Siam Wellness Group: Upbeat momentum
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Upgrade from HOLD to BUY with a higher TP of THB4.20 (vs. THB3.80 previously)
Challenges remained in 4Q25 following the decline in inbound tourists, though signs of a firm y/y recovery are emerging
Monthly Chinese tourist arrivals hit a six-year high in Feb 2026, which should bode well for SPA given that c.35% of its spa guests are Chinese
New destination project under development, with grand opening expected in 1Q27
Earnings review
Challenges remained in 4Q25. SPA reported 4Q25 profit of THB56mn, 39.4% y/y but +20.6% q/q. The y/y earnings drop were dragged by a softer international tourist number which dropped 6% y/y in 4Q25 and the uplift in SG&A expenses following branch expansion in 2025 which further weighed down company’s profitability. Expansion boosted the revenue in 4Q25.
In 4Q25, total sales were at THB 473mn, up 10.3% y/y. Despite the soft SSSG of -5% (improved -14% in 3Q25), the sales growth was supported by sales contribution from new branches. In 2025, the company opened 14 branches (closed 1 branch) and operates 91 branches (including two branches in oversea) at end 2025.
Costs spiked from new branches. The drop in SSSG, combined with new branch openings, has consistently diluted margin leverage. In 4Q25, operating margin declined to 15.7% ( 6.6ppt y/y). Although the company has well-controlled on variable expenses, the fixed expenses have increased on the branch, warehouse and head office expansion.
Pressure on net margin. Interest expense increased 27.2% y/y following higher outstanding debt as well as finance lease related to company’s expansion. The effective tax rate was normalised to 18.6% in 4Q25. Core net margin stood at 11.8% (vs 21.4% in 4Q24), highlighting the drop in earnings.
Improved tourism outlook QTD
Positive momentum breaking in from Chinese tourists. We have begun to see encouraging signs, with monthly Chinese arrivals reaching the highest level since February 2020. In 2025, Thailand lost significant Chinese tourist share to Japan and Vietnam, where arrivals increased 30% and 42%, respectively, while Thailand experienced a 33% decline. However, Chinese arrivals to Japan have declined since December 2025 due to political tensions, while growth in Vietnam has also slowed.
In February 2026, Chinese arrivals to Thailand exceeded those to Japan and Vietnam for the first time since May 2024, signaling an encouraging recovery trend. A potential headwind remains the relatively strong Thai baht against the VND and RMB, which may affect price-sensitive travelers.
Nonetheless, for total tourist arrivals, it still declined by c.4.5% in 2M25 which we believe the monthly inbound tourist arrivals should improve y/y from March 2026 from a low base.
SPA should stand as the prime beneficiary for a firm Chinese tourist recovery as the company’s guest mix from China (including Taiwan and Hong Kong) accounts for c.35% of total guest. While the spa guest mix from Middle East is c.5% which the rising geopolitical tension would have limited impact to spa.
Launching wellness destination project. The company is developing its investment in a new wellness destination project, with a total investment of THB822mn (including 30-year rental expenses of c.THB302mn). The project will be funded through a combination of bank loans and internal cash flow from operations. This wellness destination project, strategically located in Pattaya, aims to attract an equal split of local and foreign guests.
Management will try to open hotel section in 4Q25 to serve tourism demand during Tomorrow Land 2026 held in Chonburi. Whereas full opening with wellness facilities to take place in 1Q27. The internal rate of return (IRR) is expected to be 15%, with a payback period of c.8.5 years. SPA believes this could serve as a new s-curve, driving the company’s growth over the mid-term.
Recommendation
Upgrade from HOLD to BUY with higher DCF-based TP of THB4.20 (vs THB3.80). We currently have considered the new desination project in our forecast which the new project would likely support the earnings growth from 2028 (we expect the new project will generate small losses in 2027 before able to ramp up operation and turn profit in 2028 onwards). As a result, our TP has increased to THB4.20.
With upside and firm Chinese tourist recovery and upside, we upgrade our call to BUY. Nonetheless, unsuccessful execution of the new project could lead to future downside. However, the company’s strong balance sheet should be able to cover any significant gearing strain from this transaction.
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