The group is also involved in property development in Singapore, Thailand and the UK and owns prime commercial and retail properties in Singapore.
The target price, which is a 22% upside to the group’s last-closed price of $3.55 on Feb 17, is based on a revalued net asset value (RNAV) valuation with an assumed 25% discount to the analysts’ RNAV per share estimates. “Hotel Properties currently trades at a P/NAV ratio of 1.06x, at +1 standard deviation (s.d.) of its four-year historical P/NAV ratios,” say the analysts.
To Pang and Tan, the group’s hotel portfolio, which saw revenue and revenue per available room (RevPAR) recover to 90% of its pre-pandemic levels, is a prime beneficiary of revenge travel.
“We believe the group’s exposure in popular tourist destinations and in countries with relaxed Covid-19 requirements (i.e., Maldives, Southeast Asia) positions Hotel Properties as a key beneficiary of pent-up travel demand, spurred by the return of Mainland Chinese tourists,” they write.
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“For Hotel Properties’ hotel division, we forecast FY2023/FY2024 RevPAR to reach 109%/115% of pre-pandemic levels, respectively. For Hotel Properties’ property segment, upcoming property development projects will also help boost medium-term earnings,” they add.
To be sure, the analysts forecast the group’s earnings on the whole to go past its pre-Covid-19 levels in FY2023/FY2024 and drive a turnaround in dividends.
The group is also a part of the consortium Cuscaden Peak, which acquired Singapore Press Holdings’ (SPH) non-media assets for an estimated equity value of $3.8 billion in March 2022.
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“We revalued Cuscaden at $4.2 billion, which translates to 110% of Cuscaden’s offer,” say the analysts.
“The potential unlocking of Cuscaden Peak’s value via divestment of Hotel Properties’ stake to other shareholders and/or its assets will help drive an upside to Hotel Properties’ NAV, a principal share price driver (positive correlation = +0.72),” they add.
As at 12.07pm, shares in Hotel Properties are trading 3 cents higher or 0.85% up at $3.58.
