Tourism / Hotel
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Tourism revives after rainy season passes Neutral
Tourism / Hotel
- Entering high season after political unrest recedes
Tourism has entered a high season in 4Q14. More tourists have been
visiting Thailand. Tourist volume rose to 2.18 million in October and grew by
11.8% to 2.43 million in November. December is the peak tourism season
where European and American tourists tend to come to Thailand, so tourist
volume is expected to make the year's high at 2.5 million. Total tourist
volume is projected to drop by 6.5%yoy to 25 million in 2014 (falling
8.6%yoy to 21.94 million in 11M14), and then revive by 12%yoy to 28
million in 2015 as the tourism sector is projected to return to normal after
the political unrest receded.
- Hotel sector to grow best in tourism season
As tourism has entered a high season, earnings of the three hotel
companies under our study (MINT, CENTEL, and ERW) are projected to
prosper in 4Q14 and 1Q15. Their normalized profit is projected to grow by
only 6%yoy to B5.59bn in 2014 (dropped by 4%yoy in 9M14 due to the
political unrest), but then revive by 26%yoy to B7bn in 2015; the tourism
sector is projected to return to normal, boosting their revenue.
- Top picks: CENTEL, ERW
With reviving tourism, strong profit growth from 4Q14 on, and high upsides
from FY2015 fair values, we recommend speculating on hotel stocks:
are CENTEL and ERW because their upsides of 43% and 26% are the
highest among peers and their earnings are projected to revive most
remarkably; ERW's earnings are estimated to rebound significantly and
CENTEL's profit is expected to grow by 20%yoy. Russian crisis is not likely
to have a significant effect on the sector because Russian tourists made up
only 6.5% of total tourist volume and generated less than 5% of hotels'
total revenue in 11M14.
