Time for Singapore’s Travel Stocks to Soar After Border Reopens
Borders are finally opening more than 2-years after Covid-19. As travelers return to the skies, Singapore travel and its travel stocks are ready for a boost.
Aviation and travel stocks in Singapore are beginning to rebound from the low levels it was at during the pandemic. Now that the borders are open and travel curbs are being eased in countries, hopefully, the worst is now over.
Singapore Airlines Is Ready for A Turnaround
Singapore Airlines (SIA), the Republic’s national carrier, is ready for a turnaround. SIA has managed to narrow the loss experienced in the current financial year that just ended. The prediction is that SIA will return to its profitability state annually by this year.
Analysts are anticipating that SIA might be able to get at least S$160 million in its net profit for 2023. More bullish experts are even going as far as to say S$500 million. As Singapore travel picks up, the airline is still not out of the woods.
Especially with the airline looking to rebuild the workforce by reversing salary cuts.
Uncertainties Still Linger In the Air
Despite the good news happening on the Singapore travel front, caution should still be exercised. Covid-19 uncertainties are not completely gone, especially with a new strain emerging. The rising cost of food, manpower, and crude oil, still threaten the recovery process.
Monetary policies are also still tightening faster than expected. A global recession now could threaten to derail any progress that has been made. Should that happen, travel is going to come to a halt again as people shift their focus toward saving money.
Moreover, there is still the threat of the virus to think about. The Covid-19 virus continues to evolve, and that means it still poses a risk to the travel sector. The higher cost of staffing to meet the ever-growing needs is also something that SIA and SATS need to think about. Costs will definitely impact their bottom line results in the long term.
SIA and SATS Financials
The Singapore Government’s wage support has played a crucial role in helping to boost the financials of both SIA and SATS. SIA Engineering’s full-year net profit was reported at S$65.7 million for FY2022. However, this boost from last year is still “largely on paper”.
SATS’s net profit was reported at S$112.2 million in FY2022, excluding any reliefs it received from the Government. Rising food costs are one of the many challenges this ground handler faces. Other challenges include operating costs and manpower.
Given all the factors at stake, investors are adopting a “wait and see” approach as far as Singapore travel aviation stocks are concerned. Tourists and travelers are definitely making their way into Singapore again. The question is whether companies can ensure that costs don’t eat into their revenue growth too much.
If share prices are going up, they must move out of the current range. For that to happen, significant earnings must take place in Singapore travel.
A More Optimistic Outlook for Hospitality
The hospitality sector has a more optimistic outlook compared to aviation. As far as the preferred choice of stocks, Genting Singapore comes out top because of the borders reopening. This is boosted even more by the fact that Singapore is easing its domestic travel rules. Larger groups of work-related travel and events are now allowed.
This means that up to 1,000 people can travel for business-related activities. Businesses are also putting their faith in hotels with better occupancy and room rates being offered as Singapore travel begins to pick up. CDL Hospitality and Ascott Residence Trust are also dabbling in the “extended-stay” asset to help them diversify their portfolio. These are all measures to help recover from the effects of Covid-19.
The hospitality industry hasn’t been slacking and has been doing everything it can to strengthen its portfolio. Other stable streams of income are being explored while most hospitality trusts keep trading at 15% to 20% below their pre-pandemic levels.
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