TRIS Rating, the Thai rating agency, today announces that the pandemic alert at level 5 of the A/H1N1 flu outbreak is having immediate negative impacts on its rated companies in the tourism industry. The added impacts on its clients like THAI, MINT, and CENTEL; however, are expected to be minimal since the second quarter is normally a low travel season. Referring to the experience from the SARS and Avian flu outbreaks in 2003, the agency also says that if the current outbreak can be controlled effectively within a few months, performance of rated companies in the tourism industry can be expected to recover soon afterward. Still, if the outbreak is prolonged and fears spread further, TRIS Rating may take rating actions.
TRIS Rating Co., Ltd. reports that the Thai tourism industry has been largely affected by political unrest from late 2008 to mid April 2009 when anti-government demonstrations led to riots in Bangkok. The number of international tourist arrivals to Thailand in the second quarter of 2009 is expected to decrease, following a 15% drop in the first quarter, with a potential contraction in the full year number. Therefore, TRIS Rating expects the performances of companies in the tourism industry to remain weak.
Dr. Warapatr Todhanakasem, the President of TRIS Rating, says that Thai Airways International PLC (THAI) is vulnerable to the outbreak of A/H1N1 flu since around 41% of THAI’s passenger traffic revenue comes from Europe and North America. The SARS outbreak in 2003 caused the revenue-passenger-kilometers (RPK) of THAI in the second quarter of 2003 to drop sharply by 33.17% year-on-year. However, the RPK recovered to the normal level quite quickly once passengers’ confidence returned. Thus, the RPK in 2003 dropped by only 7.38% year-on-year.
Major hotel operators in TRIS Rating’s portfolio are Minor International PLC (MINT) and Central Plaza Hotel PLC (CENTEL). Although fast food businesses account for around 50%-60% of these companies’ revenue, it is expected that the growth in fast food revenue could not compensate for the drop in hotel revenue. The hotel occupancy of such operators dropped around 20% in the first quarter of 2009, resulting in a significant drop in the overall hotel revenue. The credit profiles of the two hotel operators are being monitored closely amid the current political, economic, and pandemic flu situation.
Apart from the tourism industry, the agriculture industry had been shortly impacted from the psychological concerns over the flu. The rating of Charoen Pokphan Foods PLC (CPF); however, still remains the same at the time being because only 10% of its total revenue is from swine products. In addition, the company could potentially benefit from a demand shift from pork products to other protein products.
TRIS Rating believes that the experience from the SARS outbreak in 2003 has made governments around the globe more responsive to and more capable in handling the threat of communicable diseases. Therefore, effective control should be under way and the overall impact on the tourism industry might not be very severe. The rating agency cautions that due to the impact from global economic slowdown and political turmoil in Thailand, the recovery may not be as strong as in 2003. In the mean time, Dr. Warapatr says that, “TRIS Rating will closely monitor the performances of rated companies that could be impacted by the flu outbreak. Should the flu spread is prolonged and impacts are larger than expected, further rating actions may be taken.”-- End
Company & Issue Ratings: A/Stable Minor International PLC (MINT) Company & Issue Ratings: A/Stable Central Plaza Hotel PLC (CENTEL) Company & Issue Ratings: A-/Stable Charoen Pokphan Foods PLC (CPF) Company & Issue Ratings: A+/Stable
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