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Buy These 5 Stocks to Benefit from Singapore’s Booming Travel Industry
March 16, 2023
Singapore’s tourism industry has seen a strong recovery amid the reopening of international borders and pent-up demand in travel.
In January, international tourist arrivals rose to a new post-pandemic high with over 930,000 visitors.
The Singapore Tourism Board is anticipating a significant increase in international visitor arrivals this year, with estimates reaching up to 14 million.
This projection is more than double the recorded 6.3 million visitors in 2022.
Additionally, tourism receipts are expected to surge from approximately S$14 billion last year to as high as S$21 billion in the current year.
With so much optimism in the tourism industry, investors can benefit from the booming travel and hospitality industry.
So far, year-to-date (as of 14 March 2023), the top five traded travel and hospitality-related stocks have shown an average total return of 5.8%.
These five stocks’ business performances have benefitted from the resumption of global travel and tourism.
1. Genting Singapore
Genting Singapore Limited (SGX: G13) owns and operates the Resorts World Sentosa (RWS) Integrated Resort.
The gaming and integrated resort (IR) developer is one of the key beneficiaries of the recovery in the tourism industry.
In the second half of the year, there was a noticeable increase in travel activity, leading to a 62% growth in FY22 group revenue, totalling S$1.7 billion.
Adjusted EBITDA also rose by 73% year-on-year (yoy) to S$774 million.
However, the overall profit margin was adversely affected by higher utility tariffs, increased casino tax rates, and accelerated depreciation of certain assets during the renovation of Festive Hotel and RWS 2.0 expansion plans.
With the gradual return of international visitors to Singapore, the Group experienced a significant rebound in performance, with Resorts World Sentosa standing out during the pandemic years.
Among some of the downside risks are the economic uncertainties, potential global recession as well as the impact on the pace of recovery of flight capacity.
2. Singapore Airlines
Singapore Airlines Ltd (SGX: C6L) has seen its share price gain by about 5% since I first wrote about the company back in August last year.
In fact, Singapore’s national airline has been one of the first aviation companies to recover as Singapore was among the first countries to reopen its borders to fully-vaccinated travellers.
This has helped Singapore Airlines to record operating profit of S$755 million in Q3 FY2023, which represents an increase of $$77 million quarter-on-quarter (qoq).
Net profit also grew by S$71 million qoq to S$628 million.
This represents the highest ever quarterly operating profit as well as nine-month operating and net profit for Singapore Airlines.
The strong recovery was driven by the record passenger load factors of 87.4% on the back of robust demand across its network.
Group passenger capacity reached 80% of pre-Covid-19 levels in December 2022, higher than the average of 51% for the Asia-Pacific region.
Singapore Airlines expects strong momentum in forward passenger sales for the fourth quarter, however weaker global demand and increased capacity may weigh on the air freight segment.
3. CapitaLand Ascott Trust
CapitaLand Ascott Trust (SGX: HMN) was one of the best-performing Singapore REITs (S-REITs) in 2022 with a total return of 6.7%.
It is the largest lodging trust in Asia-Pacific with more than 100 properties across 15 countries.
The company’s gross profit surged by 80% in the second half of 2022, driven by an 81% growth in its revenue per available unit (REVPAU) to pre-pandemic levels, as well as due to quality acquisitions.
The distribution per stapled security (DPS) also increased to 5.67 Singapore cents due to stronger operating performance in FY2022.
Excluding one-off items, the adjusted DPS increased by 106% yoy to 4.79 Singapore cents.
Additionally, the company achieved a gross fair valuation gain of S$200 million due to better operating performance and a positive outlook for its properties.
Airport services and food solutions providers SATS Ltd (SGX: S58) is among the top performers in the top five traded travel and hospitality-related stocks with a total return of 11.4% year-to-date.
The group’s positive profit after tax and minority interest (PATMI) in Q3 FY2022 is a significant turnaround after losses of S$9.9 million in Q2 FY2022 and S$22.5 million in Q1 FY2022.
This reflects the improving business conditions and a seasonal high during this period.
The company’s operating expenditure (OPEX) increased yoy due to the consolidation of Asia Airfreight Terminal Co. Ltd. (AAT), further reduction in government reliefs, ramp up in capacity, higher fuel and utility costs, and inflation in line with greater business volume.
Business activities have picked up as aviation continues to recover, with flight volume reaching 71% of pre-pandemic levels.
ComfortDelGro Corporation Limited (SGX: C52) is one of the largest land transport companies in the world.
In FY2022, the group’s revenue increased by 7.9% to S$3.8 billion as economies globally recovered from the pandemic.
Additionally, the group’s operating profit for 2022 was S$270.0 million, which is S$70.2 million or 35.1% higher compared to S$199.8 million for 2021.
Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.