Genting Singapore / CDL Hospitality Trust / Thai Beverage : Positioned for Travel Recovery





WEEKLY INVESTMENT IDEAS - 20220228 GENS THBEV CDREIT
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In focus: ASEAN Travel Recovery Stocks


Asian economies are opening up. We expect profitability and cash flows for Genting Singapore (GENS), CDL Hospitality Trust (CDLHT), and Thai Beverage (THAIBEV) to recover with the increase in travel in the coming months.


Singapore has reinstated the quota for its daily vaccinated travel lane (VTL) by air back to 15,000 and should benefit from a gradual pick-up in MICE events. VTLs with Qatar, Saudi Arabia, and the UAE were launched on 25 Feb. VTL (Land) quota for the land link with Malaysia was reinstated back to 2,160 per day, equivalent to 48 bus trips on 22 Feb. Hospitality REITs, hotel and leisure stocks will benefit from pent-up demand for travel and the resumption of reopening.


GENS will be a beneficiary of higher inbound travel. GENS owns the integrated resort Resort World Sentosa. It is currently developing Universal Studios Singapore’s new themed zone, Minion Land, and the Singapore Oceanarium (SGO). Hard Rock Hotel Singapore, Hotel Michael, and Festive Hotel will also progressively undergo renovation works starting from 2Q22. GENS will also embark on facility refurbishment and upgrade at the Resorts World Convention Centre. GENS’ balance sheet remains strong with a net cash position of $3b (vs $9.3b market cap). Even without assuming a full recovery, GENS trades at an undemanding 17x 2023F PE.


65% of CDL Hospitality REIT’s (CDLHT) portfolio is in Singapore - comprising Orchard Hotel, Grand Copthorne Waterfront Hotel, M Hotel, Copthorne King’s Hotel, Studio M Hotel, and W Singapore – Sentosa Cove. CDLHT trades at 0.88x P/B and 6.9% yield on pre-Covid dividend rates, which we expect to be restored gradually over the next two years.


Thailand and Vietnam are easing restrictions. From 1 Mar, travelers to Thailand would no longer have to book and pay for a second PCR test on their fifth day after arriving in the country. Instead of the PCR test, they can perform a self-test using a rapid antigen test (also known as a lateral flow test). Vietnam removed all Covid-19 curbs on international flights from all markets, with no limits on flight numbers effective 15 Feb.


Thai Beverage derives over 90% of its revenue from Thailand and Vietnam, with restaurants and entertainment venues being key distribution channels. Our SOTP-based target price for Thai Bev is S$0.90. We believe consensus estimates for 6-7% CAGR to 2024 may be too pessimistic and do not reflect the potential earnings recovery as pandemic restrictions get lifted. THBEV’s potential IPO of its beer business, which reportedly may happen as soon as in the next quarter, could unlock value for the group.


Recommendation: Gain exposure to ASEAN travel and leisure stocks yet to fully reflect a recovery in travel in ASEAN.