The widely anticipated meeting between Donald Trump and Kim Jong Un on 12 June put the spotlight on Singapore’s hotel industry, as both leaders finalised their hotels of stay and the venue of the actual meeting. The US and North Korean delegations are expected to stay in the Shangri-La Hotel and St Regis respectively, while the meeting is to be held at Capella Singapore.
Besides the Trump-Kim summit, hoteliers in Singapore had other reasons to cheer, as the Consumer Discretionary sector was the best-performing sector on SGX this month, returning an average total return of 3.1% for the month of May.
Stocks classified under the Hotels, Resorts & Cruise Lines category account for five of the ten largest stocks in the Consumer Discretionary sector in the SGX, and some hotel stocks were amongst the big winners.
According to the Singapore Tourism Board’s Report on Hotel Statistics 2018, total room revenue increased 8.8% year-on-year (YOY) for the first quarter of 2018. The Standard Average Occupancy Rate (AOR), which measures the percentage of available rooms nights occupied, increased by 1.5% to 86.2% for Q1 2018. This meant available rooms were more heavily utilised compared to the same period last year, underlying stronger demand for hotel rooms.
For this week’s edition of 4 Stocks This Week, we will analyse four of the largest hotel chain operators listed on the SGX.
Shangri-La Asia Limited (SGX: S07)
Shangri-La Asia owns and runs hotels under brands such as Shangri-La, Hotel Jen, Traders Hotel, Rasa, Summer Palace and Shang Palace. Based in Hong Kong, the group operates over 100 hotels across the world with over 40,000 rooms.
For the 2017 financial year, after accounting for non-operating items, it reported a consolidated profit attributable to equity holders of the company of US$158.0 million (S$211.0 million), up 48.9% from the previous year. Consolidated sales also increased 6.5% to US$2.2 billion (S$2.94 billion).
It is optimistic that if current operating conditions remain steady, revenue and profitability will continue to improve in 2018. This projection is aligned with expectations that five new hotels opened in China in 2017 will add new revenue.
Additionally, the re-opening of the iconic Tower Wing at its first Shangri-La Hotel in Singapore, which was closed for a year-long renovation until May 2017, is expected to supplement the company’s 2018 income by being operational for the whole year.
This optimism was shared by investors, as Shangri-La’s share price has surged by 30% compared to a year ago, closing at $2.81 per share this week.
Mandarin Oriental International Limited (SGX: M04)
In March, Mandarin Oriental announced a 1% decline in its annual profit for the 2017 financial year to US$54.9 million (S$73.3 million), dragged by ongoing renovation of its London properties and restoration of the Hotel Ritz in Madrid. Their hotel in Washington D.C. also saw softer results than the same period in 2017 during Donald Trump’s Presidential Inauguration.
However, in its interim management statement for Q1 2018, Mandarin Oriental declared that most hotels in the Group’s portfolio experienced improved performance versus the same period in 2017. Many of its Asian properties, including hotels in Singapore, Bangkok, Tokyo and two wholly-owned properties in Hong Kong performed better.
Investors seem to share their optimism: shares have risen 31.2% compared to a year ago, closing at $3.18 per share this week.
Hotel Properties Limited (SGX: H15)
Hotel Properties Limited (HPL) is an investment holding company that owns, manages and operates hotels, resorts and shopping galleries in 13 countries. HPL owns the Four Seasons and Hilton hotels in Singapore and has business interests in 32 hotels under various acclaimed hospitality brands. HPL has also made inroads into property development.
In February, HPL announced its profit for the financial year of 2017 jumped by 68%, from $108.6 million to $179.5 million. HPL’s revenue also increased by 14.1% to $659.2 million, on the back of sales from the freehold Tomlinson Heights condominium and stronger performances from its hotels and resorts.
Despite that, HPL’s share price has dipped 1.5% compared to a year ago. With a current market cap of $1.97 billion, Hotel Properties closed at $3.78 per share this week.
GL Limited (SGX: B16)
Formerly known as GuocoLeisure, GL Limited is an investment holding company with a portfolio of investments, including hospitality, gaming, oil & gas and property development.
GL Limited recorded a profit of US$24 million for the third quarter ended March 31, an increase of 445% from US$4.4 million a year ago. This was mostly due to a US$25.9 million increase in other operating income, which arose from one-off gains which included the compulsory acquisition of Thistle Euston Hotel in London and the recovery of a legacy loan which was previously written off.
GL Limited’s share price has increased 12.5% from the same period last year. With a current market cap of $1.03 billion, Hotel Grand Central closed at $0.79 per share this week.
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