Earnings Report /
Thailand

Erawan Group PCL/The: Disappointing loss in 2Q20: red-ink to continue in 3Q20

  • Short of our estimate and in line with the consensus forecast

  • ERW reported its quarterly record low core loss of Bt625m in 2Q20

  • We have cut performance in 2020 to core loss of Bt845m

Bualuang Securities
14 August 2020

ERW is our least preferred stock among tourism sector due to high financial leverage and lagging recovery after reopening due to non-diversified business model (99% pure hotel revenue in Thailand and about 70% in Bangkok). Valuations are expensive, as share price trades at a 2021 PER of 126x (1SDs above its 2006-2019 mean) and PBV of 1.8x. We maintain SELL rating a YE21 DCF-derived target price of Bt3.20 (a 70% discount to DCF value, 9.0% WACC).

Short of our estimate and in line with the consensus forecast   

ERW reported its quarterly record low core loss of Bt625m in 2Q20 against core profit of Bt7m in 2Q19 and loss of Bt103m in 1Q20. Deep loss in 2Q20 was a negative surprise to our loss forecast of Bt536m mainly due to disappointing margins. Loss was in line with the consensus forecast.