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5 Things I Learnt from Shangri-La Asia Limited Group’s Latest Annual Report

Hotels have been among the hot stocks in the month of May. Among them, Shangri-La Asia Limited Group (SGX:S07), with its 4% gain in the month, was the second biggest gainer in the sector. With that in mind, here are five things that investors should know about Shangri-La Asia.

Among the finest in the industry

Shangri-La hotels are considered one of the most luxurious hotels in Asia. If you’ve been to one, you will most certainly understand why. Its hotels are renowned for its majestic design and impeccable service and consistently rank among the top hotels in the world. The Shangri-La Hotel in Singapore is also often used for important occasions and diplomatic meetings.

Surpassed the 100 hotel landmark in 2017

With the opening of six new hotels in 2017, the group now owns, leases or manages a total of 103 hotels. There are 86 hotels under its flagship brand – Shangri-La hotels and resorts, six under the Kerry Hotels brand, 18 under the Hotel Jen franchise and three Traders Hotels.

In addition, the group has 13 more hotels under development. Five of which will be fully owned by the group, with another eight going to be managed by them. This will bring the total to 116 hotels.

Breakdown of the group’s business

The group earns its revenue through two main segments – the hotels they own and those that they manage. Below is the breakdown of revenue earned in 2017.

Source: Shangri-La Asia 2017 annual report

From the table above, we can see that the group did well in 2017. There was broad-based revenue growth across all segments of its business except for property sales, which contributed to a small portion of revenue.

The growth was driven largely by the six new hotels opened during the year. Its existing portfolio of hotels did well with revenue per available room increasing in China, Malaysia, Thailand and Australia.

Earnings increased in 2017

Earning before interest, tax, depreciation and amoritsation (EBITDA), a common metric used to exclude non-cash expenses and fluctuations in interest and tax rates, rose 2.7% to US$794.7 million. The increase in EBITDA was slower than its revenue increase due to opening-related expenses for its six new hotels. The group also suffered earnings loss due to the renovation of its flagship Shangri-La Hotel in Singapore.

Outlook remains positive for 2018

The Mainland China hospitality market, where the majority of the group’s operations are held, continues to grow. According to the management of Shangri-La, the hotel market in Tier 1 and Tier 2 cities strengthened in 2017 and they expect to see continued improvement in 2018.

Likewise, management has forecast improved performance in Singapore. With the renovation of Shangri-La Hotel in Singapore completed, the group can take advantage of the improvement in the local hospitality sector. Overall, it looks likely that the group can build on its strong 2017 performance to deliver yet another year of growth in 2018.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.