Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

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Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

Hotel Properties Limited / Equity Bottom-Up

<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
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<p>Company Update</p>
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<h3>Hotel Properties Limited</h3>
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<p><strong>COMPANY DESCRIPTION</strong><br><span style="font-size: var(--content-font-size);">Hotel Properties Limited and its subsidiaries (collectively defined herein as HPL) have principal business activities relating to hotel ownership, management &amp; operation, property development and investment holding.</span></p>
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<p><strong>SUMMARY</strong><br>For the half-year ended 30 June 2021 (1H2021), HPL reported a 17.2% year-on-year (y-o-y) increase in revenue to S$169.6 million from S$144.8 million, largely due to improved hotel revenue and rental income. Cost of sales increased by 1.6% y-o-y to S$150.8 million as revenue rose. As a result, gross profit amounted to S$18.8 million for the period compared to a loss of S$3.7 million in 1H2020. During the period, administrative expenses fell by 16.0% y-o-y to S$22.9 million while finance costs increased by 1.8% y-o-y to S$16.8 million. Other operating expenses dropped by 90.7% y-o-y to S$3.4 million, mainly due to the absence of S$33.8 million in net fair value losses in investments which were recorded in 1H2020. Meanwhile, a loss of S$18.7 million from share of results of associates &amp; jointly controlled entities was recorded for the period, compared to a profit of S$4.2 million in 1H2020. This was mainly attributable to losses incurred by hotel owning associates &amp; jointly controlled entities due to the impact of Covid-19 and given that residential apartments from Holland Park Villas and Burlington Gate in London were fully sold in 2020. Consequently, HPL reported a net loss attributable to ordinary shareholders of S$29.3 million after adjusting for non- controlling interests and distribution to perpetual capital securities. Accordingly, loss per share amounted to 5.62 cents. No dividend was declared for the period as in 1H2020.</p>
<p><strong>RECOMMENDATION</strong><br>Based on its reported net asset value (NAV) per share of S$3.26 as at 30 June 2021, HPL is currently trading at P/NAV of 1.02x. We note that HPL’s hotels (excluding those held by associates &amp; jointly controlled entities) are classified under Property, Plant &amp; Equipment (PPE) on its balance sheet and recorded at historical cost without revaluation. To adjust the hotels’ valuation to reflect current market conditions, we performed a revaluation of several of HPL’s hotels classified as PPE. Based on our revaluation, we derived a revalued NAV (RNAV) per share of S$5.48, which would imply a P/NAV of 0.61x at the current share price of S$3.330. This is lower than the P/NAV of 1.02x based on the reported NAV per share of S$3.26. We believe this may suggest that HPL could be undervalued at the current share price. Meanwhile, our peer comparison results show that HPL’s P/NAV of 0.61x, based on the RNAV per share of S$5.48, is lower than the peers’ average P/NAV of 0.67x. Based on a relative valuation approach, we estimate a target price of S$3.672 if HPL were to trade at the peers’ average P/NAV of 0.67x. This estimated target price represents a 10.3% upside from the current share price of S$3.330. We believe that further upside potential is supported by the possibility of a takeover offer for HPL. Given the above, we will maintain a buy recommendation on HPL.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.


Company Update

Hotel Properties Limited

COMPANY DESCRIPTION Hotel Properties Limited and its subsidiaries (collectively defined herein as HPL) have principal business activities relating to hotel ownership, management &amp; operation, property development and investment holding.

SUMMARY For the half-year ended 30 June 2021 (1H2021), HPL reported a 17.2% year-on-year (y-o-y) increase in revenue to S$169.6 million from S$144.8 million, largely due to improved hotel revenue and rental income. Cost of sales increased by 1.6% y-o-y to S$150.8 million as revenue rose. As a result, gross profit amounted to S$18.8 million for the period compared to a loss of S$3.7 million in 1H2020. During the period, administrative expenses fell by 16.0% y-o-y to S$22.9 million while finance costs increased by 1.8% y-o-y to S$16.8 million. Other operating expenses dropped by 90.7% y-o-y to S$3.4 million, mainly due to the absence of S$33.8 million in net fair value losses in investments which were recorded in 1H2020. Meanwhile, a loss of S$18.7 million from share of results of associates &amp; jointly controlled entities was recorded for the period, compared to a profit of S$4.2 million in 1H2020. This was mainly attributable to losses incurred by hotel owning associates &amp; jointly controlled entities due to the impact of Covid-19 and given that residential apartments from Holland Park Villas and Burlington Gate in London were fully sold in 2020. Consequently, HPL reported a net loss attributable to ordinary shareholders of S$29.3 million after adjusting for non- controlling interests and distribution to perpetual capital securities. Accordingly, loss per share amounted to 5.62 cents. No dividend was declared for the period as in 1H2020.
RECOMMENDATION Based on its reported net asset value (NAV) per share of S$3.26 as at 30 June 2021, HPL is currently trading at P/NAV of 1.02x. We note that HPL’s hotels (excluding those held by associates &amp; jointly controlled entities) are classified under Property, Plant &amp; Equipment (PPE) on its balance sheet and recorded at historical cost without revaluation. To adjust the hotels’ valuation to reflect current market conditions, we performed a revaluation of several of HPL’s hotels classified as PPE. Based on our revaluation, we derived a revalued NAV (RNAV) per share of S$5.48, which would imply a P/NAV of 0.61x at the current share price of S$3.330. This is lower than the P/NAV of 1.02x based on the reported NAV per share of S$3.26. We believe this may suggest that HPL could be undervalued at the current share price. Meanwhile, our peer comparison results show that HPL’s P/NAV of 0.61x, based on the RNAV per share of S$5.48, is lower than the peers’ average P/NAV of 0.67x. Based on a relative valuation approach, we estimate a target price of S$3.672 if HPL were to trade at the peers’ average P/NAV of 0.67x. This estimated target price represents a 10.3% upside from the current share price of S$3.330. We believe that further upside potential is supported by the possibility of a takeover offer for HPL. Given the above, we will maintain a buy recommendation on HPL.





(Non-SGX Report) Company Update: Hotel Properties Limited