In response to rising inflation in Thailand, the Ministry of Labour is reportedly considering an increase in the minimum wage of 5-8%, effective 1 January 2023. Maybank Securities (Thailand) (MST) has analyzed the impact of a proposed minimum wage hike on the tourism and healthcare sectors, finding that the healthcare players may be able to pass on the costs more effectively than their Thai tourism peers, due to the tighter supply in the healthcare sector, which may permit operators to increase prices more easily.
MST expects the healthcare sector’s impact to be limited because: 1) most workers don’t earn the minimum wage; and 2) healthcare providers can more easily pass on costs to end-consumers due to a lack of available supplies. MEGA is expected to be least impacted as about 80% of its costs are incurred outside Thailand and also vitamin and medicine production is not labour intensive as reflected by the lowest personnel cost ratio of only 16% of total cost in 2021. MEGA’s earnings in 2023 could be reduced by 0.2% for every 1% increase in the Thai minimum wage. MEGA (BUY, TP: THB66.0) is the Top Pick in the Thai healthcare sector.
For the tourism sector, MST estimates that every 1% hike in the minimum wage could lower 2023 profit in Thai tourism-related plays by 0.6-5.5%. AOT (BUY, TP: THB80.0) and MINT (BUY, TP: THB42.0) could be the least impacted (0.6% and 1.2% profit falls, respectively) due to MST’s expectation of recovery in 2023 with a profit of THB11.9 billion for AOT and MINT of THB7.1 billion. More than 70% of MINT’s revenue comes from outside Thailand, so the impact may be less than for other companies. AOT and MINT are the Top Picks in the Thai tourism sector.