Thailand Tourism Sector Analysis: A Deep Dive into Key Companies

Date: January 21, 2025

Broker: Maybank Securities (Thailand) PCL

Overview of Thailand’s Tourism Sector

The tourism sector in Thailand, despite recent challenges, continues to show promise backed by robust growth in tourist arrivals and strategic diversification by key players. A recent sell-off in tourism-related stocks, triggered by a viral incident involving a Chinese actor’s kidnapping, has created an irrational panic among investors. However, strong data on tourist arrivals and limited booking cancellations underline the sector’s resilience. This report delves into the performance and outlook of key companies in the sector: Airports of Thailand (AOT), Minor International (MINT), Asset World Corp (AWC), Central Plaza Hotel (CENTEL), and Erawan Group (ERW).

Airports of Thailand (AOT)

Stock Ticker: AOT TB

Market Cap: USD 23,952 million

Recommendation: Buy

Current Price: 57.50 THB

Target Price: 75.00 THB

Upside Potential: 30%

AOT stands as a pivotal player in Thailand’s tourism sector, managing the nation’s major airports. For FY24E and FY25E, the company is projected to achieve price-to-earnings (P/E) ratios of 42.4x and 34.8x, respectively. Its dividend yield is forecasted at 0.6% in FY24E, rising to 1.4% in FY25E. AOT’s substantial exposure to passenger traffic, with Chinese tourists accounting for 22% of its throughput, translates to a potential downside of 1.3% to FY25 earnings for every 5% drop in Chinese arrivals. Despite these risks, AOT is well-positioned to rebound from the current correction phase, with historical trends suggesting a recovery within 9-10 trading days.

Minor International (MINT)

Stock Ticker: MINT TB

Market Cap: USD 3,935 million

Recommendation: Buy

Current Price: 23.80 THB

Target Price: 36.00 THB

Upside Potential: 52%

MINT’s diversified portfolio, spanning hotels, restaurants, and lifestyle brands, provides it with a strong buffer against localized market shocks. Its P/E ratios for FY24E and FY25E stand at 18.8x and 16.7x, respectively, with a dividend yield of 1.2% in FY24E and 1.4% in FY25E. Notably, MINT’s high overseas revenue exposure minimizes the impact of any decline in Chinese tourist arrivals, with an estimated earnings downside of just 0.5% for every 5% drop. The company remains a solid pick for investors seeking exposure to Thailand’s tourism recovery.

Asset World Corp (AWC)

Stock Ticker: AWC TB

Market Cap: USD 2,837 million

Recommendation: Buy

Current Price: 3.04 THB

Target Price: 4.20 THB

Upside Potential: 38%

AWC emerges as the top pick in the tourism sector, benefiting from increased spending on accommodations and recovering foreign tourist numbers. Its FY24E and FY25E P/E ratios are projected at 47.8x and 33.4x, respectively, with a dividend yield of 0.8% in FY24E and 1.2% in FY25E. Chinese tourists contribute 14% of AWC’s revenue, resulting in a potential 1.0% downside to FY25 earnings for every 5% drop in arrivals. The company’s strategic focus on high-spending tourists and diversified revenue sources positions it well for sustained growth.

Central Plaza Hotel (CENTEL)

Stock Ticker: CENTEL TB

Market Cap: USD 1,112 million

Recommendation: Buy

Current Price: 28.25 THB

Target Price: 44.00 THB

Upside Potential: 56%

CENTEL is poised for strong earnings growth of 23% in FY25E, driven by higher revenue per available room (RevPAR) in Thailand and Japan. The company’s P/E ratios for FY24E and FY25E are 26.7x and 22.3x, with dividend yields of 1.5% and 1.8%, respectively. Chinese tourists account for 10% of CENTEL’s revenue, translating to a minimal downside of 0.6% to FY25 earnings per 5% drop in arrivals. CENTEL is a strong contender for investors seeking growth opportunities in the tourism sector.

Erawan Group (ERW)

Stock Ticker: ERW TB

Market Cap: USD 415 million

Recommendation: Buy

Current Price: 3.14 THB

Target Price: 5.00 THB

Upside Potential: 59%

ERW, known for its focus on midscale and economy hotels, is set to capitalize on the recovery of tourism in Thailand. Its P/E ratios for FY24E and FY25E are estimated at 18.2x and 16.5x, with dividend yields of 0.0% in FY24E and 1.2% in FY25E. Chinese tourists contribute 17% of ERW’s revenue, with a potential earnings downside of 1.4% for every 5% drop in arrivals. ERW’s strategic positioning and focus on cost efficiency make it an attractive investment in the current market scenario.

Conclusion

The Thai tourism sector remains a promising investment opportunity despite recent headwinds. Historical data suggests that the market correction triggered by the viral incident will be short-lived, with stocks expected to rebound within 9-10 trading days. Among the companies analyzed, AWC and CENTEL stand out as top picks due to their robust growth prospects and strategic initiatives. Investors are encouraged to capitalize on the attractive valuations and potential upside in the sector.