Tourism Sector

Panic selling would be a buying opportunity

News Flag
Tourism Sector

Recommendation

Hotel

Overweight

Airport

Overweight

Airline

Neutral

What's going on?

The Public Health minister reported yesterday evening that the first confirmed

Middle East respiratory syndrome (MERS) case had been identified in Thailand.
We expect the market to react negatively to this news. Panic selling in the
Tourism sector, including Hotel, Airport and Airline stocks, may be seen today.
However, we maintain our Overweight ratings on the Hotel and Airport sectors
as we believe the risk is short term. As we have learned from recent history,
stocks typically rebound to a normal level as concerns about the issue ease, and
we will view any stock correction this time as a Buying opportunity. For the Airline
sector, we maintain our Neutral rating due to the uncertain outlook from the
ICAO issue. Our new top picks are MINT and AOT.

Impact
Spread of virus will have only a short-term impact. Historical data suggests

the impact of virus outbreaks on the Thai tourism industry typically ranges from
3-6 months. The disease that caused the biggest impact was the SARS outbreak,
which caused international tourist arrivals to fall by around 10-50% YoY during
Mar to July 2013. After the outbreak was brought under control, international
tourist numbers quickly rebounded to a normal level (see Fig 4-5).
Tourism stocks down 10-20% during SARS. During the SARS outbreak in

2003, tourism stock prices fell in a range of 10-20% during Mar to July 2013 (see
Fig 6). But they recovered quickly to a normal level after the virus spread was
contained (see Figs 8-11).
MERS causes less concern than SARS. MERS does not appear to pass easily

from one person to another unless there is close contact such as poor clinical
care. Thus, we hope this outbreak can be brought under control faster than SARS,
which took about 4 months to contain.
Fundamental impact. We believe Thailand will able to control the spread of

MERS. If the virus becomes widespread, we expect downside to earnings at

roughly 10-20% in 15E, given that intl tourist would avoid traveling to Thailand.

Recommendation
Stock slump is a buying opportunity. Yesterday, tourism stocks fell sharply

due to concerns about the MERS issue (CENTEL -4%, MINT -2% , ERW -1%,
AOT -3%, AAV -3%, THAI -1% and BA -0.5%, vs. SET -0.5%). We expect to see
panic selling in tourism stocks today, but we would see such a share price
correction as a Buying opportunity.
Entry level & top picks. We view a decline of roughly 10-15% from the current

Analyst
Jitima Ratanatam
Jitima.r@kasikornsecurities.com

19 June 2015
Kasikorn Securities PCL

level as a signal that stocks were near their bottom. We suggest selective BUYs
on tourism stocks that have less earnings downside risk. Our new top picks are
MINT and AOT.
MINT & AOT. We select MINT as our top pick as its share price correction in
the past month implies an attractive valuation. Also MINT has less exposure
to hotels in Thailand, which face a risk from MERS, than CENTEL or ERW.
Thus, we expect MINT should face less earnings downside than CENTEL and
ERW. An entry level at Bt28, implies 20x PER in 2015 in line with its historical
average during 2011-14. For AOT, we suggest an entry level at Bt270, implying
25x PER in 2015, in line with 1.5x STD of historical avg.

Fig 1 Tourism peers

Stock

Hotel

Airline

Airport

Rec.

CENTEL
OP
MINT
OP
ERW
OP
AAV
N
BA
N
BA (core business)
THAI
UP
AOT
OP

Price (Bt)
18-Jun-15
37.75
30
4.34
4.56
22.3

Fair price
(Bt.)
42.00
37.00
5.50
4.80
22.00

Upside
(%)
11.26
23.33
26.73
5.26
-1.35

9.00
360.00

-31.82
17.26

13.2
307

P/E (x)
2015E 2016E
29.58
22.79
20.93
18.62
45.71
26.59
12.40
10.87
22.65
19.96
-2.22
28.82

-19.90
24.57

P/BV (x)
2015E 2016E
3.90
3.46
3.40
2.97
2.11
1.95
1.04
0.96
1.72
1.63
0.74
0.69
1.02
1.07
4.22
3.75

Div. yield (%) Core profit grth (%)

ROE (%)
2015E 2016E
2015E
2016E
2015E 2016E
1.36
1.76
49.17
29.82
13.90
16.09
1.67
2.00
30.61
25.33
19.72
18.72
1.61
2.30
240.56
71.90
4.81
7.62
1.61
1.84
2958.39
14.37
8.73
9.18
2.21
2.51
488.93
13.48
7.85
8.37
0.00
1.14

0.00
1.22

86.92
27.93

154.20
16.80

-37.38
15.12

-5.24
16.17

Source: Bloomberg, KS

Fig 2 Impact of events on international tourists

YoY

Number of international tourists

Political unrest

1%

26,547

0%
-1%

-5%

-3%

Source: Department of Tourism, KS

Fig 4 Intl tourist arrivals during SARS and H1N1

Fig 5 Intl tourist growth during SARS and H1N1

2003

2008

2015E

2014

2013

2012

2011

2010

2009

-7%

2008

2003

-10% -7%

2007

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

5%

5%

Source: Department of Tourism, KS

'000 persons
2,000

15%

13%

10%

5,000

2002

19%
16%

16%

15%
24,780

15,936

14,142

14,584

14,464

13,822

11,517

11,651

10,004

10,799

10,000

22,354

Coup

19,230

Tsunami impact
Sars

21%

20%

20%

Political unrest + Global financial crisis

20,000
15,000

25%

Flood

2006

H1N1 +riot in Pataya crisis

25,000

2005

30,000

2004

'000 persons

Fig 3 International tourist growth

% YoY

2009

60%

2003

2008

2009

40%

1,500

20%
1,000

0%

H1N1 in 2009

-20%

500

-40%

Sars in 2003

-60%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Dec

Nov

Oct

Sep

Aug

Jul

Jun

May

Apr

Mar

Feb

Jan

Source: Department of Tourism, KS

19 June 2015

Source: Department of Tourism, KS

Tourism Sector

Fig 6 Share price drops during SARS in 2013

Fig 7 Impact on Korean tourism stocks from MERS

Share price decline during SARS in 2013

THAI

MINT

Share price during MERS (start May 20, 2015)

ERW

CENTEL

Asiana Airlines

0%

Korea Airport
Service

Korea Airlines

Hotel Shilla

0%

-5%

-5%

-10%

-5%

-10%

-11%
-15%

-11%

-15%

-16%
-20%
-22%

-25%

-20%

-20%

-18%
-21%

-25%

Source: Bloomberg, KS

Source: Bloomberg, KS

Fig 8 CENTEL: share price during SARS in 2003

Fig 9 MINT: share price during SARS in 2003

CENTEL

MINT

2.3
2.1

1.8

1.9

1.6

1.7

1.4

1.5
1.3

1.2

1.1

0.9
0.7

Source: Bloomberg, KS

Source: Bloomberg, KS

Fig 10 ERW: share price during SARS in 2003

Fig 11 THAI: share price during SARS in 2003

ERW

Jun-04

Apr-04

Feb-04

Dec-03

Oct-03

Aug-03

Jun-03

Apr-03

Feb-03

Dec-02

Oct-02

Jun-02

Aug-02

0.5

Jun-04

Apr-04

Feb-04

Dec-03

Oct-03

Aug-03

Jun-03

Apr-03

Feb-03

Dec-02

Oct-02

Aug-02

Jun-02

0.8

THAI

2.2

55

50
45

1.8

40

1.6

35

1.4

30

1.2

25
20

15

19 June 2015

Jul-04

May-04

Mar-04

Jan-04

Nov-03

Sep-03

Jul-03

May-03

Mar-03

Jan-03

Nov-02

Sep-02

Jul-02

Mar-02

Source: Bloomberg, KS

May-02

10

Jun-04

Apr-04

Feb-04

Dec-03

Oct-03

Aug-03

Jun-03

Apr-03

Feb-03

Dec-02

Oct-02

Aug-02

Jun-02

0.8

Source: Bloomberg, KS

Tourism Sector

Fig 13 MINT: Historical PER to consensus

Source: Bloomberg, KS

Source: Bloomberg, KS

Fig 14 ERW: Historical PBV to consensus

Fig 15 AOT: Historical PER to consensus

PBV
5
4

60

2015

PER

50
+2SDV=3.16x

40

+1SDV=2.33x

30

2
2

Mean=1.51x

-1SDV=0.69x

1
-2SDV=-0.14x

10

-1SDV=9.56x

-2SDV=-1.47x

Source: Bloomberg, KS

Source: Bloomberg, KS

Fig 16 THAI: Historical PBV to consensus

Fig 17 AAV: Historical PBV to consensus

2015

2014

2013

2012

2011

2010

2009

2008

2004

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

Mean=20.59x

-10

-1

2002

20

2007

+1SDV=31.63x

2006

+2SDV=42.66x

2005

2001

2014

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

-15
2001

-2SDV=3.57x
2001

-2SDV=-5x

-5

-1SDV=12.12x

2013

-1SDV=7.28x

2012

15

Mean=20.67x

2011

Mean=19.56x

2010

25

+1SDV=29.22x

2009

+1SDV=31.84x

2008

35

2007

45

+2SDV=37.78x

2006

+2SDV=44.12x

2005

55

PER

2004

45
40
35
30
25
20
15
10
5
0

2003

PER
65

2002

Fig 12 CENTEL: Historical PER to consensus

PBV
2.5

PBV
7
6

2.0

5
4

+2SDV=3.39x

+1SDV=2.35x

1.5

Mean=1.31x

1.0

-1SDV=0.28x

-2SDV=-0.76x

-1

0.0
2012

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

+1SDV=1.52x
Mean=1.26x
-1SDV=1x
-2SDV=0.75x

0.5

-2

Source: Bloomberg, KS

19 June 2015

+2SDV=1.77x

2013

2014

2015

Source: Bloomberg, KS

Tourism Sector

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KS acts as market maker and issuer of Derivative Warrants (DWs) on the underlying stocks listed below. Investors should carefully read the details of the
DWs in the prospectus before making any investment decisions.
DWs Underlying Stocks: AAV, ADVANC, AMATA, AOT, AP, BANPU, BBL, BCP, BDMS, BH, BLAND, BMCL, BTS, CENTEL, CK, CPALL, CPF, CPN, DELTA, DTAC,
EARTH, GFPT, GLOBAL, GUNKUL, HANA, HEMRAJ, HMPRO, INTUCH, IRPC, ITD, IVL, JAS, KCE, KTB, KTC, LH, LPN, MAJOR, MINT, PS, PTT, PTTEP, PTTGC, QH,
RATCH, ROBINS, SAMART, SAWAD, SCB, SCC, SIRI, SPALI, SPCG, STEC, STPI, TCAP, THAI, THCOM, TICON, TMB, TOP, TPIPL, TRUE, TTA, TTCL TUF and VGI

19 June 2015

Tourism Sector