3 stocks that could benefit from Singapore’s re-opening

TL:DR

• Singapore has announced a relaxation of safe distancing measures and travel restrictions after reaching “a major milestone” in its Covid-19 journey.
• This would include allowing all vaccinated travellers to enter Singapore quarantine free from 1 April.
• The announced relaxation of measures could spur an improvement in outlook in the transport, travel and hotel sectors.
• Some of the companies which might benefit include ComfortDelgro, SATS, and CDL Hospitality Trust.

What happened?

After more than two years of having to decide on which friends to invite for our Saturday night dinner gathering, those of us in Singapore can now gather in larger groups of up to 10 from 29 March 2022. This change was part of a relaxation in safe management measures announced by Prime Minister Lee Hsien Loong on 24 March.

In his speech, PM Lee shared that Singapore has “reached a major milestone” in its Covid-19 journey, as about 95% of the eligible population has been fully vaccinated. In addition, the Omicron wave appears to be subsiding with daily cases falling to around 10,000 in recent days. We don’t hear of as many of our contacts being down with Covid-19 these days compared to a few weeks ago!

Apart from being able to gather in larger groups, the other key change is that all vaccinated travellers can enter Singapore quarantine-free from 1 April, with no need for vaccinated travel lane (VTL) flights.

3 stocks that will benefit

The announced relaxation of measures could spur an improvement in outlook in the sectors most impacted by the pandemic. These industries would include the transport, travel and hotel sectors.

1. ComfortDelgro

With the relaxation on the group size, more Singaporeans might be keen to have social gatherings outside of their home premises. After all, we are all be bored of the same choices on Grab and delivery fees appear to keep going up! This could drive more people to take taxis as they go around their social gatherings.

In addition, with 75% of employees who can work from home now able to return to offices,  taxi usage could go up further.  

All of this is good news from ComfortDelgro, Singapore’s largest operator of taxis with a fleet of more than 10,000 taxis. Singapore represents more than half of ComfortDelgro’s revenue in 2021.

2. SATS

The other positive development is that all vaccinated travellers can enter Singapore quarantine-free from 1^st April. This could help to spur a recovery in tourism, which has been significantly impacted since the start of the pandemic.

Total visitor arrivals into Singapore fell to just 330,000 in 2021, a fraction of the 19.1 million visitors that came in 2019. Encouragingly, monthly tourist arrivals have improved to 92,800 visitors in December 2021 as vaccinated travel lanes were introduced. This could rise further with the announced relaxation of travel restrictions.

SATS provides services linked to Singapore’s travel industry, including baggage handling at Changi Airport, as well food catering for flights. Its revenue is hence directly linked to the flight traffic into and out of Singapore.

In the last fiscal year, SATS generated 88% of its revenue from Singapore. Close to 55% of revenue came through from aviation-related services.  It could hence benefit from a recovery in tourist arrivals into Singapore.

3. CDL Hospitality Trust

Another sector that could benefit from the increase in tourists coming into Singapore would be hotels. While many had to try generate revenue from Singaporeans going on staycations and inbound travellers serving their quarantine in the past two years, the potential influx of tourists could help to improve their occupancies and room rates.

According to data from Singapore Tourism Board, hotel room revenue in Singapore fell by 32% in the first nine months of 2021 compared to a year ago. Compared to prior to the start of the pandemic in 2019, it was down a staggering 79%!

CDL Hospitality Trust (CDLHT) owns hotels in Singapore such as W Hotel and M Hotel. These Singapore assets represent close to 65% of its total portfolio as of 31 December 2021. Some of the other countries where CDLHT owns hotel assets would be in United Kingdom, Germany, and Maldives.

In FY2021, CDLHT’s portfolio of five Singapore hotels saw an average revenue per available room (RevPAR) of $82, representing close to half of its RevPAR in 2019! This could improve if more tourists start visiting Singapore once again.

What would Beansprout do?

• The Singapore market has continued to do well this year, driven by continued optimism about economic recovery and the attractive valuation of stocks. The announced relaxation of safe management measures and travel restrictions could spur further confidence about an improvement in outlook in the sectors most impacted by the pandemic.
• These industries would include the transport, travel and hotel sectors. In particular, inbound tourists could see a boost with all vaccinated travellers allowed to enter Singapore quarantine-free from 1 April. Some of the stocks that could benefit from this would include ComfortDelgro, SATS and CDL Hospitality Trust.

Apart from these names, shopping malls could also benefit from the increase in group sizes to 10 pax. Check out our article about the best shopping malls in Singapore and how to own them!