25 July 2022: Ascott Residence Trust (ART SP), Tongcheng Travel Holdings Limited (780 HK)
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Ascott Residence Trust (ART SP): Tourism recovery still in play
- BUY Entry 1.15 – Target – 1.30 Stop Loss – 1.10
- Ascott Residence Trust (ART) is the largest hospitality trust in Asia Pacific with an asset value of S$7.7bn as at 31 December 2021. ART’s international portfolio comprises 95 properties with more than 17,000 units in 44 cities across 15 countries in Asia Pacific, Europe and the United States of America as at 31 March 2022. ART’s properties are mostly operated under the Ascott The Residence, Somerset, Quest and Citadines brands. They are mainly located in key gateway cities such as Barcelona, Berlin, Brussels, Hanoi, Ho Chi Minh City, Jakarta, Kuala Lumpur, London, Manila, Melbourne, Munich, New York, Paris, Perth, Seoul, Singapore, Sydney and Tokyo. ART is managed by Ascott Residence Trust Management Limited (as manager of Ascott Reit) and Ascott Business Trust Management Pte. Ltd. (as trustee-manager of Ascott BT), both of which are wholly-owned subsidiaries of Singapore-listed CapitaLand Investment Limited (CLI SP).
- UNWTO/IATA sees growing occupancy rates across Asia, Europe, and the Americas. According to the UNWTO Tourism Recovery Tracker, key ART markets such as Asia Pacific, Europe, and the Americas have seen recovering occupancy rates vis-a-vis pre-pandemic levels in 2019. In the Asia Pacific region, June occupancy levels have grown to 56% vs Jan’s 43%. Meanwhile, other key markets in Europe and Americas have seen stronger and more robust occupancy rates likely due to the summer vacations. Europe’s Jun occupancy rates were 75% (Jan: 34%) of 2019 levels, while the Americas’ stood at 69% (Jan: 47%). Notwithstanding the occupancy rates, we note that the same tracker observes the Asia Pacific region further picking up the slack with hotel bookings currently at -19% (Jan: -78%) vs 2019 levels, while Europe and the Americas are substantially higher, albeit still stronger booking rates of -59% (Jan: -82%) and -59% (Jan: -72%), respectively.
- Green shoots of recovery already seen in 1Q22. ART reported strengthening portfolio RevPAU of S$67 (+22% YoY) or about 50% of 1Q19 levels, with increases in both average daily rates and occupancy. Additionally, management shared that forward bookings had indicated sustained robust demand from leisure and corporate travel segments combined with growth in the MICE industry. Leisure demand was particularly boosted by revenge travelling into key markets such as Australia, Japan, Singapore, UK, and the US.
- Trading below pre-pandemic valuations even as recovery likely picked up. The Street currently has 6/3/1 BUY/HOLD/SELL ratings and an average TP of S$1.23. Based on consensus estimates, FY22F gross revenue and NPI should surge 32.5%/55.8% YoY, while FY22F DPU growth should jump 20.6% YoY higher to S$0.052 apiece. While ART’s valuations have improved significantly since the pandemic struck, it is still significantly lower than the levels it was trading at prior. As the tourism recovery takes hold, we believe that there is upside risk that ART could outperform the Street’s forecasts and revert to its pre-pandemic valuations. At current prices, ART would trade at a still fairly attractive 4.5%/5.4% FY22F/23F yield.
CapitaLand Integrated Commercial Trust (CICT SP): Position for strong set of results on 28 July
- RE-ITERATE BUY Entry 2.10 – Target – 2.30 Stop Loss – 2.00
- CICT owns and invests in quality income-producing assets primarily used for commercial (including retail and/ or office) purposes, located predominantly in Singapore. As the largest proxy for Singapore commercial real estate, CICT’s portfolio comprises 21 properties in Singapore and two in Frankfurt, Germany, with a total property value of S$22.5bn as of 31 December 2021. CICT is managed by CapitaLand Integrated Commercial Trust Management Limited, a wholly-owned subsidiary of CapitaLand Investment Limited (CLI), a leading global real estate investment manager with a strong Asia foothold.
- Easing of pandemic restrictions from April 2022 to bolster office portfolio. We reckon that the substantial easing of pandemic restrictions in Singapore would provide significant tailwinds to CICT’s office properties. On its office portfolio, anecdotal evidence suggests that the large crowds seen in the core central region on weekdays implies that the return to office community has swelled (22 April 2022: 47%), and should result in greater leasing traction and in turn rental reversions. In addition, we believe that the acquisition of a 70%-stake in CapitaSky on 27 April 2022 will reap immediate benefits to this segment.
- Return of the tourist dollar on eased travel restrictions. According to STB, Singapore clocked 1.5m visitor arrivals in 1H22, more than 12x more on a YoY basis. Meanwhile, 1Q22 tourist dollars climbed to S$1.33bn (+213% YoY) driven by feeder markets such as Indonesia and India. Nonetheless, this is still a far cry from pre-pandemic spending of S$6.6bn in 1Q19. Moving forward, there is increasing optimism that global travel will start to pick up pace and the agency believes that Singapore can expect to receive between 4 to 6 million visitors this year, which would fuel tourism spending particularly along the downtown Orchard road belt.
- FY22 results to be fueled by M&As. Recall that in1Q22, CICT already started to see a recovery across its portfolio and reported strong office rental reversion of 9.3%, while its retail rental reversions saw a slight 1.2% increase after excluding Raffles City Singapore’s AEI. The Street is thus overall bullish on CICT’s prospects, with 16/3/1 BUY/HOLD/SELL ratings and an average TP of S$2.45. Based on consensus estimates, FY22F gross revenue and NPI should swell 7.0/8.3% YoY, while distributable income would grow at a faster 12.5% pace. FY22F DPU should come in at 9.3% YoY to S$0.114 apiece due mainly to a larger unit base. We believe that CICT is slightly undervalued now considering that it is currently trading ~1sd away from its post-merger mean of ~1.04x P/B. At current prices, CICT would trade at an attractive 5.4%/5.7% FY22F/23F yield.
Tongcheng Travel Holdings Limited (780 HK): Summer holiday to revive the domestic tourism
- Buy Entry – 15.8 Target – 17.5 Stop Loss – 15.0
- Tongcheng Travel Holdings Ltd, formerly Tongcheng-Elong Holdings Ltd, is a China-based holding company mainly providing online tourism products and services. The Company is mainly engaged in transportation ticketing services, accommodation reservation services and other services. The transportation ticketing services mainly include air ticket and train ticket booking, sales of tourism insurance and other transportation related services. The accommodation reservation services mainly provide accommodation booking services. Other services mainly include attraction ticketing, ancillary value-added user services and advertising services.
- The worst could be over. China Tourism Academy released a report stating that domestic tourism had a downturn in 1H22 due to the covid outbreaks and the ensuing lockdowns. In 1H22, travelers made 1.46bn domestic visits, down 22.2% YoY. Revenue dropped by 28.2% YoY to US$173bn. However, the tourism market started to recover in June as the number of travellers recovered to 60% of last year’s level. It is expected to rebound further in July.
- Resumption of inter-provincial group tours. At the beginning of June, more than ten Chinese localities moved to restart inter-provincial group tours, after the Ministry of Culture and Tourism (MCT) announced more targeted anti-epidemic measures in an effort to boost tourism.
- 1Q22 financials and operations review. Revenue grew by 6.5% YoY to RMB1.72bn. Adjusted net profit dropped by 18% YoY to RMB298.9mn. Average MAUs grew by 4.5% YoY to 234.2mn. Average MPUs grew by 16.1% YoY to 27.3mn.
- The updated market consensus of the EPS growth in FY22/23 is 17.8%/72.0% YoY, respectively, translating to 36.2×/21.1x forward PE. The current PER is 47.5x. Bloomberg consensus average 12-month target price is HK$17.68.
(Source: Bloomberg)
Samsonite International S.A. (1910 HK): Travelling peak season has come
- RE-ITERATE Buy Entry – 16.5 Target – 18.0 Stop Loss – 15.8
- Samsonite International S.A. is a Hong Kong-based company principally engaged in the design, manufacture, sourcing and distribution of luggages, business and computer bags, outdoor and casual bags, travel accessories and slim protective cases for personal electronic devices. The Company operates its business through three segments. The Travel Bag segment is engaged in travel products with suitcases and carry-ons of three main categories, including hard-side, soft-side and hybrid luggages. The Casual Bags segment is engaged in daily use, including different types of backpacks, female and male shoulder bags and wheeled duffel bags. The Business Bags segment is engaged in business use, including rolling mobile office bags, briefcases and computer bags.
- Air travel recovery continued to gain momentum. According to IATA, the total demand for air travel in May 2022 (measured in revenue passenger kilometers or RPKs) was up 83.1% YoY. Global traffic is now at 68.7% of pre-Covid levels. May domestic air travel was up 0.2% YoY. Overall, May domestic traffic was 76.7% of May 2019. International RPKs rose 325.8% YoY in May. May 2022 international RPKs reached 64.1% of May 2019 levels.
- 1Q22 results review. Net sales jumped by 67.7% YoY to US$576.6mn. Operating profit arrived at US$58.1mn compared to a loss of US$47mn during the same period last year. Profit attributable to the equity shareholders arrived at US$16.4mn in 1Q22 compared to a loss of US$72.7mn in 1Q21. The effects of the COVID-19 pandemic on demand for the company’s products moderated due to the continued rollout and effectiveness of vaccines leading governments in many countries to further loosen social-distancing, travel and other restrictions, which has led to the continuing recovery in travel. The company will announce 2Q22 results on 17th August.
- The updated market consensus of the EPS growth in FY22/23 is 1,100%/49.2% YoY, respectively, translating to 18.4×/12.3x forward PE. The current PER is 30.8x. Bloomberg consensus average 12-month target price is HK$22.43.
United States
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- American Express Co (AXP US) climbed 1.9% as growth in travel and entertainment spending helped American Express beat Wall Street estimates. The company reported $2.57 in earnings per share on $13.40 billion of revenue in the second quarter. Analysts surveyed by Refinitiv had pencilled in $2.41 per share on $12.50 billion of revenue.
- Snap Inc (SNAP US) plunged 39.1% after the company reported disappointing results in the second quarter. The Snapchat parent company, which also said it plans to slow hiring, cited Apple iOS changes and slowing demand for its online advertising platform among the reasons for the miss on the top and bottom lines. Snap got hit by a wave of Wall Street downgrades on the back of the results.
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Singapore
- Acesian Partners Ltd (ACP SP) shares rose 23.1% on Friday. It provided earnings guidance for the six months ended 30 June 2022. For the period, the Group is expected to report a significant improvement in profit before tax for the six months ended 30 June 2022, as compared to the six months ended 30 June 2021. The expected improvement in PBT is mainly attributable to an increase in revenue from their manufacturing segment, which was primarily due to progressive order delivery from several significant new sales orders as announced on 27 April 2022.
- Genting Singapore Ltd (GENS SP) shares rose 4.5% on Friday. Maybank Singapore has upgraded Genting Singapore to “buy” from “hold” after competitor Marina Bay Sands saw a recovery in its earnings in the second quarter of 2022. The research team noted that the results reflect operations after Singapore opened its borders on Apr 1 and removed Covid-19 testing requirements on Apr 26. The read on MBS’ results is favourable for mainboard-listed Genting Singapore’s Resorts World Sentosa, said analyst Yin Shao Yang in a report on Thursday. He added that MBS operations recovered faster than expected even without Chinese gamblers. On top of upgrading its call on the resort operator, Maybank has raised its target price on Genting Singapore to S$0.85 from S$0.83.
- Geo Energy Resources Ltd (GERL SP) shares rose 3.7% on Friday. Many countries are ramping up coal to keep up with rising energy demands. Earlier this year, Beijing capped coal prices and pushed for more coal production. Already, the country’s 60% power requirement comes from coal. Now, China has decided to increase its reliance on low-cost coal to help boost its economy and push past temporary power shortages. Meanwhile, India, the world’s second-biggest coal importer, saw record thermal coal deliveries this June. In fact, the country’s thermal coal imports were up 35% to 19.22 million tons in June this year. Over the past few years, India has been reducing the amount of thermal coal sourced from Australia. Instead, the country has increased imports of cheaper, lower-quality coal from Indonesia.
- AEM Holdings Ltd (AEM SP) and Frencken Group Ltd (FRKN SP) shares rose 2.9% and 1.7% respectively on Friday. Analysts from RHB Group Research and UOB Kay Hian are keeping their “overweight” call on the Singapore technology sector. Analyst John Cheong is remaining positive on the sector ahead of the release of their results for the 2QFY2022. The RHB analyst sees the sector’s valuations as attractive after tech stocks corrected by some 50% to 70%, especially SGX-listed counters. “We believe a company’s ability to pass on costs to its customers will likely determine its earnings resiliency against that of peers,” he writes. “Manufacturing stocks have been largely impacted by the global component shortages of the last two years,” says Seet. “However, we think that this will likely ease in 2HFY2022, which will lead to a much better performance for this year and – possibly – lead to a positive sector re-rating,” he adds.
Hong Kong
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Top Sector Losers
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Food Additives & Flavouring | -3.85% | Huabao International Holdings Ltd (336 HK) |
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Coal | -1.19% | China approves $458 million coal project in Inner Mongolia region Yankuang Energy Group Co Ltd (1171 HK) |
- Golden Solar New Energy Technology Holdings Ltd (1121 HK) shares rose 8.9% on Friday. It was reported that Golden Solar’s heterojunction large-scale silicon wafer project is expected to be fully put into operation in 2023, and will have an annual production capacity of 20GW of heterojunction matrix materials. When the project is completed, it is expected that the Group’s monocrystalline silicon wafer production capacity will rank among the top monocrystalline silicon wafer production capacity in the world, and is expected to become the world’s top five monocrystalline silicon wafer supplier with production capacity.
- Helens International Holdings Co Ltd (9869 HK) shares rose 8.7% on Friday. The company’s new store model “Hailun Si Yue”, which incorporates popular night-time eateries found in low-tier cities such as food stalls and taverns, performed significantly better than the original model. CITIC Construction Investment also stated that Helen’s new model has a good initial operation result during the year. If it uses its regional resource advantage, it will lead to new possibilities for store expansion, and will eventually become an important driving force for development in the future.
- NagaCorp Ltd (3918 HK) shares rose 6.0% on Friday. NagaCorp announced that the company was informed by the controlling shareholder and executive director Dr. Chen that from July 19, 2022 to July 20, 2022, Dr. Chen has completed the 1.943 billion shares (approximately 44.76% of the total issued shares as at the date of this announcement) transfer to the trustee, The Sakai Trust. The establishment of The Sakai Trust and the transfer are solely for the purpose of Dr. Chen’s family wealth and succession planning. As at the date of this announcement, Dr. Chen is the sole beneficiary of The Sakai Trust. The company believes that the transfer will not affect the company as a whole.
- Huabao International Holdings Ltd (0336 HK) shares fell 27.3% on Friday. On the evening of July 21, Huabao International disclosed that it received a notice from the company’s co-chairman and executive director Lin Jiayu on the same day. He received a notice from the Changsha County Public Security Bureau that decided to lift his residential surveillance and take bail pending trial. On January 27 this year, the company announced that Lin Jiayu was under investigation and placed under residential surveillance on suspicion of illegality. It is reported that Lin Jiayu is the son of Zhu Linyao, the actual controller of the company.
- China National Building Material Co Ltd (3323 HK) shares fell 7.4% on Friday. It announced that on July 22, 2022, the company received a notice from China National Building Materials United Investment Co Ltd (Zhonglian Investment), a wholly-owned subsidiary of the company’s controlling shareholder increased its holdings of 41.456 million H shares of the company through Shenzhen-Hong Kong Stock Connect from July 14 to 22, 2022 (accounting for approximately 0.91% of the issued H shares of the company as of the date of this announcement). The source of funds for the increased shareholding is the self-raised funds of China United Investment.
Trading Dashboard Update: Take out Capitaland Investment (CLI SP) without any gains and losses at S$3.85. Take profit on Capitaland Integrated Commercial Trust REIT (CICT SP) at S$2.09. Add Mapletree Industrial Trust (MINT SP) at S$2.61.
