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Erawan Group foresees mid-year dip

By on May 18, 2012 in Property News

The SET-listed hotel developer Erawan Group (ERW) is expected to post a loss in the second and third quarters this year even though it gained extraordinary profit from its land sale in Si Racha, attributing the dip to the low season.

Krailuck Asavachatroj, chief financial officer of ERW, said the company may post losses the next two quarters because of low tourism numbers. He said most hotel companies underperform during these quarters.

However, the company is confident it will remain profitable for the full year as it exceeded its profit target in the first quarter, while it expects the last quarter _ the high season for tourism _ will boom.

ERW posted a first-quarter net profit of 99 million baht, a gain of 26% from 78 million in the same period last year. Its revenue expanded 4% to 1.175 billion baht.

He attributed the first-quarter gain to its renovation of hotel assets, as it helped company achieve higher room rates and the occupancy rate improved to 78% from 69% last year.

For the full year, the company aims to raise revenue by 20% from last year’s 4.48 billion baht.

In addition, the company plans to sell one of its hotels every year to profit from renovating its assets. He was quick to add ERW does not have a liquidity problem.

The group will keep its two core revenue sources, the JW Marriott and Grand Hyatt Erawan hotels in Bangkok.

“Previously, we planned to raise funds by selling shares in a property fund, but now that the Securities and Exchange Commission allowed the creation of real estate investment trusts, we will likely offer those directly to investors once the rules are clear,” said Mr Krailuck.

The Asean Economic Community has prompted ERW to consider investment opportunities in hotel properties overseas, but it will wait for the proper time and market conditions to invest. The company set a budget for new hotel investment of 400-500 million baht a year.

He added the group plans to build three- to four-star hotels in the future after focusing exclusively on five-star assets, because that market is getting tougher. It intends to renovate its existing five-star hotels to increase rooms rates by 7%.

This year it will start renovation of the Grand Hyatt Erawan at a cost of 700 million baht to be finished in three years.

ERW also plans to launch two new projects this December _ the Mercure Siam and Ibis Siam in Bangkok _ bringing the hotels in its portfolio to 16.

Shares of ERW closed on the Stock Exchange of Thailand yesterday at 2.66 baht, up two satang, in trade worth 1.14 million baht.

Source : Bangkok Post 18 May 2012

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