The Outperforming November Limits Upside to Hotel-Trans Stocks as BTS-BEM still Playable

The outperformance in November results in a limited upside to hotel and transportation stocks due to a sharp spike over vaccine news.

Stock markets have been rallying as far in November in response to positive trials of the coronavirus vaccine, developed by leading pharmaceutical corporations, namely Pfizer, Moderna, BioNTech and AstraZeneca that proved to be more than 90% effective.

 

Countries such as Thailand, which relies heavily on tourism, are responding well to the vaccine reports that could potentially signal for a faster-than-expected recovery in tourism, especially for international arrivals.

John Brown, Chief Executive of Agoda, told CNBC that domestic travel started to recover in Asia, mainly in Taiwan, Thailand and Vietnam at a faster pace compared to the West.

“Asia is generally leading the way,” he said on CNBC’s “Street Sign Asia”. “We’ve seen again in markets like Taiwan, certainly places like Thailand, where they really have the best control over Covid — those are the markets where we see the domestic bookings doing the best.”

 

Thailand is among one of the top countries to successfully contain the spread of coronavirus, keeping local transmission at zero with a great recovery rate.

 

Furthermore, the Thai cabinet had also approved the conceptual framework or projects under the plan or projects aimed at restoring the economy and society in the amount of Bt400.0bn in the second round, the total amount of Bt152.0bn, focusing on 4 main work plans, hiring and creating new jobs, adjust career skills and local infrastructure investment projects which the government is expected to increase GDP in 2020 by 0.2% and increase GDP in 2021 by 0.25% and it is expected to increase and maintain employment of more than 310,000 jobs.

 

SET Index has gained 206.68 points or 17.29% in November as of the closing on November 24, 2020. Hotel and transportation stocks are among one of the best performers in recovery from a slump since the impact of the coronavirus outbreak hit the Thai stock market in March.

 

Most stocks in the hotel sector have been performing outstandingly in November, showing more than a 12% gain this month, but still underperformed by 19.50% in this year. Nevertheless, the share prices have already priced in positive sentiment on the vaccine development, gaining close to or more than what analysts had anticipated as the actual operation results have yet to pair with the hopes of brighter recovery from the market.

Central Plaza Hotel Public Company Limited (CENTEL) is only 1.90% shy from its target price consensus at ฿24.86/share, while Minor International Public Company Limited (MINT) is 1.02% away from a consensus at ฿24.45/share. As for The Erawan Group Public Company Limited (ERW) and Dusit Thani Public Company Limited (DTC), both shares have gained more than what had been anticipated, resulting in a 7.02% and 7.79% downside to the consensus, respectively.

 

The same goes for Asia Aviation Public Company Limited (AAV) as Air Asia opened more domestic routes to support tourism when Thailand has control over the outbreak, making domestic tourism more freely. The share price spiked 46.85% in November, but was still 7.14% lower for this year. The share price surpassed Bloomberg Consensus by 4.79% as analysts gave the 12-month target price at ฿1.94/share.

The direction of Airports of Thailand Public Company Limited (AOT) is not much different than AAV’s since the company relies on traffic from tourists, mostly international arrivals that have yet to return despite the reopening border to welcome tourists with a special visa for long stay.

 

However, the situation of Bangkok Airways Public Company (BA) is different from AAV, even though they are both operating airline business. The momentum of BBA was better than low-cost airlines such as AAV or NOK since before the coronavirus outbreak. Named itself as Asia’s boutique airline, BA offers classy services at an affordable price.

The airline focuses mainly on domestic flights, unlike AAV or NOK that expanded their routes internationally. More importantly, it can be said that the company has a strong backup since the Prasarttong-Osoth Family, who runs the company, also operates other businesses as well. The family also runs one of Thailand’s hospital chains, Bangkok Dusit Medical Services Public Company Limited (BDMS), making BA more resilient to the coronavirus impact than Thailand’s low-cost airlines.

 

Meanwhile, the transportation stocks such as BTS Holdings Public Company Limited (BTS) and Bangkok Expressway and Metro Public Company Limited (BEM) are performing well due to the recovery in passengers in which both companies did not rely heavily on foreigners much, while still having an upside to play.

Bloomberg Consensus gave a target price for BTS at ฿12.96/share, reflecting 21.11% of upside, while the target price of BEM is at ฿10.52/share, reflecting 12.51% of upside.

 

On November 24, 2020, SET Index closed at 1,401.63 points, decreased 18.80 points or 1.32% with a trading value of 102 billion baht. The analyst estimated that the plummet was due to profit-taking after the index made a rally over 200 points in November, while there are no major negativity to weigh down the market as of now besides political gatherings, expected to show up at The Crown Property Bureau, to pressure the Thai PM for resignation and monarchy reform.

 

In addition, JPMorgan Chase & Co. stated that global stock markets may see a huge outflow in a money rotation into bonds for a port rebalancing by large multi-asset investors after strong equity performance so far in November.