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>ERW reported 3Q22 net loss at Bt12m, the lowest loss in the past 11 quarter.The result came out above our and market estimates while lower-than-expected operating cost from hotel business </li>
<li>Net loss in 3Q22 improved significantly Loss from core operation reduced to Bt12m (vs. Bt623m loss in 3Q21 and Bt139m loss in 2Q22)on the back of revenue that hit 11-quarter</li>
<li>Effective control for cost from operations and benefit from high operating leverage play a vital role as gross profit margin expanded to 11-quarter high at35.5%while SG&amp;At sales decreased to 11-quarter </li>
</ul>


ERW reported 3Q22 net loss at Bt12m, the lowest loss in the past 11 quarter.The result came out above our and market estimates while lower-than-expected operating cost from hotel business 
Net loss in 3Q22 improved significantly Loss from core operation reduced to Bt12m (vs. Bt623m loss in 3Q21 and Bt139m loss in 2Q22)on the back of revenue that hit 11-quarter
Effective control for cost from operations and benefit from high operating leverage play a vital role as gross profit margin expanded to 11-quarter high at35.5%while SG&amp;At sales decreased to 11-quarter 


ERW : Much Quicker Recovery Relative to Peers but 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>Global fund managers still suggest increasing holdings of safe-haven assets, such as cash, or investing in sectors with recurring income, notably utilities and health care stocks, while they are bearish on risk assets and global growth in the next 12 months.</li><li>Investors also repriced their expectations regarding the terminal fed funds rate in 1Q23 by 50 bps higher.</li><li>However, we expect the Thai market to see a limited impact from the bearishness thanks to the good earnings recovery momentum, in contrast to global economies, as well as the boost from the huge growth in the number of tourist arrivals from 400k in 2021 to an expected 21mn in 2023E.</li></ul>

Global fund managers still suggest increasing holdings of safe-haven assets, such as cash, or investing in sectors with recurring income, notably utilities and health care stocks, while they are bearish on risk assets and global growth in the next 12 months.Investors also repriced their expectations regarding the terminal fed funds rate in 1Q23 by 50 bps higher.However, we expect the Thai market to see a limited impact from the bearishness thanks to the good earnings recovery momentum, in contrast to global economies, as well as the boost from the huge growth in the number of tourist arrivals from 400k in 2021 to an expected 21mn in 2023E.

<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

<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

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 : Much Quicker Recovery Relative to Peers but Mostly Priced In

ERW reported 3Q22 net loss at Bt12m, the lowest loss in the past 11 quarter. The result came out above our and market estimates while lower-than...

Pi Securities PCL, Thailand

Fund Manager Survey - No Cuts, No Glory

Global fund managers still suggest increasing holdings of safe-haven assets, such as cash, or investing in sectors with recurring income, notably...

Krungthai XSpring

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

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