Introduction to The Erawan Group

The Erawan Group, a leading hotel investment company in Thailand, boasts a diverse portfolio of properties ranging from luxury to mid-scale and economy hotels across Thailand’s prime tourist destinations. As a key player in the consumer discretionary sector, the company holds significant market share and is a prominent name in the hospitality industry.

Stock Performance and Major Shareholders

As of the report date, the Erawan Group’s stock price stands at Bt3.28, with a target price of Bt4.60, indicating a potential upside of 40.2%. The group’s major shareholders include the Wattanavekin family (28.2%) and the Vongkusolkit family (28.4%). The stock has experienced a 52-week high of Bt5.25 and a low of Bt3.12, reflecting significant market fluctuations over the past year.

4Q24 Earnings Preview: A Robust Quarter Ahead

The Erawan Group is expected to report strong 4Q24 core earnings of Bt326 million, marking a significant increase of 52.1% year-on-year and 161.7% quarter-on-quarter. The total revenue for the quarter is projected to reach Bt2.2 billion, up 17.8% year-on-year and 19.4% quarter-on-quarter. This robust growth is primarily driven by high occupancy rates during November and December 2024, particularly at the Grand Hyatt, and the reopening of the Holiday Inn Pattaya.

Key financial metrics reveal an estimated gross profit of Bt1.063 billion, reflecting a 22.3% year-on-year increase. The operating EBITDA is forecasted at Bt794 million, up 32.3% year-on-year. The net profit margin is expected to climb to 15.2% for 4Q24, compared to 11.4% in 4Q23.

Key Financial Highlights

Annual Performance

The group’s net turnover for 2024 is forecasted at Bt7.9 billion, a 12.3% growth compared to 2023. EBITDA is projected to grow by 19.7% year-on-year, reaching Bt2.592 billion. Operating profit is expected to rise to Bt1.597 billion, while net profit is forecasted at Bt1.238 billion, reflecting a 66.8% year-on-year increase.

Balance Sheet Overview

The group’s total assets are projected to increase to Bt26.311 billion in 2024, with shareholders’ equity growing to Bt8.064 billion. The net debt-to-equity ratio is expected to improve to 160.0%, compared to 219.4% in 2023. This reflects the company’s focus on debt repayment and effective financial management.

Operational Metrics and Growth Drivers

Occupancy and Revenue per Available Room (RevPAR)

The group’s occupancy rate for luxury hotels is expected to reach 85% in 4Q24, up 2 percentage points year-on-year. The average daily rate (ADR) for luxury hotels is projected at Bt3,610 per night, a 12.5% year-on-year increase. The overall RevPAR for the group is forecasted to grow by 9.2% year-on-year, driven by an 11.1% increase in ADR.

Resilience Against External Challenges

The Erawan Group remains immune to negative sentiment from Chinese tourists following a security incident in early January 2025. While there were cancellations from Chinese tour groups, the group has minimal exposure to this segment, as it primarily caters to individual travelers. Strong room demand has offset any minor cancellations, ensuring continued growth.

Revised Earnings Forecast and Investment Recommendation

The 2024 net profit forecast has been revised upward by 9.2%, reflecting the group’s better-than-expected performance in 4Q24. The Erawan Group demonstrates strong core operations and is well-positioned to capitalize on the high travel season in 1Q25.

UOB Kay Hian maintains a BUY recommendation for The Erawan Group, with a target price of Bt4.60. The valuation is based on an EV/EBITDA multiple of 13.0x, in line with historical trading levels. While the short-term outlook remains positive, long-term concerns include potential downcycles from renovations and new projects, as well as lease overhangs.

Environmental, Social, and Governance (ESG) Initiatives

Environmental Efforts

The Erawan Group emphasizes resource efficiency, greenhouse gas reduction, and ecosystem management.

Social Responsibility

The group promotes human rights, equality, and employee well-being through various initiatives, including volunteering programs to foster social and environmental responsibility.

Governance Standards

The board maintains a 3:1 male-to-female ratio, with independent directors constituting 33% of the board. This reflects a commitment to balanced governance.