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

<p><strong>We maintain HOLD rating with 2021E target price at Bt3.10, derived from 0.74x PBV’21E, which was its valuation at 31-Dec-19, right before the Covid-19 outbreak.</strong></p><div>• SHR had 1Q21 recurring losses of Bt421m, fell from profit of Bt235m in 1Q20 and slightly worse than losses of Bt356m in 4Q20.</div><div></div><div>• Its performance could slowdown QoQ in 2Q21, given the lower occupancy rate in Maldives as the country banned travel from South Asia.</div><div></div><div>• The strong recovery could be seen in 3Q21, thanks to fast vaccine rollout in Western countries, particularly UK, where more than 60% of its keys operates.</div><div></div><div>• In the long term, SHR targeted to have 80 hotels in its portfolio, from 38 hotels currently.</div><div>
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</div><p><strong>We expect its earning to recover in 2H21, given an easing in Covid situation. However, we see minor downside risk to our 2021 projection as COGS in 1Q21 progressed faster than our expectation.</strong></p>

We maintain HOLD rating with 2021E target price at Bt3.10, derived from 0.74x PBV’21E, which was its valuation at 31-Dec-19, right before the Covid-19 outbreak.• SHR had 1Q21 recurring losses of Bt421m, fell from profit of Bt235m in 1Q20 and slightly worse than losses of Bt356m in 4Q20.• Its performance could slowdown QoQ in 2Q21, given the lower occupancy rate in Maldives as the country banned travel from South Asia.• The strong recovery could be seen in 3Q21, thanks to fast vaccine rollout in Western countries, particularly UK, where more than 60% of its keys operates.• In the long term, SHR targeted to have 80 hotels in its portfolio, from 38 hotels currently.
 
We expect its earning to recover in 2H21, given an easing in Covid situation. However, we see minor downside risk to our 2021 projection as COGS in 1Q21 progressed faster than our expectation.

SHR: Hiccup in 2Q21 Before Recover Strongly in 2H21

<p><strong>We downgrade our recommendation to HOLD rating, from BUY, with new 2021E target price at Bt3.10, from Bt2.60, derived from 0.74x PBV’21E, which was its valuation at 31-Dec-19, right before the Covid-19 outbreak. The stock price increased 110% since our bullish call in Mar-20, at the bottom of Covid-19 situation.</strong></p><div>• SHR had 4Q20 recurring loss of Bt356m, escalating from Bt167m in 4Q19, but slightly recovered from Bt600m in 3Q20.</div><div></div><div>• 4Q20 EBITDA turned black at Bt14m, from loss of Bt267m in 3Q20, reflected hotels re-opening momentum and well expenses control.</div><div></div><div>• 2020 normalized losses was Bt1.8bn, compared to Bt454m losses in 2019.</div><div></div><div>• The Covid-19 caused SHR revenue in 2020 to fall 59%YoY and let it made losses at gross loss level of Bt105m and EBITDA level of Bt415m.</div><p><strong>SHR is on a recovery path in 2021. Its oversea assets, particularly in Maldives, UK, Fiji and Mauritius, should benefit from fast vaccination rate in Western countries.</strong></p>

We downgrade our recommendation to HOLD rating, from BUY, with new 2021E target price at Bt3.10, from Bt2.60, derived from 0.74x PBV’21E, which was its valuation at 31-Dec-19, right before the Covid-19 outbreak. The stock price increased 110% since our bullish call in Mar-20, at the bottom of Covid-19 situation.• SHR had 4Q20 recurring loss of Bt356m, escalating from Bt167m in 4Q19, but slightly recovered from Bt600m in 3Q20.• 4Q20 EBITDA turned black at Bt14m, from loss of Bt267m in 3Q20, reflected hotels re-opening momentum and well expenses control.• 2020 normalized losses was Bt1.8bn, compared to Bt454m losses in 2019.• The Covid-19 caused SHR revenue in 2020 to fall 59%YoY and let it made losses at gross loss level of Bt105m and EBITDA level of Bt415m.SHR is on a recovery path in 2021. Its oversea assets, particularly in Maldives, UK, Fiji and Mauritius, should benefit from fast vaccination rate in Western countries.

SHR: Stock Price Recovered to Pre-Covid Level

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

<p>We have visited many of two interesting companies recently, namely Singha Hotels (SHR) and PTG Energy, the country's second largest gas station operator.</p><ul>
<li>
<strong>Singha Hotels</strong>' losses in H1'20 widened over six-fold YoY to Bt946m as revenues dropped 34% to just Bt1.5bn, and the company expects earnings to be flat in H2'20. The company could not cut costs as aggressively as Minor did, bleeding Bt120/month on fixed cash costs alone.</li>
<li>Management clarified that most of their investments would be organic (refurbishment and improvements) rather than M&amp;A due to the tougher operating conditions. In the long-run, UK based hotels would fall from 74% to 21% of portfolio, and homegrown, own-managed hotels would rise to 48% of the portfolio.</li>
<li>
<strong>PTG Energy</strong> reported H1'20 earnings of Bt717m, down 24% YoY, on the back of a 15% revenue decline to Bt51.4bn during the same period. The company put up a brave face talking about its strong MKM (marketing margin) even as volumes plunged more than 30% for key categories.</li>
<li>We are rather bearish on the company, which appears to focus more on market share than profitability during this precarious period. They are investing some Bt3.5bn in capex and hoping to move up the rankings against key rivals.</li>
</ul>

We have visited many of two interesting companies recently, namely Singha Hotels (SHR) and PTG Energy, the country's second largest gas station operator.

Singha Hotels' losses in H1'20 widened over six-fold YoY to Bt946m as revenues dropped 34% to just Bt1.5bn, and the company expects earnings to be flat in H2'20. The company could not cut costs as aggressively as Minor did, bleeding Bt120/month on fixed cash costs alone.
Management clarified that most of their investments would be organic (refurbishment and improvements) rather than M&amp;A due to the tougher operating conditions. In the long-run, UK based hotels would fall from 74% to 21% of portfolio, and homegrown, own-managed hotels would rise to 48% of the portfolio.

PTG Energy reported H1'20 earnings of Bt717m, down 24% YoY, on the back of a 15% revenue decline to Bt51.4bn during the same period. The company put up a brave face talking about its strong MKM (marketing margin) even as volumes plunged more than 30% for key categories.
We are rather bearish on the company, which appears to focus more on market share than profitability during this precarious period. They are investing some Bt3.5bn in capex and hoping to move up the rankings against key rivals.


Small Cap Diary: Singha Hotels, PTG Energy

<p><strong>We initiate coverage of SHR with a BUY rating and a 2020E target price of Bt2.60, derived from 22.0x PE’21E, which is -1 SD of the 5-year trading average of peers MINT and CENTEL.</strong></p>
<p><strong>The story:</strong></p>
<div>•Thai conglomerate is in the process of expanding its footprint in world class resort segment</div>
<div>•Less effect from Covid-19 compared to SET peers</div>
<div>•Trading deep at an NAV discount</div>
<div>•Expect earnings to turn around from late 2021 onward</div>
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<p><strong>Risks: </strong></p>
<div>•Foreign exchange rate fluctuation</div>
<div>•New project failure</div>
<div>•Reliance on third-party sales agents</div>
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<p><strong>Background:</strong> S Hotels and Resorts Public Company Limited (SHR) is a subsidiary of Singha Estate Public Company Limited. SHR is a holding company that is engaged in investment and management of high-end hotels and resorts. Currently, SHR has a total of 4,647 rooms in 39 hotels and resorts in five countries include Thailand, the Republic of Maldives, Republic of Fiji Islands, Mauritius and the United Kingdom.</p>
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We initiate coverage of SHR with a BUY rating and a 2020E target price of Bt2.60, derived from 22.0x PE’21E, which is -1 SD of the 5-year trading average of peers MINT and CENTEL.
The story:
•Thai conglomerate is in the process of expanding its footprint in world class resort segment
•Less effect from Covid-19 compared to SET peers
•Trading deep at an NAV discount
•Expect earnings to turn around from late 2021 onward

 

Risks: 
•Foreign exchange rate fluctuation
•New project failure
•Reliance on third-party sales agents


Background: S Hotels and Resorts Public Company Limited (SHR) is a subsidiary of Singha Estate Public Company Limited. SHR is a holding company that is engaged in investment and management of high-end hotels and resorts. Currently, SHR has a total of 4,647 rooms in 39 hotels and resorts in five countries include Thailand, the Republic of Maldives, Republic of Fiji Islands, Mauritius and the United Kingdom.


SHR: World Class Resorts at a Deeply Discounted Price

Thailand

S Hotels and Resorts Public Company Limited is a Thailand-based holding company that manages hotels and resorts and invests in international hotel companies. It owns and operates a portfolio of properties across the Maldives, Fiji, Mauritius, the United Kingdom, and Thailand. The company was founded in 2014 and is headquartered in Bangkok, Thailand.

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S Hotels and Resorts (SHR TB)

SHR: Hiccup in 2Q21 Before Recover Strongly in 2H21

We maintain HOLD rating with 2021E target price at Bt3.10, derived from 0.74x PBV’21E, which was its valuation at 31-Dec-19, right before the Covid...

Pi Securities PCL, Thailand

SHR: Stock Price Recovered to Pre-Covid Level

We downgrade our recommendation to HOLD rating, from BUY, with new 2021E target price at Bt3.10, from Bt2.60, derived from 0.74x PBV’21E, which was...

Pi Securities PCL, Thailand

Small Cap Diary: Singha Hotels, PTG Energy

<p>We have visited many of the country's top three hotel operators. In this review, we checked two smaller ones, namely Singha Hotels and Dusit...

Athaporn Arayasantiparb, CFA

SHR: World Class Resorts at a Deeply Discounted Price

We initiate coverage of SHR with a BUY rating and a 2020E target price of Bt2.60, derived from 22.0x PE’21E, which is -1 SD of the 5-year trading...

Pi Securities PCL, Thailand

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