3 Singapore Stocks Winning From the Travel Boom

Billy Toh

July 20, 2022

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After two years of travel restrictions and concerns over COVID-19 infections, the world is ready to travel again.

In Singapore, international visitor arrivals into the city state are expected to reach four million to six million in 2022 as travel recovers.

For the H1 2022 period, visitor numbers in Singapore hit 1.5 million, more than 12 times as much compared to a year ago.

Meanwhile, tourism receipts in Q1 2022 came in at an estimated S$1.3 billion, an increase of 213% from the same period a year ago.

The Singapore Tourism Board (STB) expects tourism to recover to pre-COVID levels by the mid-2020s.

As travel demand continues to soar, here are three Singapore stocks that investors should watch as these companies will benefit from it.

1. SATS

The largest food solutions and gateway services provider at Singapore’s Changi Airport, SATS Ltd (SGX: S58), will certainly benefit from the return to travel.

The Group reported strong revenue growth of 21.3% to S$1.18 billion in FY2022 as compared to S$970 million in FY2021.

Source: SATS Ltd’s FY2022 Performance Review

While revenue surpassed the S$1.0 billion level in FY2022, SATS’ earnings were affected and slipped into core net losses of S$8.5 million.

This was mainly due to higher operating expenses, driven by higher staff costs due to increased headcount and wage inflation, as well as the inflationary pressures seen in raw materials, utilities and fuel.

While near-term earnings could be affected by the run-up in costs to position for demand recovery, I am optimistic that this puts SATS in a good position to benefit from the return to travel.

Given the lead time required for training and an estimate of aviation traffic to around 70% of the pre-pandemic level by the end of 2022, SATS is in a position to turn profitable for its FY2023.

SATS management has also guided that the Group is exploring measures, including new menu items and recipes as well as ingredient substitutions to manage rising material costs.

Aside from that, the Group has a healthy cash position of around S$786.0 million with net cash of S$275 million as of FY2022.

This puts the company in a position of strength to follow through with its S$1.0 billion capital expenditure and new investments targeted at growing the Group’s revenue to S$3 billion by FY2025.

2. Ascott Residence Trust

Ascott Residence Trust (SGX: HMN), which is one of the largest hospitality trusts in Asia Pacific with a portfolio comprising of hotels and serviced residences, is another travel stock to watch.

This is as the trust aims to boost the recovery of occupancy rates of its hotels and serviced residences.

It has total assets of S$7.7 billion as at 31 December 2021 and more than 95 properties across 44 cities in 15 countries.

Source: Ascott Residence Trust’s Q1 FY2022 Business Updates

In the Group’s latest earnings during Q1 FY2022, Ascott Residence reported an increase of 22% in its revenue per available unit of properties (RevPAU) to S$67 despite the Omicron variant.

Pent-up demand in travel has translated into strong pickup in March 2022 when restrictions were lifted, particularly in the UK, the US, Japan and Australia.

In China, long stays offer resilience as lockdowns curtail transient travel. Occupancy of Ascott Residence properties in China remain resilient at above 50% although RevPAU moderated lower during the quarter.

Source: Ascott Residence Trust’s Q1 FY2022 Business Updates

Going forward, as global travel recovers, Ascott Residence is a good proxy to the recovery of the hospitality sector.

It is supported by a 25-30% stable income base from longer-stay lodging while another 70-75% of its assets will benefit from the resumption of travel.

3. ComfortDelGro

Finally, there’s Singapore’s largest taxi operator, ComfortDelGro Corporation Limited (SGX: C52). It’s also another company that will benefit from the travel boom in Singapore.

As Singapore is one of the first countries to reopen its international border, this has benefitted the company.

As mentioned in my previous article on ComfortDelGro, ridership for public transport has gradually returned to normal.

As 58% of the Group’s revenue is generated in Singapore, the reopening and easing of travel restrictions in Singapore, will benefit the company.

With travel in Singapore expected to return to 70% of pre-COVID levels by the end of this year, demand for taxi rides in Singapore will continue to grow.

This bodes well for ComfortDelGro, which has seen a recovery in earnings.

A return to pre-COVID operations for the company’s  public transportation and taxi business operations in Singapore will continue to support earnings growth.

Take advantage of earnings recovery

While the stock market remains volatile on concerns over the risk of recession, persistent inflation data and geopolitical tensions, investors should take advantage of the market weakness to accumulate companies that will benefit from the return to travel.

These include the likes of travel beneficiaries such as SATS, Ascott Resident Trust and ComfortDelGro.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

About the Author: Billy Toh

Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.