Maybank Securities downgrades Thailand's tourism sector to 'negative'

MAYBANK Securities has downgraded its call on Thailand's tourism sector to "negative" from "neutral" on the belief that the market has already priced in an expected recovery in international tourist arrivals in FY2022.

In a research report on Friday (Feb 4), analyst Yuwanee Prommaporn noted overall sector share price gains of 4 per cent in the year to date on average. The brokerage's forecasted Q4 results for all Thai tourism stocks under Maybank Securities' coverage performed better than expected due to high seasonality amid a "relatively controlled Covid outbreak", she added.

Prommaporn is expecting softer hotel occupancy rates for Q1 2022 as a result of the spread of Omicron and Thailand's shutdown of borders from December 2021 to January 2022. Higher food raw material costs could also exacerbate losses and therefore remains a concern, the analyst said.

As such, Maybank Securities has downgraded its ratings for Thai hospitality groups Central Plaza Hotel and Minor International to "sell" and "hold", respectively.

This comes as Central Plaza Hotel share prices surpassed its pre-Covid level despite challenges to the sector such as higher cost inflation, especially for food.

Prommaporn believes such challenges are difficult to pass on to restaurant customers amid the difficult economic conditions. In her view, the stock is most exposed to higher pork and palm oil prices, as 60 per cent of the company's normalised income is from the restaurant business.

On the other hand, the analyst expects hospitality, restaurant and lifestyle company Minor International to take a hit from lower hotel occupancy rates and inflation of food prices.

While Minor International is projected to post the strongest Q4 FY2021 occupancy of 50 per cent, Maybank Securities anticipates softer Q1 FY2022 occupancy for the group, in line with other stocks under its coverage.

Airports of Thailand remain as the brokerage's only "buy" call in the sector as a prime recovery beneficiary due to its "sound fundamentals" and its position as the gateway to Thailand, the analyst said.