The Erawan Group (ERW), one of Thailand’s top hospitality firms, unveiled plans to sell two of its hotels, Renaissance Koh Samui and Ibis Samui Bophut, to boost liquidity.
Analysts on Thursday said the move will grant the firm liquidity, after the tourism industry was devastated by the knock-on effects of the pandemic.
“The asset sales are designed to support the long-term strategy of reshaping the hotel portfolio to focus more on the budget hotel segment,” ERW President Petch Krainukul said in a statement.
ERW expects the total transaction, worth 925 million baht, to be completed by December 30.
Ekasit Kundirekwong, an analyst at Krungsri Securities, said ERW would strengthen its debt to equity ratio and gain capital to expand its budget hotel chain, Hop-In.
“These hotels have been delivering low profitability since 2019,” he noted. “The two hotels that are for sale accounted for only about 3 per cent of ERW’s total rooms.”
However, Krungsri predicted losses of 623 million baht in this year’s third quarter as occupancy rate would shrink due to Covid-19 restrictions.
Krungsri gave a ‘Sell’ rating on ERW with a target price of 2.7 baht, while KTB rated ‘Hold’ with a target price of 3 baht. As of Thursday morning, ERW traded at 3.16 baht, equal to its prior closing.
ERW will likely book one-time profits in its fourth quarter results from the sale of hotels, said KTB analyst Saranrat Panthachotirat.
After closing borders to overseas visitors in 2020, Thailand will welcome fully vaccinated tourists from 46 countries without quarantine starting from November 1, with hopes to revitalize its battered tourism sector.