Hotel Stocks Are On a Roll, Defying All Fundamentals as Data Shows Heavy Loss in 2020!

Hotel stocks in SET Index edged higher in response to the reopening economy with gradual lockdown easing measures, raising hopes for hotel operators on the revival of their businesses from the effect of the coronavirus outbreak. However, the rallies were seen as a gain beyond their fundamentals.

 

MINT closed at ฿22.90/share on June 10, 2020, increased 67.15% from its year’s low at ฿13.70/share on March 24.

CENTEL closed at ฿26.25/share on June 10, 2020, increased 100.3% from its year’s low at ฿13.10/share on March 24.

ERW closed at ฿4.20/share on June 10, 2020, increased 114.2% from its year’s low at ฿1.96/share on March 24.

March 24, 2020, was the day SET Index dropped to 1,033.84 points, nearly its lowest level since the Global Financial Crisis in 2008.

 

Hotel stocks are on a winning streak since the government started to ease lockdown measures, which unlocked domestic travelling restriction, raising hopes for hotel operators such as MINT, CENTEL and ERW that the business would resume as early as late June.

However, upon looking at the fundamentals of these hotel stocks, the data showed that the share prices were already well beyond their intrinsic values.

 

The consensus for the 12 months target price based of MINT is ฿19.02/share, ฿20.84/share for CENTEL and ฿3.14/share for ERW.

Meanwhile, the consensus has estimated that MINT’s 2020 profit would contract 8,421.3 million baht from a net profit of 6,721 million baht in 2019. The profit is forecasted to recover to 2,330.8 million baht in 2021.

CENTEL’s 2020 profit is expected to contract 470.3 million baht from a net profit of 1,835.9 million baht in 2019. The profit is forecasted to recover to 1,037.5 million baht in 2021.

ERW’s 2020 profit is expected to contract 733.2 million baht from a net profit of 445.6 million baht in 2019. The profit is forecasted to recover to 147.9 million baht in 2021.

 

The intrinsic value and the 2020F profit forecasts might be indications to support the saying that hotel stocks’ share prices were well above their fundamentals. Domestic demand in tourism still has a dire outlook despite the reopening economy and restriction lifting, 2Q earnings will definitely contract, while international arrivals are nowhere to be found.

How come the share prices are still advancing?