Maybank Kim Eng Securities (Maybank) expects Thailand tourism to have a slow recovery, starting from 2H21 as vaccines should be widely available from July 21 onwards and hence, Covid-19 can be contained.
Domestic travel will recover first, as travelers continue to avoid long-haul flights. The business travel segment could recover last in 2022-2023 as technology can replace physical meetings. Minor International Public Company Limited (MINT) has about 48% of normalised hotel revenues from domestic travelers, mostly in Europe and is Maybank top BUY as its recovery should be the most prominent among its coverage.
Asset World Corp Public Company Limited (AWC), The Erawan Group Public Company Limited (ERW) and Central Plaza Hotel Public Company Limited (CENTEL) have only 10-20% of domestic clients, mostly in Thailand and should recover later than MINT. ERW downgraded to HOLD, while maintaining TP. Maybank thought ERWs share price was priced in the expected recovery.
In FY21, Airports of Thailand Public Company Limited (AOT) expects 45.6m domestic passengers (+30% YoY) whereas international passengers will decline to 2.3m from 37.5m in FY20. Because AOT earns THB700 in Passenger Service Charge (PSC) from each international passenger vs THB100 for each domestic passenger, Maybank expects AOT to make a substantial loss of THB8.5b in FY21, and turn profitable in FY22 at THB15.5b and THB31.2b in FY23 due to strong international passenger growth.
For FY23, this will be buoyed by the duty-free income of THB27b, higher than THB4.6b in FY21 due to added space and higher payment from King Power as international passengers increase.
In 2021, all hoteliers should enjoy higher occupancy with MINT gaining by the most (to 53% from 28% in 2020E), followed by CENTEL (to 48% from 28% in 2020E), ERW (to 50% from 34% in 2020E) and AWC (to 45% from 24% in 2019 ). AWC has the highest revenue contribution from business travelers (60%) and Maybank expects this to recover last.
Maybank rated MINT as Top BUY. Under Maybank coverage, CENTEL (WACC 6.5%, g 2 .5%) is likely to be the only profitable (THB231m) company for 2021 as its resilient food business makes up 60% of CENTELs income.
AOT (WACC 7.26%, growth 2.5%), AWC (WACC 9.10%, growth 2.5%), ERW (WACC 7.30%, growth 2.5%) and MINT (WACC 8.44%, g 2.5%) should turn profitable in FY22E. All, except MINT, have long-term growth of 2.5% due to their focus on Thailand and growth should rise in tandem with Thai GDP growth of 2-3%.
For MINT, the main business is in Europe where there is low growth that could be offset by the moderate growth in Thailand and strong growth in China – the long-term growth could average to be 2.5%. The key risk is political unrest in Thailand, which could dent recovery.