6 Stocks That Will Benefit from the Singapore Travel Rebound
September 6, 2022
Hotel rooms in Singapore are now the most expensive in almost a decade as visitor arrivals continue to accelerate amid the ease in COVID-19 restrictions.
However, despite this increase, luxurious stays in Singapore are still relatively cheap in comparison to some of its global city peers.
The return of the Formula One Grand Prix in Singapore from 30 September to 2 October 2022, after a two-year hiatus, will also be a boost to the tourism industry.
According to Singapore’s Transport Minister, S Iswaran, this year’s night race is expected to see the biggest turnout since the inaugural event in 2008.
Aside from the Formula One, below is a table of the events that will be available over the remaining months of 2022.
Singapore benefits from Hong Kong’s approach
The pent-up demand in travel has benefitted Singapore as Hong Kong continued with its cautious approach to reopening.
For example, Hong Kong has just recently shortened the compulsory hotel quarantine for arrivals from seven days to “3+4”.
That still requires three days of hotel quarantine and four days of home medical surveillance with limited freedom of movement.
This is in stark contrast with the ease in entry restrictions for Singapore.
In August, major airlines – such as Cathay Pacific Airways Ltd (SEHK: 293) – have scheduled 12% more flights to Hong Kong as compared to July, but the frequency is still only one-third that of Singapore.
How can investors benefit from the revival of travel into Singapore?
While rising inflation will continue to pose downside risks, the revival of travel remains on track in 2022.
This is as Singapore has relaxed most of its COVID-19 restrictions when compared to other countries in the region.
The Lion City has just lifted its general indoor mask mandate recently as well. With this in mind, here are six Singapore-listed companies that will benefit from this trend.
|Singapore Airlines Limited
|Singapore’s national airline||Clear beneficiary of the surge in travel demand. SIA has recently returned to profit in its Q1 FY2023.
Overall capacity increased to 66.7% of its pre-pandemic level and management has guided for capacity to go up to 68% of pre-pandemic levels in Q2 FY2023 and around 76% by Q3 FY2023.
|In-flight catering service provider||The largest food solutions and gateway services provider at Singapore’s Changi Airport. It will certainly benefit from the return to travel.
Strong earnings growth and healthy cash position puts SATS in a good position to follow through its S$1.0 billion capital expenditure and new investments targeted to growing its revenue to S$3 billion by 2025.
|SIA Engineering Co Ltd
|Provider of MRO service||SIA Engineering is a provider of maintenance, repair and overhaul (MRO) services.
Its client base is more than 80 international airlines and aerospace equipment manufacturers.
With the increase in the number of flights, more maintenance checks will be required and this could provide a boost to earnings.
SIA Engineering has returned to the black with earnings of S$67.7 million for FY2021/2022 as compared to a loss of S$11.2 million for FY2020/2021.
|ComfortDelGro Corporation Ltd
|Singapore’s largest taxi operator||The return to ridership for public transport will benefit ComfortDelGro, which is the largest taxi operator in Singapore.
On top of that, with the surge in tourist arrivals, this will boost earnings recovery for the company. During the first half of 2022, ComfortDelGro’s revenue rose 6.7% year-on-year (yoy) to S$1.86 billion while profit after tax and minority interest (PATAMI) jumped by 27.7% yoy to S$118.7 million.
ComfortDelGro is a strong reopening play and with more tourists coming into Singapore, the company should continue to maintain its earnings growth momentum.
|Ascott Residence Trust
|One of the largest hospitality trusts in Asia Pacific||Ascott Residence will benefit from the return of tourists in Singapore as it will boost the occupancy rates of its hotels and serviced residences.
As seen by the rise in hotel rates, Ascott Residence will be a good proxy to the recovery of the hospitality sector.
It has support from long-stay lodging which generates stable income that makes up around 70% of gross profit while 70-75% of its assets will benefit from tourist arrivals.
|Capitaland Integrated Commercial Trust
|Largest SGX-listed office and retail REIT||The arrival of tourists in Singapore will boost shopper traffic.
During H1 FY2022, rental reversion was negative at -0.5% but it was an improvement from the -1.3% in Q1 FY2022.
The suburban malls have also seen improvement with positive rental reversion of +1.1%.
Invest in the “New Normal”
Beyond the pent-up demand in travel, investors should look at the potential of Singapore as Asia’s primary aviation hub.
Singapore is already working on a fifth terminal at Changi Airport, with a revised design that allows it to adjust capacity during a pandemic.
The terminal is expected to be completed by the middle of next decade.
Prior to COVID-19, Changi had ambitious plans and invested for a heavily-automated terminal while also minimising touch points. The pandemic has served as a catalyst to fine-tune those plans.
Aside from that, Singapore has recently offered new elite working visas to attract high-paid foreign talent.
With the Singapore government pushing ahead in terms of moving beyond the COVID-19 pandemic, the hospitality and travel industries are likely to see sustained demand over the long term.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
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.