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The continued surge in tourism during the current low season is likely to have a positive impact on the hotel operators as they ready themselves to report their 2nd quarter results for the year.
Domestic tourism in Thailand has been on an uptick as the country continues to open up its visa regime to allow citizens from up to 93 countries to be able to enter Thailand for up to 60-days without requiring applying for visa.
According to latest data, as many as 20 million visitors had entered Thailand from the start of this year until July 25th, with Chinese tourists making the biggest chunk with nearly 4 million, followed by Malaysians with 2.8 million and Indians at about 1.2 million visitors.
Most hotel operators are expected to start reporting their Q2 results within 45-days after the end of Q2 (June 2024), with Minor International Plc (MINT) most likely to benefit the most from the surge in domestic tourism and the rise of tourism in Europe.
MINT, which has about 550 hotels spread across Thailand, Europe and Australia, is expected to be the star performer among the hotel operators in Thailand. With nearly 80,000 room keys under its management, MINT’s nearly 96% owned NH Hotels, came out to report its earnings for the 2nd quarter of 2024 on Madrid stock exchange, showing a remarkable 7% year-on-year (YoY) growth in the revenue per available room (RevPar).
“We now expect MINT to report a solid 2Q24 core profit at Bt3.24bn, presenting its best quarterly earnings. Hotels in Europe and Thailand, together with its food business should be key drivers for the quarter. Strong momentum continues in July, boosted by NH Hotels,” says Kalvalee Thongsomaung, analyst at Bualuang Securities.
Charti Phrawphraikul, analyst at Kiatnakin Phatra Securities says that hotel sector is expected to continue to post strong improvement YoY as RevPAR continues to post YoY growth. He says that for quarter-on-quarter (QoQ) the trend should weaken due to seasonality.
While the occupancy rate is starting to normalize after having largely rebounded back from low bases during COVID-19, average daily rate should continue to post a strong increase driving strong revenue growth.
MINT
Charti of Kiatnakin Phatra says that MINT, due to its large exposure to the EU market, will also post a strong QoQ turnaround as its operations in Europe enter the high season. While the overall occupancy rate has trended back to the 2019 level, RevPAR has already far surpassed the 2019 level (by 42% for the group average) thanks to the higher average daily rates.
“We expect operation to continue to post solid growth in H2 2024 with improvement QoQ for Thai focused hotels. MINT remains our top pick due to continued strong YoY growth while its valuation remains cheaper than peers.”
Attaphol Tisayukata, analyst at TISCO Securities says that they are of the view that MINT will report a new high in core earnings at its upcoming results announcement, thanks to operational improvements in the hotel and food segments.
He says that the high season for hotels in the EU & LATAM markets, along with ongoing recovery in Thailand, are expected to be the key drivers for the hotel segment. Although the food business remains sluggish, lower raw material and management costs should help margins improve YoY.
“We estimate a Q2 core profit of 3.68 billion Baht (+22% YoY). However, we expect FX loss related to translation impact (due to the appreciation of the USD) to hit bottom line and thus we estimate a 3.18 billion Baht net profit (-2% YoY / +177% QoQ),” Attaphol said.
Kalvalee of Bualuang said that the profits reported by NH Hotels was another indication of how the trend of MINT is going to look like.
NH reported net profit at 93 million Euros (€) for Q2 2024, up 15% YoY. Top line grew 11% YoY, driven by average daily rates increased 6% YoY for the like-for-like basis (occupancy was flattish YoY at 73%), and a higher revenue by 5% YoY from refurbishment and rebranding hotels.
All 3 brokers have a ‘Buy’ rating on the shares of MINT with Bualuang having the highest target price of 42 Baht/share from its closing price on Friday at 30.25 Baht/share.
AWC
Asset World Corporation Plc (AWC), the hotel business owned by Charoen Sirivadhanabhakdi’s TCC Group, is expected to report Q2 2024 pre-ex net profit of 175 million Baht, +116% YoY but -74% QoQ due to seasonality.
Chatri of Kiatnakin Phatra says that in his view, H1 2024 pre-ex net profit would total 855 million Baht, +65% YoY and making up 29% of the broker’s full-year forecasts. Total revenue is expected to increase by 14% YoY driven by strong growth from its hotels which is expected to increase by 15% YoY.
Revenue from commercial properties is also expected to increase by 6% YoY driven by retail properties’ improving performance. Meanwhile, revenue from its offices is expected to remain stable YoY.
Due to hotels’ high operating leverage, margins are expected to expand YoY. EBITDA margin is expected to increase to 31% in Q2 2024, up from 29% in Q2 2023.
Pre-ex net margin is expected to improve to 5% in Q2 2024, up from 3% in Q2 2023. Chatri says that he expects operation to further improve QoQ in H2 2024 from seasonality and as its new properties continue to ramp up. While there is a downside risk to our full-year forecasts, AWC should still post the highest YoY earnings growth. Chatri says he maintains a ‘Buy’ with 5.90 Baht/share.
ERW
The Erawan Group Plc (ERW), the hotel that saw 6 people die of poisoning earlier this month, is expected to see some decline in profitability so says Attaphol of TISCO. He expects ERW’s earnings to drop by 2% YoY. Excluding reversal of asset impairment and revaluation of ERWPF in Q2 2023, core earnings should grow 26% YoY, underpinned by topline expansion of 10% and EBITDA margin by 160 basis points.
Attaphol says that for the topline, all segments should see RevPAR growth, with the exception of midscale as the Holiday Inn in Pattaya underwent renovations (will continue to the end of the year). Nonetheless, rates at the partially opened hotel in Pattaya have already increased by 20% and the company foresees a high trajectory once it fully opens. All considered, the luxury, Hop Inn, and hotels in Philippines and Japan to continue to deliver solid performance.
Attaphol has a ‘Buy’ on the shares with a target price of 6.50 Baht/share.
CENTEL
Central Plaza Hotel Plc (CENTEL) is expected to post Q2 2024 pre-ex net profit of 240 million Baht, +100% YoY but -68% QoQ due to seasonality.
Charti of Kiatnakin Phatra says that in his view 1st half of 2024 CENTEL should report a pre-ex-net profit of about 995 million Baht, +33% YoY and making up 59% of our full-year forecasts and 64% of full-year consensus estimates.
“We expect hotel revenue to post a strong increase of 19% YoY driven by continued improvement in Thailand as well as the ramping up of its new hotel in Osaka, Japan, food revenue growth is expected to accelerate to 5% YoY in Q2 2024, up from 4% YoY in Q1 2024, driven by an improving SSSG and TSSG trend (+2% and +6% in Q2 2024 vs. +1% and +3% in Q1 2024),” he said.
Chatri says that while margin for food should improve both YoY and QoQ, margin for hotel is expected to lower QoQ, in line with the revenue trend from seasonality. Thus, overall pre-ex net margin is expected to improve to 4.2% in Q2 2024, up from 2.3% in Q2 2023 but lower from 11.8% in Q1 2024.
He has a ‘Buy’ rating with a target price of 48 Baht/share.