Brokers’ take: Maybank ‘negative’ on Thai tourism sector as uncertain recovery, high valuations weigh

THAILAND’S currently-booming tourism industry could run out of steam by the first half of next year, according to a Maybank Securities report.

While pent-up demand for travel drove hospitality room rates above pre-Covid levels in the second and third quarters of 2022, Maybank analyst Yuwanee Prommaporn sees this same demand possibly waning by H1 of 2023. 

With the rebound in tourist arrivals fuelling share prices of Thai hoteliers to what was described as “overpriced” territories, Prommaporn has downgraded the tourism sector as a whole to “negative” from “positive”.

High costs, which have depressed Ebitda (earnings before interest, taxes, depreciation and amortisation) margins across the sector, were also cited by Prommaporn as another reason for the downgrade.

In all, Maybank expects international tourist arrivals to total 22 million in 2023 and 40 million in 2024 - the same level as pre-Covid 2019. The Thai government announced last week that tourist arrivals reached 10 million in 2022.

Prommaporn noted that the Tourism Authority of Thailand recently cautioned of pressures from recession, higher travel costs and inflation as possible countersinks to tourist arrivals next year. 

However, the analyst also said China’s recent relaxation of its Covid-19 curbs could serve as a foil and add to tourist arrivals in H1. 

She is also expecting Thai tourism names to turn profitable in the fiscal year ahead as occupancy and room rates recover. 

“Despite this, we believe Thai tourism operators will not see their profits reach pre-Covid FY2019 levels until FY2024,” cautioned Prommaporn. 

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Thailand-based Minor International, which runs the Thai Express chain of restaurants in Singapore, was highlighted by the analyst as Maybank’s top sector pick as the only counter with a “buy” rating. With a customer base in Europe that is made up of mostly domestic tourists, Minor International is “more resilient” than its Thai peers, Prommaporn said.