$SHANG / 5517 (SHANGRI-LA HOTELS (MALAYSIA) BERHAD)
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*Shangri-la: Riding on the trend of tourism revival*
馃泿 Shang owns 5 hotels in Malaysia: 1 in KL, 3 in Penang, 1 in Sabah.
馃泿 The average occupancy rate is recovering, reaching *67% in 1QFY24 vs. 71%-73% in FY17-FY19*.
馃泿 The average revenue per available room in FY23 *was only 1% lower than the FY19 level*, primarily driven by a strong rebound in room rates for its Penang hotels, despite their smaller contribution.
馃泿 Notably, the Sabah hotel, a major contributor accounting for 30% of FY23 PBT, had its revenue per available room 19% below the FY19 level. This suggests *potential upside for the group if the Sabah hotel recovers*.
馃泿 The Sabah hotel was historically popular with China tourists (50% during pre-covid vs. current 20%-30%). Hence, visa-free entry for Chinese nationals could accelerate the hotel's recovery.
馃泿 Shang is considered a *dividend stock*, with the majority of its earnings distributed as dividends. In FY17-FY19, the dividend payout ratio was 91%-104%.
馃泿 It distributed 15sen/year during the periods and it was valued at targeted div yield of 2.8%-3.2%.
馃泿 Assuming a RM40-44mil PAT in FY24, this indicates a *dividend of approx. 10 sen*, using targeted div yield of 3.2% (take the higher range to exclude Dr Yu effect), this implies a *TP of RM3.12*. A full recover to pre-covid level (dividend: 15 sen) would imply a *TP of RM4.69*.
馃泿 Technical wise, the share price appears to be *bottoming out* with support close to the current level.
(I) Pattern: it has formed an inverse head and shoulders pattern with support at RM2.14-2.20.
(ii) 120MA: RM2.17 serve as another support for the share price.
(ii) An uptrend will be confirmed upon breaking through RM2.64, which is likely if the fundamentals and hotel recovery remain solid.