DBS Group Research analysts Elizabelle Pang and Derek Tan have initiated coverage on Hotel Properties Limited with a “buy” call and a target price of $4.35.
Hotel Properties Limited is a luxury hotel operator that runs and owns 39 hotels across 15 countries under renowned names such as Four Seasons, Concorde, InterContinental Hotels, Six Senses and Como.
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.
