The Erawan Group
Q4 2012: Achieves SCBS estimates BUYThe Erawan Group Plc (ERW)
Q4 2012 in line. 4Q12A net profit was Bt57mn, improved from the Bt103mn loss in 4Q11 and Bt54mn loss in 3Q12. This met SCBS estimates but was below market consensus of Bt66mn. Operations in terms of revenues and EBITDA margin have improved, propelled by Thailand's tourism high season in 4Q12. Despite limited upside to TP, we believe positive momentum will continue with catalysts including: 1) higher earnings growth in 1Q13, 2) extra gain from the launch of a property fund in 2Q13 (estimated at Bt600mn to Bt1.0bn) and 3) a cut in net debt to equity to 1.4x-1.6x from 2.0x. We will update the company outlook after the analyst meeting on 28 February 2013. Maintain BUY.
Key items for 4Q12A:
Revenues at Bt1.2mn, up 40% YoY and 28% QoQ. Operations in all hotel segments improved - both occupancy rates and average room rates - boosted by Thailand's tourism high season in 4Q12 and the low base from the flooding last year (Figure 1). Average occupancy rate climbed to 79% in 4Q12 from 65% in 4Q11 and 69% in 3Q12 while average room rate (ARR) grew by 13% YoY and 14% QoQ.
EBITDA margin at 29%, up from 18% in 4Q11 and 22% in 3Q12. The healthier EBITDA margin was provided by the high revenues.
Bt0.0189 dividend. ERW announced a dividend of Bt0.0189/share on 2012 operations. This implies a 40% payout ratio and 0.3% dividend yield. XD is 12 March 2013 with payment 23 May 2013.
ERWPF in Q2 2013. ERW has appointed Siam Commercial Bank Group to act as financial advisor, underwriter and fund manager to establish Erawan Hotel Growth Property Fund (ERWPF). The fund is in the process of gaining approval and the public offering is expected in 2Q13.