CFA Society Singapore
SINGAPORE (Apr 5): The $9 billion investment to renew and refresh Singapore’s two integrated resorts (IRs) could provide some vibrancy to the domestic economy in the next few years and whip up some optimism in the city-state, says CGS-CIMB Research.
“The economic implication of this transformation will first be felt in the construction sector before having a multiplier effect on the rest of the economy via service-producing industries (jobs creation),” says analyst Lim Siew Khee in a Friday report.
“The construction industry could recover with the flood of contracts and margin expansion in the next two to three years. We anticipate construction demand to rise to $30-35 billion per annum from 2020 from close to $25 billion per annum in 2015-2017,” she adds.
The way Lim sees it, this could benefit construction-related companies such as Yongnam Holdings.
“Yongnam had previously won contracts worth over $340 million for various elements of the Marina Bay Sands resort and is potentially poised to win further structural steelworks from IR expansion,” Lim says.
CGS-CIMB is keeping is “add” call on Yongnam with a target price of 33 cents.
As at 4.11pm, shares in Yongnam are trading 3.8% higher at 19.3 cents.
In addition, the analyst believes IR 2.0 could lift the tourism and hospitality industry in the medium term.
“Potential structural beneficiaries of Singapore’s new initiatives would be companies that are in the Tanjong Pagar, Southern Waterfront and Sentosa vicinity,” Lim says.
Lim says this could bode well for Mapletree Commercial Trust (MCT), which could see higher traffic for Vivocity from the expansion of Resorts World Sentosa.
As at 4.11pm, units in MCT are trading 1.1% down at $1.87.
She adds that Far East Hospitality Trust (FEHT) and Amara could also see higher room rates – at Oasia Hotel Downtown and Amara Hotel, respectively – as a result of the refurbishment of the Tanjong Pagar area.
As at 4.11pm, units in FEHT are trading 0.7% lower at 69 cents while shares in Amara are trading flat at 47 cents.
“Overall demand for corporate hotel and service residences could also see a boost from project management companies for the construction of [IR 2.0],” Lim says. “This would benefit CDL Hospitality Trust, UOL Group and Ascott REIT.”
As at 4.11pm, units in CDL HTrust are trading 0.6% higher at $1.68, shares in UOL are trading 0.6% lower at $7.12, and units in Ascott REIT are trading flat at $1.18.
Meanwhile, she notes that SATS could benefit from the potential development of Marina Bay Cruise Centre 2 and Straco Corporation’s Singapore Flyer could also get a boost from increased visitors as a result of IR 2.0.
As at 4.11pm, shares in SATS are trading 0.8% higher at $5.19 while shares in Straco are trading 3.2% higher at 82 cents.
At the same time, the redevelopment of Sentosa could speed up Keppel Corporation’s plan to develop plot 4 and 6 in Keppel Bay.
As at 4.11pm, shares in Keppel Corp are trading 0.3% higher at $6.57.
To further improve accessibility into Sentosa, RWS will also introduce a driverless transport system offering visitors new and more efficient last-mile connectivity across the Sentosa Boardwalk.
“The driverless transport systems could benefit [ST Engineering] as a smart-nation proxy,” says Lim.
As at 4.11pm, share in ST Engineering are trading flat at $3.81.
Last but not least, the analyst believes expectations of jobs creation from the development of IR 2.0 will sustain staffing demand for HRnetGroup.
As at 4.11pm, shares in HRnetGroup are trading 1.3% higher at 79.5 cents.