The Erawan Group Public Company Limited (SET: ERW) has announced the signing of a long-term land lease agreement with Akkara Sarapa Co., Ltd. for a two-rai plot near the Asoke BTS station, intended for the development of a new hotel project beginning in 2029. According to Krungsri Securities’ latest analysis, this move is consistent with the firm’s strategy to grow its presence across the economy-to-luxury hotel segment, which currently represents around 73% of ERW’s total revenue.
The lease deal has a term of 30 years, with an option to extend for an additional 30 years, covering the period from August 1, 2029, to July 31, 2059, and potentially running through 2089 if the extension is exercised. The transaction’s total value is 9.3 billion baht, including roughly 7 billion baht in lease payments, project development costs, and other related expenses. ERW plans to fund the development via a combination of bank loans and internal resources.
Krungsri Securities expressed a positive outlook on the transaction, highlighting that the new hotel is expected to fall into the midscale category, making up about 27% of ERW’s revenue. The project’s scale is anticipated to be similar to the company’s previously disclosed S26 project. ERW estimates a total investment of about 2 billion baht for the development of over 400 rooms, with the hotel expected to begin operations in 2030.
Based on the valuation of the S26 project at 0.2 baht per share, Krungsri Securities anticipates that the new undertaking will provide a comparable upside for ERW in the long term. Funding for the new venture will largely rely on debt, with around 70% expected to come from borrowings. ERW’s current financial position, including cash on hand of 1 billion baht, a net IBD/E ratio of 1.1x, and a D/E ratio of 1.7x, suggests the company retains sufficient borrowing capacity without facing liquidity risks, according to Krungsri Securities.
Krungsri maintains a BUY rating on ERW with a target price of 3.30 baht, citing the expected recovery in Thai tourism and the company’s continued hotel expansion strategy.
