Tourism sector

Tourism sector

Curfew lifted in Pattaya, Samui and Phuket
National Council for Peace and Order (NCPO) has declared to lift a curfew
in three major tourist areas: Phuket, Pattaya (Chonburi) and Samui (Surat
Thani); effective from June 3, 2014 on.
- Positive sentiment. Outstanding in 4Q14
This would have a positive sentiment on tourism-hotel sector. Tourism is
expected to revive after curfew has been lifted. The politics is currently at
peace, and the new government might be established in near future;
curfew is likely to be lifted in other areas soon, especially in Bangkok.
Consequently, Thailand would regain confidence from tourists, and other
countries would start lowering their Outbound Travel Alert (OTA). The coup
d'etat should have a short-term impact on tourism, only in 2Q14 (low
season). Tourist volume has declined drastically in May - June 2014,
making the lowest of the year. However, it would rebound in 3Q14 and
make the peak in 4Q14 (high season). According to the statistics, in the
month that major political events took place, tourist volume tended to
plunge drastically; two months was usually needed after that to regain
confidence from tourists and revive tourism. During the September 2006
coup d'etat, tourist volume dropped by 20%mom to 979,000 in
September, then increased in October - December 2006. This is similar to
the April 2009-2010 emergency decree that took place in a low season.
- NEUTRAL. Top pick: MINT
Under the assumption that there is no violent political conflict, tourism is
expected to improve. MINT, ERW and CENTEL are expected to pass their
lowest in 2Q14, recover continuously, and make their peaks in 4Q14 -
1Q15 (peak season). This would have a positive sentiment on hotel stocks.
We upgrade our recommendation from UNDERWEIGHT to NEUTRAL. We
revise up MINT, ERW and CENTEL's fair values (under DCF valuation,
increasing their terminal growth rate from 3% to 4%) to B32 (20%
upside), B5 (15% upside), B40 (19% upside), respectively. We also
upgrade our recommendation on these three stocks from HOLD to BUY.
Top pick is MINT; its net profit is expected to grow best thanks to
diversified business. Also, MINT's fair value implies the largest upside with
the lowest P/E ratio.