Services/Tourism & Leisure Sector: Overweight July 21, 2017 245

2QFY17 earnings for tourism sector will continue to recover in line with domestic tourism which nearly returns to normality. International tourist arrivals to Thailand in the first six months of FY17 rose 4.4% y-y especially in Apr when an influx of visitors led by those from Europe and Russia took their Easter holiday. As Chinese tourist volumes start to return to normality after the zero-dollar tour crackdown, the numbers grew 6%y-y in Jun 2017. In Maldives, hotel operations have shown a better performance from a YTD 5.8% rise in tourist traffic which would partially help adsorb an oversupply of rooms. Growth in hotel business would offset food business which has felt the short-term pinch of a slowdown in domestic buying power. We believe the overall performance of tourism sector will recover in what remains of the year due to a low-base effect in 2HFY16. MINT is our top pick in the tourism space on views that earnings from its hotel business in Portugal are expected to be strong during high season in 3QFY17 and its restaurant services business will deliver the best operating results for the year in 4QFY17.

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