Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

Moreover, our new research team tailored for institutional clients to focus on mid to small cap of Thai equities and trading strategies. Our services offered to our premium clients also include arrangement of company or site visits to with the managements of Thai listed companies.

Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

<ul>
<li>We downgrade ERW to HOLD while cut target price to Bt4.20. (Previous TP:4.60) after earnings downgrade in 22-23E chiefly from rising cost pressure.The stock price rallies 25% in the past</li>
<li>Expect loss to be reduced by almost 60%QoQ in 3Q22 We expect the company to report 3Q22 net loss of Bt57m(vs. Bt623m loss in 3Q21 and Bt139m loss in 2Q22)</li>
<li>EBIT margin is assumed to turn positive for the first time since pandemic, thanks to recovery in traffic at hotels and well-managed cost control.</li>
</ul>


We downgrade ERW to HOLD while cut target price to Bt4.20. (Previous TP:4.60) after earnings downgrade in 22-23E chiefly from rising cost pressure.The stock price rallies 25% in the past
Expect loss to be reduced by almost 60%QoQ in 3Q22 We expect the company to report 3Q22 net loss of Bt57m(vs. Bt623m loss in 3Q21 and Bt139m loss in 2Q22)
EBIT margin is assumed to turn positive for the first time since pandemic, thanks to recovery in traffic at hotels and well-managed cost control.


ERW : Expect Turnaround in 4Q22, but Has Mostly Priced In

Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

Thematic (Sector/Industry)

<ul><li>The Global Fund Manager Survey in October reconfirms a bear market atmosphere due to concerns over a global economic slowdown, which is prompting investors to overweight cash and underweight equities.</li><li>While the Thai market has not escaped being impacted by the bearishness as evidenced from the net selling by foreign investors and the weaker baht amid the stronger USD, we still hold a positive view thanks to the outlook for a more outstanding recovery in Thailand than other countries, based on the upward revision to the World Bank’s 2022E GDP projection from +2.9% to +3.1% YoY.</li><li>We maintain our recommendation for stocks under the reopening theme that should benefit from the peak seasons for spending and tourism. </li></ul>

The Global Fund Manager Survey in October reconfirms a bear market atmosphere due to concerns over a global economic slowdown, which is prompting investors to overweight cash and underweight equities.While the Thai market has not escaped being impacted by the bearishness as evidenced from the net selling by foreign investors and the weaker baht amid the stronger USD, we still hold a positive view thanks to the outlook for a more outstanding recovery in Thailand than other countries, based on the upward revision to the World Bank’s 2022E GDP projection from +2.9% to +3.1% YoY.We maintain our recommendation for stocks under the reopening theme that should benefit from the peak seasons for spending and tourism. 

Special Report: Global Fund Manager Survey

<ul>
<li>Maintain BUY rating for ERW while roll over target price to Bt4.60. (Previous TP: 4.20) 2Q22 net loss at Bt139m was in-line with market estimate while EBITDA has turned positive </li>
<li>Net loss in 2Q22 improved substantially Stripping out extra gains mainly from sales of 3 Ibis hotels, loss from core operation would be at Bt160m(vs.Bt556m loss in 2Q21 and Bt316m </li>
<li>Revenue was at Bt974m (+271%YoY +53%QoQ),supported by luxury segment (44% of total revenue in 2Q22)where occupancy jumped to 66% (42% in 1Q22) while average room rate (ARR) recovered 66% YoY</li>
</ul>


Maintain BUY rating for ERW while roll over target price to Bt4.60. (Previous TP: 4.20) 2Q22 net loss at Bt139m was in-line with market estimate while EBITDA has turned positive 
Net loss in 2Q22 improved substantially Stripping out extra gains mainly from sales of 3 Ibis hotels, loss from core operation would be at Bt160m(vs.Bt556m loss in 2Q21 and Bt316m 
Revenue was at Bt974m (+271%YoY +53%QoQ),supported by luxury segment (44% of total revenue in 2Q22)where occupancy jumped to 66% (42% in 1Q22) while average room rate (ARR) recovered 66% YoY


ERW : EBITDA Turned Positive in 2Q22 Supported by Solid Recovery in All

<ul>
<li>Analyst meeting came out with positive tone regarding 22E outlook.We maintain BUY rating with TP Bt4.20 derived from DCF valuation (WACC=7% &amp; Terminal growth= 2%) implying 10% discount to 23.1xPE’23.</li>
<li>The company reported net loss of Bt313m in 1Q22 compared to net loss of Bt492m in 1Q21 and net loss of Bt246 in 4Q21 in line with our expectation.</li>
<li>Excluding extra ordinary items, the operational losses declined YoY and QoQ to Bt313m since revenue almost doubled YoY  and increased 4% QoQ to Bt646m after bottoming out in 3Q21.</li>
</ul>


Analyst meeting came out with positive tone regarding 22E outlook.We maintain BUY rating with TP Bt4.20 derived from DCF valuation (WACC=7% &amp; Terminal growth= 2%) implying 10% discount to 23.1xPE’23.
The company reported net loss of Bt313m in 1Q22 compared to net loss of Bt492m in 1Q21 and net loss of Bt246 in 4Q21 in line with our expectation.
Excluding extra ordinary items, the operational losses declined YoY and QoQ to Bt313m since revenue almost doubled YoY  and increased 4% QoQ to Bt646m after bottoming out in 3Q21.


ERW: Operational Losses Continued to Decline in 1Q22

<ul>
<li>We upgrade to BUY rating from SELL rating and raise TP by +75% to Bt4.2 derived from DCF valuation (WACC=7% &amp; Terminal growth= 2%) implying 10% discount to 23.1xPE’23. </li>
<li>We expect ERW to post net loss of Bt296m  against loss of Bt492m in 1Q21 and Bt246 in 4Q21 despite strong  revenue growth.</li>
<li>Strong revenue growth is underpinned by the growth in domestic and international tourism due to the introduction of Test and go scheme and ‘Rao Tiew Duay Kan phase-4’ in 1Q22</li>
</ul>


We upgrade to BUY rating from SELL rating and raise TP by +75% to Bt4.2 derived from DCF valuation (WACC=7% &amp; Terminal growth= 2%) implying 10% discount to 23.1xPE’23. 
We expect ERW to post net loss of Bt296m  against loss of Bt492m in 1Q21 and Bt246 in 4Q21 despite strong  revenue growth.
Strong revenue growth is underpinned by the growth in domestic and international tourism due to the introduction of Test and go scheme and ‘Rao Tiew Duay Kan phase-4’ in 1Q22


ERW: Spike in International Tourists Will Speed up the Recovery

Thailand

The Erawan Group Public Company Limited develops and operates luxurious hotels, office buildings and shopping centers in the heart of Bangkok.

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Erawan Group (ERW TB)

ERW : Expect Turnaround in 4Q22, but Has Mostly Priced In

We downgrade ERW to HOLD while cut target price to Bt4.20. (Previous TP: 4.60) after earnings downgrade in 22-23E chiefly from rising cost...

Pi Securities PCL, Thailand

Special Report: Global Fund Manager Survey

We maintain our recommendation for stocks under the reopening theme that should benefit from the peak seasons for spending and tourism

Krungthai XSpring

ERW : EBITDA Turned Positive in 2Q22 Supported by Solid Recovery in All

Maintain BUY rating for ERW while roll over target price to Bt4.60. (Previous TP: 4.20) 2Q22 net loss at Bt139m was in-line with market estimate...

Pi Securities PCL, Thailand

ERW: Operational Losses Continued to Decline in 1Q22

Analyst meeting came out with positive tone regarding 22E outlook. We maintain BUY rating with TP Bt4.20 derived from DCF valuation (WACC=7% &...

Pi Securities PCL, Thailand

ERW: Spike in International Tourists Will Speed up the Recovery

We upgrade to BUY rating from SELL rating and raise TP by +75% to Bt4.2 derived from DCF valuation (WACC=7% & Terminal growth= 2%) implying 10%...

Pi Securities PCL, Thailand

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