AWC – Preview 4Q24: Earnings stronger

Hotel operational data shows YoY and QoQ growth in RevPar, indicating that the fourth quarter has indeed been its high season, and we estimate 4Q24 core earnings at Bt540mn, up 12% YoY and 87% QoQ. AWC’s share price has fallen by 12% YTD, dragged down by market concern on a possible plunge in tourists on safety concerns, but so far it has seen limited impact. We expect the strong 4Q24 will be a share price catalyst. AWC is on our sector top picks list. We assign a 3-month tactical call of Outperform with an end-2025 DCF TP of Bt4.4/share.

Preview 4Q24: High season to drive core earnings growth. Data from hotel operations (75% of revenue) shows YoY and QoQ growth in RevPar, confirming that the fourth quarter has been its high season. In 4Q24, we estimate RevPar growth at 18% YoY and 13% QoQ on a high occupancy rate of 74% (up from 65% in 4Q23 and 72% in 3Q24) with ARR up 5% YoY and 10% QoQ. This suggests limited effect from October’s floods in Chiang Mai (~5% of revenue). We assume QoQ stability at office and retail businesses (25% of revenue), which gives estimated core earnings of Bt540mn, up 12% YoY and 87% QoQ. Assuming stable fair value of investment property QoQ gives 4Q24 net profit of Bt1.4bn, up 2% YoY and 22% QoQ.

Strong hotel operations continue in 1Q25. AWC is monitoring a possible negative impact from safety concerns, particularly from Chinese guests (13% of hotel revenue) following the disappearance (and subsequent rescue) of a Chinese actor. So far, it has not seen a significant impact as its hotel booking pace implies growth in room nights of ~8% YoY with room revenue growth of ~18% YoY in 1Q25, suggesting a continued uptrend in occupancy rate and ARR. In 1Q25, AWC plans to open two new hotels in Pattaya: Melia Pattaya (234 rooms) and Marriott Resort Jomtien Beach (289 rooms). We expect the pre-operating cost to be diluted by the strength of high tourism season.

Earnings forecast maintained. In 2025, we expect AWC to deliver strong core earnings growth at 23%, underwritten by 40mn international tourist arrivals to reach 100% of pre-COVID-19 level (+12% YoY) and the ramp-up of its hotel operations. AWC is on our tourism top pick list and we assign a 3-month tactical call of Outperform with an end-2025 DCF TP of Bt4.4/share: Bt4.0 based on projects in the pipeline in 2024-26 and Bt0.4 from long-term projects after 2026 (WACC at 6.6% and LT growth at 2%).

Risks. 1) An economic slowdown, 2) cost inflation that would erode profitability and 3) the slow ramp-up of developing assets in the portfolio. We see ESG risk as effective environmental management of greenhouse gases, energy, wastewater, and waste (E).