The Erawan Group - Global Alliance Partners
The Erawan Group Buy (17E TP Bt6.20)
Company Update
Close Bt4.44
Tourism & Leisure October 28, 2016
Earnings upgrade/Earnings downgrade/Overview unchanged
RevPAR continued to grow across the board Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS Bt)
0.143
0.188
KT ZMICO vs. consensus Share data
11.9%
‐9.6%
Reuters / Bloomberg
ERW.BK/ERW TB
Paid‐up Shares (m)
2,498.17
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
11.00/316.00
Foreign limit / actual (%)
49.00/17.29
52 week High / Low (Bt)
5.30/3.72 7,291.00
Avg. daily T/O (shares 000) NVDR (%)
1.31
Estimated free float (%)
44.57
Beta
0.71
URL
www.theerawan.com
CGR
Anti‐corruption
Level 4 (Certified)
Anapat Wanuschaiyapruk Analyst, no. 57076 [email protected] 66 (0) 2-624‐6289
3Q16E to turn to profit We expect ERW to report a net profit of Bt21mn, turning from a loss of Bt20mn last year. RevPAR has continued to increase in every hotel segment and strong growth was visible in budget hotels (Hop Inn). The mourning period has had some impact on revenue from function rooms so there is downside risk to our 16E net profit forecast by Bt20mn to Bt30mn. We expect an insignificant effect to our 17E valuation and therefore our Buy rating stands. RevPAR grew in every segment Group RevPAR increased 2%YoY as the group occupancy rate increased by 10%YoY. Excluding the budget segment, RevPAR grew 11.7% driven by a 9.8% increase in the occupancy rate of non‐budget hotels. Room rates dipped by 1.3% due mainly to a 10% drop in the room rate of economy hotels (Ibis). The budget segment (Hop Inn) was still the strongest segment, as it saw RevPAR growth of 28%YoY despite almost doubling total hotel rooms YoY (867 rooms in 3Q15 vs. 1,558 rooms in 3Q16). The occupancy rate increased from 55% to 74% while the room rate remained quite stable at Bt511/night, ‐1.7%YoY. Impact from the mourning period leads to lower revenue guidance Low sentiment during the mourning period has led to cancellations of function rooms but has not had much impact on hotel rooms so far. The company has estimated a financial impact on total revenue in 4Q16 of around Bt200mn. This means that we should see no growth YoY in the quarter. We think that there will be downside risk to our 16E net profit by around Bt20mn to Bt30mn. It is still too early to assess whether the impact will continue into 1Q17, but the management said that the operation results in 4Q16 will be an important indicator. Expansion continues The first Hop Inn in the Philippines will soft‐launch in late November, which will be the first step for international expansion. ERW targets to open another six Hop Inn in the Philippines by 2020 and the second one will certainly be opened in 4Q17. In Thailand, ERW will open seven Hop Inn next year. These will increase the total rooms of Hop Inn from 1,600 by the end of 2016 to 2,300 by the end of 2017. For the longer term, ERW has plans for two new midscale hotels and two new economy hotels and has already secured the land for these projects. The company is still committed to total investment of Bt10,000mn for its five‐year plan. Still our top pick despite potential earnings cut Even though the impact from the mourning period will lead to an earnings cut in 16E, ERW is still the most interesting stock in the sector due to its solid earnings turnaround (we expect no quarterly loss from this point onward) and expansion story. Note that the impact is considered one‐off and should not significantly decrease the DCF valuation. We maintain our 17E TP at Bt6.20/share for now (40% upside) and reiterate our Buy recommendation. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) Core EPS (Bt) Core E S growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2013 4,702 245 0.42 1285% 0.15 2.03 2013 10.69 15.34 2.19 3.4% 21.8% 119%
2014 4,285 (112) (0.05) ‐111% 0.04 1.82 2014 ‐98.45 20.21 2.44 0.9% ‐2.3% 164%
2015 5,255 198 0.08 ‐276.7% 0.04 1.88 2015 55.71 13.12 2.36 0.9% 4.3% 154%
2016E 5,775 394 0.16 97.8% 0.08 2.00 2016E 28.16 11.26 2.22 1.8% 8.1% 136%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 5,924 422 0.17 7.2% 0.08 2.09 2017E 26.27 11.03 2.12 1.9% 8.3% 123%
2018E 6,064 468 0.19 10.8% 0.09 2.19 2018E 23.70 10.76 2.02 2.1% 8.7% 109%
Figure 1: ERW’s 3Q16 earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit EBITDA Interest expense Other income Income tax Gn (Ls) from affiliates Net profit (loss) Core profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%)
3Q15 1,216 410 261 (96) 6 (13) 5 (20) (20) (0.01) 33.7 21.5 (1.6)
2Q16 1,277 465 289 (89) 14 (16) 5 17 17 0.01 36.4 22.6 1.3
3Q16E 1,375 467 293 (89) 10 (6) 5 21 21 0.01 34.0 21.3 1.6
%YoY 13.1 14.0 12.3 (7.4) 63.4 (55.5) (4.7) (207) (207) (207)
%QoQ 7.7 0.4 1.5 0.2 (27.9) (63.3) (4.4) 25.9 25.9 25.9
9M16E 4,194 1,630 1,080 (271) 33 (66) 18 229 229 0.09 38.9 25.8 5.5
%YoY 8.4 11.8 11.3 (7.0) 27.8 0.3 5.9 141.7 141.7 139.7
%YoY 9.9 17.2 18.4 (2.7) (41.4) 6.4 2.9 99.1 99.1 97.8
2016E 5,775 2,375 1,623 (377) 27 (105) 20 394 394 0.16 41.1 28.1 6.8
YTD 72.6 68.6 66.5 72.0 122.4 62.3 91.6 58.2 58.2 58.3
Sources: ERW, KT Zmico Research
Figure 2: Hotel operation results
Rooms
Luxury Midscale Economy (Ibis) Budget (Hob Inn) Total Group Total Group excl. Budget
Occupancy
ARR (Bt/room/night)
3Q15 966 1,282 2,253 867 5,368
3Q16 966 1,282 2,253 1,558 6,059
3Q15 74% 77% 73% 55% 71%
3Q16 83% 86% 84% 71% 81%
3Q15 +9.8% +8.2% +10.7% +16.5% +9.5%
3Q16
3Q15
5,104 2,443 1,105 519 2,138
4,501
4,501
74%
84%
+9.8%
2,354
RevPAR (Bt/room/night) 3Q16
3Q16
5,150 2,523 995 511 1,916
3Q16 +0.9% +3.0% ‐10.0% ‐1.7% ‐10.3%
3,757 1,896 805 285 1,525
4,298 2,161 831 365 1,550
3Q16 +14.4% +14.0% +3.2% +27.9% +1.6%
2,323
‐1.3%
1,750
1,954
+11.7%
Sources: ERW, KT Zmico Research
Figure 3: ERW’s PER band
Figure 4: ERW’s PBV band
(X) 200
(X) 3.5
150
3.0
100
2.5
+1 S.D.
2.0
50 +1 S.D.
1.5
0
-1 S.D.
1.0
-50
0.5
-1 S.D.
-100
Source: Bloomberg, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Source: Bloomberg, KT Zmico Research
Jan-07
0.0 -150
FINANCIAL TABLE PROFIT & LOSS (Btmn) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Gain (loss) from affiliates Extra Items Non‐controlling Net profit Reported EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btmn) Cash and equivalents Accounts receivable Inventories Investment PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Total liab. & shareholder equity CASH FLOW (Btmn) Net income Non‐cash adjustment Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013 4,702 (2,880) 1,822 (1,307) 1,180 (665) 515 (368) 31 177 (91) 16 864 (30) 937 0.42 245 0.42 0.15
2014 4,285 (2,901) 1,383 (1,205) 850 (672) 178 (360) 70 (112) (19) 21 0 (1) (112) (0.05) (112) (0.05) 0.04
2015 5,255 (3,228) 2,027 (1,374) 1,371 (717) 653 (387) 46 312 (99) 19 0 (35) 198 0.08 198 0.08 0.04
2016E 5,775 (3,399) 2,375 (1,500) 1,623 (748) 875 (377) 27 526 (105) 20 0 (47) 394 0.16 394 0.16 0.08
2013 827 209 52 165 12,182 281 13,715 1,004 6,030 8,486 2,505 5,229 13,715
2014 676 212 55 163 13,165 245 14,517 1,721 6,722 9,783 2,505 4,734 14,517
2015 1,011 202 62 163 13,116 266 14,820 2,618 5,988 9,903 2,505 4,917 14,820
2016E 845 222 68 163 12,990 269 14,556 2,002 5,988 9,316 2,505 5,240 14,556
2017E 5,924 (3,433) 2,492 (1,604) 1,657 (769) 888 (353) 27 562 (112) 20 0 (47) 422 0.17 422 0.17 0.08
2013 966 (812) 666 162 983 (2,026) 1,737 (289) (847) 643 (42) (30) (277) 417 694 0.28
2014 (110) (21) 672 47 588 (1,772) 2 (1,770) 1,408 13 (375) (15) 1,031 (151) (1,182) (0.48)
2013 9.3% ‐1.8% 1284.7% 38.7% 25.1% 10.9% 19.9% 5.2% 8.7%
2015 233 (15) 717 12 947 (743) 12 (732) 158 61 (99) 0 120 335 216 0.09
2014 ‐8.9% ‐28.0% ‐110.9% 32.3% 19.8% 4.2% ‐2.6% ‐2.6% ‐16.9%
2017E 864 228 69 163 12,830 271 14,425 1,602 5,988 8,935 2,505 5,489 14,425
2016E 441 (20) 748 0 1,169 (621) 20 (601) (617) 0 (100) (17) (734) (166) 568 0.23
2015 22.6% 61.3% ‐276.7% 38.6% 26.1% 12.4% 3.8% 3.8% 31.7%
2018E 909 233 71 163 12,681 274 14,331 1,202 5,988 8,559 2,505 5,772 14,331
2017E 470 (20) 769 9 1,228 (609) 20 (589) (400) 0 (197) (23) (620) 19 639 0.26
2016E 9.9% 18.4% 97.8% 41.1% 28.1% 15.2% 6.8% 6.8% 20.0%
2018E 6,064 (3,495) 2,569 (1,639) 1,698 (769) 929 (335) 28 622 (124) 20 0 (50) 468 0.19 468 0.19 0.09
2018E 518 (20) 769 14 1,281 (621) 20 (601) (400) 0 (211) (24) (635) 45 680 0.27
2017E 2.6% 2.1% 7.2% 42.1% 28.0% 15.0% 7.1% 7.1% 20.0%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
2018E 2.4% 2.5% 10.8% 42.4% 28.0% 15.3% 7.7% 7.7% 20.0%
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, TPOLY, M‐CHAI, TFD, SUTHA. KT ZMICO is a co‐underwriter of ALLA, BPP.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
th
th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Company Update
Close Bt4.44
Tourism & Leisure October 28, 2016
Earnings upgrade/Earnings downgrade/Overview unchanged
RevPAR continued to grow across the board Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS Bt)
0.143
0.188
KT ZMICO vs. consensus Share data
11.9%
‐9.6%
Reuters / Bloomberg
ERW.BK/ERW TB
Paid‐up Shares (m)
2,498.17
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
11.00/316.00
Foreign limit / actual (%)
49.00/17.29
52 week High / Low (Bt)
5.30/3.72 7,291.00
Avg. daily T/O (shares 000) NVDR (%)
1.31
Estimated free float (%)
44.57
Beta
0.71
URL
www.theerawan.com
CGR
Anti‐corruption
Level 4 (Certified)
Anapat Wanuschaiyapruk Analyst, no. 57076 [email protected] 66 (0) 2-624‐6289
3Q16E to turn to profit We expect ERW to report a net profit of Bt21mn, turning from a loss of Bt20mn last year. RevPAR has continued to increase in every hotel segment and strong growth was visible in budget hotels (Hop Inn). The mourning period has had some impact on revenue from function rooms so there is downside risk to our 16E net profit forecast by Bt20mn to Bt30mn. We expect an insignificant effect to our 17E valuation and therefore our Buy rating stands. RevPAR grew in every segment Group RevPAR increased 2%YoY as the group occupancy rate increased by 10%YoY. Excluding the budget segment, RevPAR grew 11.7% driven by a 9.8% increase in the occupancy rate of non‐budget hotels. Room rates dipped by 1.3% due mainly to a 10% drop in the room rate of economy hotels (Ibis). The budget segment (Hop Inn) was still the strongest segment, as it saw RevPAR growth of 28%YoY despite almost doubling total hotel rooms YoY (867 rooms in 3Q15 vs. 1,558 rooms in 3Q16). The occupancy rate increased from 55% to 74% while the room rate remained quite stable at Bt511/night, ‐1.7%YoY. Impact from the mourning period leads to lower revenue guidance Low sentiment during the mourning period has led to cancellations of function rooms but has not had much impact on hotel rooms so far. The company has estimated a financial impact on total revenue in 4Q16 of around Bt200mn. This means that we should see no growth YoY in the quarter. We think that there will be downside risk to our 16E net profit by around Bt20mn to Bt30mn. It is still too early to assess whether the impact will continue into 1Q17, but the management said that the operation results in 4Q16 will be an important indicator. Expansion continues The first Hop Inn in the Philippines will soft‐launch in late November, which will be the first step for international expansion. ERW targets to open another six Hop Inn in the Philippines by 2020 and the second one will certainly be opened in 4Q17. In Thailand, ERW will open seven Hop Inn next year. These will increase the total rooms of Hop Inn from 1,600 by the end of 2016 to 2,300 by the end of 2017. For the longer term, ERW has plans for two new midscale hotels and two new economy hotels and has already secured the land for these projects. The company is still committed to total investment of Bt10,000mn for its five‐year plan. Still our top pick despite potential earnings cut Even though the impact from the mourning period will lead to an earnings cut in 16E, ERW is still the most interesting stock in the sector due to its solid earnings turnaround (we expect no quarterly loss from this point onward) and expansion story. Note that the impact is considered one‐off and should not significantly decrease the DCF valuation. We maintain our 17E TP at Bt6.20/share for now (40% upside) and reiterate our Buy recommendation. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) Core EPS (Bt) Core E S growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2013 4,702 245 0.42 1285% 0.15 2.03 2013 10.69 15.34 2.19 3.4% 21.8% 119%
2014 4,285 (112) (0.05) ‐111% 0.04 1.82 2014 ‐98.45 20.21 2.44 0.9% ‐2.3% 164%
2015 5,255 198 0.08 ‐276.7% 0.04 1.88 2015 55.71 13.12 2.36 0.9% 4.3% 154%
2016E 5,775 394 0.16 97.8% 0.08 2.00 2016E 28.16 11.26 2.22 1.8% 8.1% 136%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 5,924 422 0.17 7.2% 0.08 2.09 2017E 26.27 11.03 2.12 1.9% 8.3% 123%
2018E 6,064 468 0.19 10.8% 0.09 2.19 2018E 23.70 10.76 2.02 2.1% 8.7% 109%
Figure 1: ERW’s 3Q16 earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit EBITDA Interest expense Other income Income tax Gn (Ls) from affiliates Net profit (loss) Core profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%)
3Q15 1,216 410 261 (96) 6 (13) 5 (20) (20) (0.01) 33.7 21.5 (1.6)
2Q16 1,277 465 289 (89) 14 (16) 5 17 17 0.01 36.4 22.6 1.3
3Q16E 1,375 467 293 (89) 10 (6) 5 21 21 0.01 34.0 21.3 1.6
%YoY 13.1 14.0 12.3 (7.4) 63.4 (55.5) (4.7) (207) (207) (207)
%QoQ 7.7 0.4 1.5 0.2 (27.9) (63.3) (4.4) 25.9 25.9 25.9
9M16E 4,194 1,630 1,080 (271) 33 (66) 18 229 229 0.09 38.9 25.8 5.5
%YoY 8.4 11.8 11.3 (7.0) 27.8 0.3 5.9 141.7 141.7 139.7
%YoY 9.9 17.2 18.4 (2.7) (41.4) 6.4 2.9 99.1 99.1 97.8
2016E 5,775 2,375 1,623 (377) 27 (105) 20 394 394 0.16 41.1 28.1 6.8
YTD 72.6 68.6 66.5 72.0 122.4 62.3 91.6 58.2 58.2 58.3
Sources: ERW, KT Zmico Research
Figure 2: Hotel operation results
Rooms
Luxury Midscale Economy (Ibis) Budget (Hob Inn) Total Group Total Group excl. Budget
Occupancy
ARR (Bt/room/night)
3Q15 966 1,282 2,253 867 5,368
3Q16 966 1,282 2,253 1,558 6,059
3Q15 74% 77% 73% 55% 71%
3Q16 83% 86% 84% 71% 81%
3Q15 +9.8% +8.2% +10.7% +16.5% +9.5%
3Q16
3Q15
5,104 2,443 1,105 519 2,138
4,501
4,501
74%
84%
+9.8%
2,354
RevPAR (Bt/room/night) 3Q16
3Q16
5,150 2,523 995 511 1,916
3Q16 +0.9% +3.0% ‐10.0% ‐1.7% ‐10.3%
3,757 1,896 805 285 1,525
4,298 2,161 831 365 1,550
3Q16 +14.4% +14.0% +3.2% +27.9% +1.6%
2,323
‐1.3%
1,750
1,954
+11.7%
Sources: ERW, KT Zmico Research
Figure 3: ERW’s PER band
Figure 4: ERW’s PBV band
(X) 200
(X) 3.5
150
3.0
100
2.5
+1 S.D.
2.0
50 +1 S.D.
1.5
0
-1 S.D.
1.0
-50
0.5
-1 S.D.
-100
Source: Bloomberg, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Source: Bloomberg, KT Zmico Research
Jan-07
0.0 -150
FINANCIAL TABLE PROFIT & LOSS (Btmn) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Gain (loss) from affiliates Extra Items Non‐controlling Net profit Reported EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btmn) Cash and equivalents Accounts receivable Inventories Investment PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Total liab. & shareholder equity CASH FLOW (Btmn) Net income Non‐cash adjustment Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013 4,702 (2,880) 1,822 (1,307) 1,180 (665) 515 (368) 31 177 (91) 16 864 (30) 937 0.42 245 0.42 0.15
2014 4,285 (2,901) 1,383 (1,205) 850 (672) 178 (360) 70 (112) (19) 21 0 (1) (112) (0.05) (112) (0.05) 0.04
2015 5,255 (3,228) 2,027 (1,374) 1,371 (717) 653 (387) 46 312 (99) 19 0 (35) 198 0.08 198 0.08 0.04
2016E 5,775 (3,399) 2,375 (1,500) 1,623 (748) 875 (377) 27 526 (105) 20 0 (47) 394 0.16 394 0.16 0.08
2013 827 209 52 165 12,182 281 13,715 1,004 6,030 8,486 2,505 5,229 13,715
2014 676 212 55 163 13,165 245 14,517 1,721 6,722 9,783 2,505 4,734 14,517
2015 1,011 202 62 163 13,116 266 14,820 2,618 5,988 9,903 2,505 4,917 14,820
2016E 845 222 68 163 12,990 269 14,556 2,002 5,988 9,316 2,505 5,240 14,556
2017E 5,924 (3,433) 2,492 (1,604) 1,657 (769) 888 (353) 27 562 (112) 20 0 (47) 422 0.17 422 0.17 0.08
2013 966 (812) 666 162 983 (2,026) 1,737 (289) (847) 643 (42) (30) (277) 417 694 0.28
2014 (110) (21) 672 47 588 (1,772) 2 (1,770) 1,408 13 (375) (15) 1,031 (151) (1,182) (0.48)
2013 9.3% ‐1.8% 1284.7% 38.7% 25.1% 10.9% 19.9% 5.2% 8.7%
2015 233 (15) 717 12 947 (743) 12 (732) 158 61 (99) 0 120 335 216 0.09
2014 ‐8.9% ‐28.0% ‐110.9% 32.3% 19.8% 4.2% ‐2.6% ‐2.6% ‐16.9%
2017E 864 228 69 163 12,830 271 14,425 1,602 5,988 8,935 2,505 5,489 14,425
2016E 441 (20) 748 0 1,169 (621) 20 (601) (617) 0 (100) (17) (734) (166) 568 0.23
2015 22.6% 61.3% ‐276.7% 38.6% 26.1% 12.4% 3.8% 3.8% 31.7%
2018E 909 233 71 163 12,681 274 14,331 1,202 5,988 8,559 2,505 5,772 14,331
2017E 470 (20) 769 9 1,228 (609) 20 (589) (400) 0 (197) (23) (620) 19 639 0.26
2016E 9.9% 18.4% 97.8% 41.1% 28.1% 15.2% 6.8% 6.8% 20.0%
2018E 6,064 (3,495) 2,569 (1,639) 1,698 (769) 929 (335) 28 622 (124) 20 0 (50) 468 0.19 468 0.19 0.09
2018E 518 (20) 769 14 1,281 (621) 20 (601) (400) 0 (211) (24) (635) 45 680 0.27
2017E 2.6% 2.1% 7.2% 42.1% 28.0% 15.0% 7.1% 7.1% 20.0%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
2018E 2.4% 2.5% 10.8% 42.4% 28.0% 15.3% 7.7% 7.7% 20.0%
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, TPOLY, M‐CHAI, TFD, SUTHA. KT ZMICO is a co‐underwriter of ALLA, BPP.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
th
th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
