Finansia Syrus Securities (FSS) has a positive outlook on the signing of a long-term land lease agreement by the Erawan Group for project development around Phrom Phong BTS station.
The Erawan Group Public Company Limited (SET: ERW) disclosed to the Stock Exchange of Thailand earlier today for the entering into a long-term land lease agreement with 11 landowners, both juristic persons and individuals, (collectively referred to as the Lessors) for the lease of land cover an area of 2-0-17 rai located near the Phrom Phong BTS station, Bangkok.
The purpose of the leases is to develop a real estate project which aligns with the company’s strategy and operational plans, with a lease term of 30 years (from 1 December 2028 to 30 November 2058).
The company also has the right to extend the Lease Term for an additional 30 years from the expiration of the Lease Term (from 1 December 2058 to 30 November 2088).
The new hotel is expected to be completed by 2030 with an expectation of IRR around 8-9%. FSS commented that the signing has a growth potential for ERW’s upscale segment, but the lease is quite expensive when compared to other areas such as Block A Sian Square, resulting in low IRR ratio.
Additionally, FSS noted that there will be no impact on ERW’s profit and loss from 2025-2030 as all are capitalized until the opening in 2030. The analyst recommended “BUY” at a target price of THB6.00 per share.
