ERW’s stock price typically lags its peers. We believe the bottom-line bottomed out in 4Q21 and expect a swift recovery in 2H22. We also like ERW’s HOP INN operation for its 3Q21 turnaround and successful eight-year expansion story. Our rating is BUY to a YE22 DCF-derived target price of Bt4.50.
ERW is our Tourism sector catch-up play
The stock price has dived 40% from its pre-COVID era level and—in contrast to its peers, whose prices have recently bounced back to normalized levels—ERW still languishes. We believe this is due to investor concerns over its 2020-21 bottom-line performance (deep losses) and perceptions of solvency risk. But Thai tourism is rebounding and ERW is clearly in turnaround phase. The current stock price of Bt3.58 is equal to replacement value (versus premiums of 2-3x in 2018-19), implying minimal downside risk.