Daol Securities expressed a positive view on the Thai tourism sector after an interest rate cut by the Bank of Thailand on Wednesday, seeing the move could alleviate pressure on interest expenses.
News Flash – MPC 0.25% Policy Rate Cut Have a Positive Effect on Tourism
Yesterday, the Monetary Policy Committee had a resolution to decrease the policy rate down by 0.25% to 2.25% to help weaken the baht and stimulate tourism in the country.
Implication
Daol Securities saw a positive effect in tourism as lower interest would help alleviate pressure on interest expense, while also attracting more tourists into the country. Several stocks are expected to benefit from every 0.25 percentage points of interest rate cut. The stocks, sorted from most impacted to least impacted, are as followed:
- ERW will have an estimated 2.4% upside toward 2025E net profits due to its high loan ratio in Thailand of 88% and float rate at 100%.
- SHR will have an estimated 1.7% upside toward 2025E net profits due to loan ratio in Thailand of 41% and float rate at 47%.
- CENTEL will have an estimated 0.5% upside toward 2025E net profits due to loan ratio in Thailand of 90% and float rate at 40%.
- MINT will have an estimated 0.3% upside toward 2025E net profits due to loan ratio in Thailand of 30%, but if combined with EUR loans that have the ratio as much as 60% MINT will have an additional 0.6% to the upside.
Meanwhile, an airline group including AAV will have an upside toward 2025 net profit at +0.6%, while AOT is expected to see no significant impact.
Daol Securities rated the tourism sector at “Market Weight”, with its top pick being MINT at a target price of THB34.00 per share as its valuation is still cheaper than its peers with 2024E EV/EBITDA at 10x (-2.00SD below 10-yr average EV/EBITDA), which is cheaper than ERW and CENTEL. Meanwhile, the firm maintained its estimate for 3Q24E year-on-year growth since it is still in high season in Europe, with Europe’s RevPAR can still grow +15% YoY and ADR can grow +12% YoY. Thailand’s RevPAR can still grow +16% YoY. 4Q24E will be a high season for both Thailand and Maldive, reinforcing growth.
