• Still O/W; Top Picks: Airports of Thailand (AOT) and Minor International (MINT). Foreign tourist arrivals to Thailand stood at 2.96m in August (+20% YoY, -5% MoM) – 23.57m (+32% YoY) in 8M24 – and we expect arrivals to rise 22% YoY (+6% QoQ) to 8.66m in 3Q24. AOT is approaching its peak travel period in 1HFY25 (Sep) while we think MINT’s 2H24F earnings would be stronger than 1H24’s on a profitable high season for hotels, stronger food operations domestically, and effective cost controls in China.

• The Tourism & Sports Ministry stated on Tuesday that 2.96m international tourists (+20% YoY, -5% MoM; 85% of 2019’s levels) visited Thailand in August. The slight MoM dip was mainly on the end of the summer travel period in key source markets like Europe and East Asia, which saw 8M24 numbers reach 23.57m, ie a strong 32% YoY growth and 89% of 2019’s numbers. China was the biggest source market, with 0.65m arrivals in August (+83% YoY, -4% MoM; 64% of 2019’s levels) and 4.79m visitors in total during 8M24 (+117% YoY; 63% of 2019 levels). The others were Malaysia (3.27m), India (1.36m), South Korea (1.25m), and Russia (1.08m). Total receipts from international tourists in 8M24 stood at THB1.11trn.

• Based on historical data, we expect international numbers to seasonally fall 13% MoM (+22% YoY) to 2.59m in September or 89% of 2019’s levels. Yet, we estimate total foreign tourist arrivals to climb 22% YoY (+6% QoQ; 89% of 2019’s numbers) and reach 8.66m in 3Q24. Thailand may also see an 83% YoY (+14% QoQ; 67% of 2019’s levels) rise to 1.92m in Chinese visitors in 3Q24. The YoY growth is based on the tourism recovery fuelled by the aforementioned markets while the QoQ growth should be driven by seasonality, ie the abovementioned summer travel period and an expected rise in Middle Eastern visitors (our view) in 3Q vs 2Q.

• We still believe Thailand will see 35m foreign arrivals (88% of 2019’s numbers) and 245m trips by local travellers (2023: 240m trips). We also expect total tourism receipts to ramp up to THB3trn (2023: THB2bn) and account for 16% of domestic GDP (2023 GDP: 11%) with THB1.9trn and THB1.1trn from international tourists and domestic travellers. We forecast China tourist numbers to rise to 6m, accounting for 17% of total international arrivals (2023: 3.5m arrivals; 13% of the total). We also believe the volume of international visitors will return to 2019’s levels in 2025 despite Chinese arrivals likely at 9m only (2019: 11m). We hold the view that the full-year tourism growth will be driven by the continuing post-COVID-19 recovery in traveller numbers among key source markets in terms of business, leisure, and medical tourism, as well as the Government’s visa-free schemes.

• Top Picks: AOT and MINT. As a Tier-1 proxy to the tourism recovery, we look forward to AOT’s peak travel period in 1HFY25, where bottomline may return to FY19’s levels in 2025. MINT’s 2H24F earnings will be stronger than 1H24, in our view, on a profitable high season for hotels in Europe (3Q), and Thailand and the Maldives (both in 4Q). Its food wing may also benefit from business rationalisation in Thailand and effective cost controls in China.

Source: RHB Securities Research - 4 Sept 2024