Thailand’s biggest massage and spa chain will expand its outlets in China to take its popular services closer to its largest group of customers.
Siam Wellness Group Plc is in talks with potential partners to operate its “Let’s Relax” shops under licence in cities in the world’s most populous country, said President Wiboon Utsahajit, without specifying the number of outlets planned. Expansion in China, where the company now has just one outlet, underpins achieving the company’s annual earnings growth target of more than 20%, he said.
Siam Wellness joins Thai companies including Carabao Group Plc and Taokaenoi Food & Marketing Plc in looking to leverage the Southeast Asian nation’s popularity among Chinese tourists directly in their home country. Prime Minister Prayut Chan-o-cha’s government has wooed Chinese tourists and investors to spur the economy as the trade dispute between China and US saps exports.
“We have conducted a very careful study and now have the confidence to expand in China,” Mr Wiboon said in an interview on Friday. “China is a very tough market for most foreign players, but the risk versus reward is worth it.”
About 75% of Siam Wellness’s 3,000 daily customers are foreigners, and most are from China, according to Mr Wiboon. The Chinese expansion will operate under franchise agreements with local partners, he said. The company now has 62 outlets, with six located abroad in countries including Myanmar and Cambodia.
“Siam Wellness’s earnings are expected to hit new highs in coming years” as it expands, said Nantika Wiangphoem, an analyst at DBS Vickers Securities (Thailand) Co. Still, risks to its outlook include the possibility of a slump in foreign tourist arrivals to Thailand, a global economic slowdown and increased competition, she said.
To be sure, a more than 7% appreciation in the value of the baht against the dollar in the past year has contributed to a slowdown in Thailand’s crucial tourism industry. Chinese arrivals moderated earlier this year, although recent reports indicate a revival in visitors.
Mr Wiboon said baht strength hasn’t damped demand. Siam Wellness posted its highest quarterly earnings since listing in the three months through September, according to data compiled by Bloomberg.
The shares have gained 39% this year, after losing almost half of their value a year earlier, valuing the company at $294 million compared with the about $76,000 Mr Wiboon invested to start it up 20 years ago. The company has the second-biggest stock by market value in the Market for Alternative Investment, the Thai stock exchange’s bourse for 161 small- and medium-sized companies.