CENTEL – Preview 3Q24: Up YoY but down QoQ

133% YoY on a robust hotel business but down 36% QoQ on a seasonally weak food business and hotel operations in Maldives. We estimate an extra item of Bt20mn for pre-operating cost at its third new hotel in Maldives (opened in November 2024). Including the extra items, CENTEL’s net profit in 3Q24 will be Bt145mn, jumping 97% YoY but down 13% QoQ.

Hotel: Strong Bangkok and Japan but weak upcountry and Maldives. We estimate hotel revenue at Bt2.3bn, up 5% YoY and 4% QoQ. Strong tourism in Thailand and Japan will underwrite strong RevPar growth for Bangkok hotels of 15% YoY (and 8% QoQ) and 34% YoY for Japan (but down 12% QoQ on seasonality). We expect hotels upcountry to see a fall in RevPar of 3% YoY (and 1% QoQ) due to renovations at Centara Grand Mirage Beach Resort Pattaya with ~60% of rooms closed. For hotels in Maldives, we estimate a weak RevPar, falling 4% YoY due to lower occupancy rate and 7% QoQ from weaker ARR.

Food: Weak QoQ on seasonality. We estimate food revenue at Bt3.2bn, up 4% YoY but down 5% QoQ on seasonality. We estimate SSS at 3% in 3Q24, up from the flat SSS in 3Q23 and 2% in 2Q24, boosted by stronger operations at key brand, Mister Donut. We estimate small growth in outlet expansions (+1% YoY and +1% QoQ), reflecting caution, as it also is closing low-performing outlets.

4Q24 outlook. Our preview suggests 9M24 core earnings will account for 78% of our full-year forecast and 79% of market consensus and we leave our core earnings forecast unchanged. We expect core earnings in 4Q24 to grow YoY and QoQ on seasonality and completion of renovation at Centara Grand Mirage Beach Resort Pattaya in December. However, as CENTEL previously guided to booking pre-operating cost of Bt200-250mn in 3Q-4Q24 for its third and fourth (to open in 1Q25) new hotels in Maldives, we expect costs to rise in 4Q24 and pull net profit down both YoY and QoQ.

Neutral maintained. We stay Neutral on CENTEL in view of its low core earnings growth in 2025, dragged down by two new hotels in Maldives. Our end-2025 DCF TP is Bt39/share (WACC of 6.3% and long-term growth at 2%). Catalyst will be a strong ramp up of the two new hotels in Maldives.

Risks 1) An economic slowdown that would derail travel demand and 2) cost inflation that would damage profitability of its hotel and food businesses. We see ESG risk as effective environmental management (E).