3 Companies Poised to Benefit from Vaccinated Travel Lane Scheme

During a press conference held on Saturday (9 October), Singapore’s Transport Minister, Mr. S Iswaran, announced that Singapore will be expanding its Vaccinated Travel Lane (“VTL”) scheme to 8 more countries - Canda, Denmark, France, Italy, Netherlands, Spain, the U.K. and the U.S.

The expanded VTL scheme will open up quarantine-free travel for those who are vaccinated, with mandatory pre-departure COVID-19 tests.

This latest effort to further re-open our borders could have a boost on our overall economy, especially in the tourism sector.

With this latest announcement, we will be looking at 3 companies that could potentially benefit from a new international tourists' influx:

• Straco Corporation Limited (SGX: S85)
• Frasers Hospitality Trust (SGX: ACV)
• OUE Commercial REIT (SGX: TS0U)

1) Straco Corporation Limited (SGX: S85)

Straco Corporation Limited (“Straco”) is a leading developer and operator of aquatic-related facilities and tourism-related assets.

Straco’s main operating assets include Shanghai Ocean Aquarium, situated in the New Pudong Area, next to Shanghai’s landmark Oriental Pearl Tower; Lixing cable car service at Mount Lishan in Lishan in Lintong District, Shaanxi province; Underwater World Xiamen on the scenic Gulangyu Island, a key tourist attraction of Xiamen City, and the Singapore Flyer, an iconic landmark located in the Marina Bay skyline.

Key Statistics

Financial Performance

For its trailing 12-month performance, Straco’s revenue surged by more than 53% to S$45.19 million. The higher revenue was contributed from its China attractions as well as Singapore Flyers, on back of significant jump in overall visitation figure.

With higher revenue and the award of insurance claim relating to the Singapore Flyer’s breakdown incident in 2018, Straco managed to stage a turnaround in its bottom line, with a profit after tax of S$16.04 million.

For some perspective, Singapore Flyer’s revenue and visitor numbers plummeted more than 90% in the past year as travel restrictions and borders closures resulted in sharp decline of international tourist arrivals. The re-opening of borders will attract more visitors to Singapore Flyer, an iconic attraction in Singapore.

2) Frasers Hospitality Trust (SGX: ACV)

Frasers Hospitality Trust (“FHT”) is established with the principal strategy of investing globally, on a long-term basis, in income-producing real estate assets used primarily for hospitality purposes.

FHT provides investors exposure to one of the largest international hospitality portfolios by number of keys. Its geographically diversified portfolio of 15 quality assets are in prime locations across 9 key cities in Asia, Australia and Europe.

Key Statistics

Financial Performance

For its trailing 12-month financial performance, FHT’s revenue declined by 25.6% to just S$65.89 million. The decline in its topline can be attributed to the current COVID-19 pandemic, which saw a decline in the overall occupancy rate and room rates.

As a result of the ongoing difficult operating environment and the need to preserve cash, FHT’s net income available for distribution experienced a sharp decline of 66.8% to just S$11.38 million.

3) OUE Commercial REIT (SGX: TS0U)

OUE Commercial REIT (“OUE C-REIT") is one of the largest diversified Singapore REITs with total assets of S$5.8 billion as at 30 June 2021.

With seven properties across the commercial and hospitality segments in Singapore and Shanghai, OUE C-REIT’s portfolio comprises approximately 2.2 million sq ft of prime office and retail space, and 1,640 upscale hotel rooms.

Key Statistics

Financial Performance

For its trailing 12-month financial performance, OUE C-REIT's revenue declined marginally by 2.8% to S$283.54 million. The slight decline was mainly due to its divestment of 50% interest in OUE Bayfront, while the Hospitality segment remained the same as it is under the master lease arrangement, which ensures a minimum rent.

On the back of a slight decline in its topline, OUE C-REIT's net income available for distribution dropped by 0.7% to S$142.75 million.

Conclusion

To conclude, the expansion of VTL scheme to other countries is a positive development for our local tourism and hospitality industry, as the arrival of tourists could help in the increase in tourism receipts for the economy.

Investors who wish to participate in the re-opening theme may consider looking at these 3 small and mid caps counters for a start.

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