#2 Singapore Airlines

What about flights from China to Singapore? Singapore Airlines (SIA) got you covered for the trips between the two countries. SIA is primarily engaged in the business of transporting passengers and cargoes across the world, and also engineering services.

Currently, in Singapore, there are about 38 total weekly flights to China, with SIA estimated to account for about 29 of the weekly flights (including Hong Kong). There is much opportunity for SIA to scale up as the current 38 total weekly flights is only about 10% of the pre-pandemic flight frequencies of 400 per week.

In terms of financial performance, SIA’s trailing revenue of SGD13.2 billion as of September 2022 is close to its pre-pandemic revenue of SGD16.3 billion in 2019. Meanwhile, profits have also rebounded to SGD816.1 million, even exceeding 2019’s profit of SGD721.6 million.

SIA could be a good bet for your portfolio for the following reasons:

1. Dominant position in Singapore’s airline market.
2. Steady dividend yields of 3.0% to 7.6% from 2018 to 2020.
3. Rapid rebound in SIA’s financial performance in 2022.

Meanwhile, most analysts in the market have a HOLD call on SIA, with a target price of SGD5.67. Most investors are already pricing in the recovery of SIA in light of the Chinese tourists returning as SIA is currently trading at a price-to-earnings ratio of 22.1 times compared to the historical median of 9.4 times.

#3 Frasers Hospitality Trust

How can you travel without the hospitality and ease of Frasers Hospitality Trust (FHT)? FHT is a global hotel and serviced apartments trust listed in Singapore, and has assets located within Asia, Australia, and United Kingdom.

FHT stands to benefit immensely from Chinese tourist returning to the destinations of Singapore, Australia and United Kingdom, as revenue from these countries comprised around 82.0% of its total revenue in 2022.

Now, FHT is poised to recover back to its former glory with the boost from Chinese tourism. Its revenue of SGD95.8 million in 2022 is on a strong footing to recover back to the level of SGD149.8 million in 2019. There’s nothing to worry on the profit front as net profits of SGD58.3 million have already exceeded 2019’s level of SGD47.3 million.

This positive sentiment is reflected in the market with most analysts having FHT at a BUY call, of an average target price of SGD0.56. This represents an upside of 13.1%.

Hence, you should have a good look at FHT for the following reasons:

1. Its main assets are situated in Singapore, Australia and United Kingdom which are traditionally favoured destinations for Chinese tourists.
2. High historical dividend yields of around 7.0% to 11.0%.

FHT is currently trading at a price-to-earnings ratio of 16.2 times, much higher than the historical average of 8.5 times as most investors are pricing in a boost from Chinese tourism to FHT’s hotel and serviced apartments businesses in 2023.

#4 Mandarin Oriental

FHT is not the only hospitality-based company listed in Singapore that could benefit. The famous Mandarin Oriental (MO) operates luxury hotels, resorts and residences in 24 countries and territories in the world.

MO’s primary exposure is in Asia with about 75.1% of its assets located here, followed by middle east and Africa (19.6%) and America (5.3%).

The return of Chinese tourism could bring MO back to profitability as it has lost money from 2019 to 2022 due to the pandemic. MO’s trailing revenue of SGD413.5 million (June 2021 to June 2022)  is now nearly back to its pre-pandemic level of SGD566.5 million in 2019.

MO currently has a BUY call from analysts, with a target price of USD2.30. This is an upside of 22.3% from the current share price of USD1.88.

While its four years of losses could be concerning, but you should look at its long-term growth factors first:

1. Established reputation as a hotel operator in the world.
2. Diversified revenue base with operations in 24 countries.
3. Strong long-term outlook from increased tourism spending especially from Chinese tourists.

In terms of valuation, MO is currently trading at a price-to-book ratio of 0.74 times, below the 1.0 times mark. From 2013 to 2019, MO has a dividend yield that ranges from 3.0% to 7.0%.

#5 Straco Corporation

Hey, what about companies listed in Singapore that has a large tourism exposure in China? Presenting Straco Corporation (SC). SC is listed in the Singapore stock exchange and is a developer of tourism-related assets in China.

This includes the Shanghai Ocean Aquarium, Underwater World Xiamen, cable car attractions in Mount Lishan Xian and Chao Yuan Ge, and the Singapore Flyer.

In terms of financial performance, SC’s revenue of SGD41.9 million in 2021 is only about 38.5% of its 2019 revenue of SGD108.8 million while profits are only about 30.0% of 2019 profits. With the re-opening of travels between the various provinces in China, domestic tourism in China is expected to be a big boost to SC’s top- and bottom-line financials and lead to a rebound back to pre-pandemic numbers.

Domestic tourism is a force to be reckoned with. It generated about CNY5.7 trillion in revenue in 2019, which translates to about 5.7% of the entirety of China’s gross domestic product (GDP).

Currently, SC is trading at a price-to-earnings ratio of 37.7 times, higher than its historical average of 14.4 times. Many investors are pricing in the rebound in SC’s revenue and profits in light of the increased domestic tourism in China.

Its current dividend yield is at 2.0% but investors could find more value here as its historical dividend yield ranges from 3.5% to 4.9% from 2017 to 2021.