According to CGSI’s analysis of the Thai hotel sector, The Erawan Group Public Company Limited (SET: ERW) is forecasted to emerge as the top performer in the fourth quarter of 2024.
CGS International Securities (CGSI) stated that ERW’s performance in the third quarter of 2024 saw RevPAR and net profit on par with expectations, while the company is expected to display the strongest performance among hotels under the coverage of CGSI in the upcoming fourth quarter.
In 3Q24, ERW’s core net profit matched CGSI’s and Bloomberg consensus at THB 125 million, reflecting a 20% year-on-year decrease and a 2% quarter-on-quarter decline. The decline in net profit was primarily attributed to an exceptional impact on RevPAR due to the Grand Hyatt Erawan poisoning incident in July 2024, alongside increases in depreciation and interest expenses by 10% year-on-year and 19% year-on-year to THB 255 million and THB 179 million, respectively.
The overall RevPAR stood at THB 1,382 per room night, indicating a 3% year-on-year decrease and a 5% quarter-on-quarter decline, aligning with CGSI’s and consensus estimates.
During 4Q24, the analyst anticipates robust RevPAR performance for Thai and Japanese hotels, driven by seasonal trends and robust hotel demand. It is projected that ERW’s RevPAR will increase by 14% quarter-on-quarter in 4Q24, while the average room rate (ARR) is expected to grow by 5% year-on-year for non-Hop Inn hotels.
As a result, CGSI maintains an ‘Add’ rating on ERW with a target price of THB 5 per share.
Additionally, ERW disclosed its outlook after the announcement of its 3Q24 earnings, expecting Thailand’s tourism industry to continue its growth over the next three months of 2024, coinciding with the peak travel season. The government aims to reach a target of 35 million international arrivals, bolstered by strong support from travelers from China, India, and Europe, as well as an increase in flight capacity.
Overall, 2024, the outlook for total revenue growth is expected to be in the range of 14-15 percent YoY with an occupancy rate of 80 percent and average room rate growth of 5-7 percent YoY. The Company continues to develop new projects as outlined in our long-term plan by focusing on investment in the budget hotel segment and increasing the contribution of revenue and profit from international to generate stabilized growth in the long term. In addition, the Company also focuses on asset improvement of 3-5 star hotels segment to increase its competitiveness in response to the changes in customer demand. In 3Q24, there were 12 new HOP INN hotels in Thailand.
