenses for two hotels in the Maldives, totaling THB140 million in the fourth quarter of 2024.

While CENTEL’s earnings may contract by 6% year-on-year in 4Q24, the outlook remains positive, with strong growth expected in 1Q25, driven by higher Revenue per Available Room (RevPAR) in Thailand and Japan.

Minor International (MINT)

MINT’s Thailand hotels are performing exceptionally well, with occupancy rates anticipated to exceed pre-Covid levels. The company is projected to experience a 34% increase in potential returns, with an estimated growth in earnings supported by its diversified portfolio and strategic positioning across the sector.

Erawan Group (ERW)

ERW is another prominent player in the sector, with a focus on non-budget hotels. The company is positioned to benefit from the recovery in tourist arrivals, with occupancy rates expected to surpass pre-pandemic figures. However, any 1% decline in ADR could result in a 1.6% impact on ERW’s FY25E earnings, highlighting the need for strategic revenue management.

Airports of Thailand (AOT)

AOT is set to capitalize on the increased passenger traffic, with its international passenger recovery at 97% of the 2019 level and domestic passengers showing a similar trend. The company offers a 21% upside potential, supported by the ongoing recovery in tourism and strategic expansion plans.

Market Forecast and Strategic Insights

The report anticipates moderate supply growth in the hotel sector, particularly in Bangkok. With CBRE forecasting a 3.8% increase in hotel supply for 2024 and further growth from 2024 to 2026, the luxury segment is expected to be the major contributor. Despite potential challenges, the average ADR is projected to remain high throughout 2025.

The report also underscores the importance of strategic revenue management, with any decline in ADR impacting earnings across the sector. Investors are advised to consider these dynamics when evaluating potential investments in the Thai tourism industry.

Conclusion

In conclusion, the Thai tourism sector is poised for a robust recovery, driven by strategic government incentives and a resurgence in leisure travel. AWC and CENTEL emerge as top picks, offering significant growth potential and resilience in the face of challenges. Investors are encouraged to closely monitor market trends and strategic developments within this dynamic and evolving sector.