SGX Stocks and Warrants

Author: kimeng   |   Latest post: Mon, 23 Jul 2018, 10:26 AM


Regional Hospitality: Here Comes the Sun

Author:   |    Publish date:

  • It’s been a long, cold, lonely winter
  • Turning a corner in SG and in CN
  • Initiate on Shangri-La Asia [69 HK]

Singapore: It’s Going to Get Hotter Through the Year

Hotel RevPARs are currently ~20% down from their peak in 2012, having been affected by stiff competition from new hotels despite climbing visitor arrivals. Going forward, given that much of last year’s supply injection was back-end loaded, we expect hotel RevPARs to accelerate from the pace seen in 1Q18.

Visitor arrival growth has had a healthy start with visitor days growing +1.2% YoY in Jan, +7.1% in Feb, and +8.6% in Mar. On the other hand, hotel room supply is only expected to increase +2.5% in 2018, +0.8% in 2019, and +0.6% in 2020.

China: More Than a Temporary Heat Wave

Singapore is, however, not only place where we see a demand-supply situation ripe for RevPAR growth. RevPAR growth in mainland China turned positive in 1Q17 after several years of decline, and we believe the recovery is still in its early stages, particularly for luxury hotels.

From channel checks and data points, it appears that the growth of luxury hotel room supply in Tier 1 and 2 cities has been slowing down while the domestic tourist spend has continued its relentless pace of growth.

Feeding the growth of local demand for luxury hotel rooms in China are three key factors:

  1. high-spending millennials
  2. legislation and
  3. massive infrastructure developments within the country, which are discussed in greater detail in the sector report.

Given the current demand-supply situation, we believe existing hotel owners/operators are poised to benefit from several years of RevPAR recovery.

Initiate BUY on Shangri-La Asia

We initiate coverage on Shangri-La Asia [BUY; FV: HK$21.05], an Asia-based hotel ownership and management company, with a portfolio consisting mainly of five-star deluxe city centre hotels and resorts. With the group’s substantial exposure to mainland Chinese hospitality as well as a high degree of operational leverage, we see Shangri-La as a proxy to what we expect to be a multi-year recovery in the Chinese luxury hotel industry.

On the other hand, for hospitality SREITs, while we see 2018 as a positive year operationally, we remain wary on the impact of rate hikes on REITs as an asset class. Out of the hospitality S-REITs, we like Far East Hospitality Trust [BUY; FV: S$0.735] as we believe that the operational upside has yet to be priced in. We are also positive on Hotel Properties Limited [BUY; FV: S$4.74] given its attractive valuations.

We have a POSITIVE view on the regional hospitality sector.

Source: OCBC Research - 18 Jun 2018

Share this

Related Stocks

Chart Stock Name Last Change Volume 
Shangri-La HKD 12.84 -0.30 (2.28%) 26,000 
Far East HTrust 0.67 +0.025 (3.88%) 1,890,400 
HPL 3.91 -0.05 (1.26%) 37,900 

  Be the first to like this.


171  144  227  533 

Top 10 Active Counters
 HSI28800MBeCW.. 0.128-0.009 
 HSI29600MBeCW.. 0.08-0.006 
 HSI26600MBePW.. 0.087-0.007 
 HSI29200MBeCW.. 0.1290.00 
 HSI28200MBePW.. 0.177-0.006 
 APAC Strategic 0.0020.00 
 HSI28888VTeCW.. 0.103-0.005 
 HSI30400MBeCW.. 0.037-0.004 
 HSI28000MBePW.. 0.063-0.015 
 HSI30000MBeCW.. 0.0810.00 


1. Sembcorp Marine: Patience Needed SGX Stocks and Warrants
2. Venture Corporation - Not quite smoke-free yet Singapore Stock Market News
3. HYFLUX : 成也 新加坡, 败也 新加坡 STE's Stocks Investing Journey
4. Straits Times Index - [ Rebounding Off From Our Support, Looking At Next Target] Singapore Humble Stock
5. Keppel Corporation - It gets better at 50 Singapore Stock Market News
Partners & Brokers