SINGAPORE (Sept 16): Genting Singapore, operator of Resorts World Sentosa (RWS), has emerged the winner of the agriculture, hotels and restaurants sector. Companies in these three industries have been combined into a single sector, as there are not enough companies in each sector for a proper ranking. Although the businesses in each sector are different — which makes them difficult to compare — it is still possible to draw some conclusions about how they have been performing over three years.

This is the first year that the BDC is taking into account the companies’ environmental, social and governance initiatives, in addition to its financial performance over the past three years. The ESG score is based on the iEdge ESG Transparency Index of the Singapore Exchange.

Genting Singapore’s ranking was boosted by its scoring the highest in the three-year growth profit after tax category, and the highest in the ESG Transparency Index. The group recorded earnings of $193.1 million for FY2015, which then steadily increased to $384.5 million in FY2016, $685.6 million in FY2017 and $755.4 million in FY2018. Its three-year share price return as well as return on equity (ROE) were strong too, sealing its position at the top.

For its latest quarter, 2QFY2019, however, the group experienced a 5% decline in earnings to $168.4 million, from $177.6 million in 2QFY2018, even though revenue rose 14% y-o-y to $636.8 million. During the quarter, Genting Singapore registered hotel occupancy rates of 85%, lower than the 93% recorded in the previous quarter.

In April, Genting Singapore announced additional capital expenditure of $4.5 billion to refresh and expand RWS, adding new attractions, entertainment and lifestyle offerings from 2020.

Strong ROE from agriculture stocks

Palm oil producer Bumitama Agri recorded the highest three-year ROE score among its peers in the sector. It also came in with the second-highest growth in profit after tax.

Bumitama recorded earnings of IDR124.6 billion ($12.2 million) in its latest 2QFY2019 earnings, 67.9% lower than its 2QFY2018 earnings of IDR388.1 billion. This came on the back of a 24.3% y-o-y drop in revenue to IDR1.8 trillion, mainly attributable to the decrease in average selling prices of crude palm oil (CPO) and palm kernel by 15.4% and 38.8% respectively.

Fellow palm oil producer First Resources scored the second highest in the sector for ESG and ROE, and is ranked overall second in the sector.

In its latest 2QFY2019 results, the group recorded earnings of US$29.3 million ($40.4 million), 54% lower than US$63.7 million in the same period a year ago, owing mainly to the effects of weaker palm oil prices. According to First Resources, this was a result of uncertainties in the macro environment brought on by the ongoing US-China trade tensions as well as pressures from other competing vegetable oils.

CPO price affordability and Indonesia’s biodiesel mandate is expected to be supportive of demand, however, and the group is confident that production will pick up seasonally in 2H2019.

Maybank Kim Eng has “buy” calls on both First Resources and Bumitama, with price targets of $1.80 and 80 cents respectively.

Hotels have best shareholder returns

Mandarin Oriental International, a member of the Jardine Matheson Group, came in third in this sector, though it scored the highest in its three-year shareholder returns and retains its spot as the best-performing stock for two years running. The stock rose 23.4% from US$1.36 on March 31, 2016 to US$1.95 on March 31, 2019, with a compound annual growth rate (CAGR) of 12.8%.

Shares in Mandarin Oriental spiked on Sept 18, 2017, opening 24.7% higher at US$2.68, after the group announced it had received proposals from potential purchasers to acquire The Excelsior in Hong Kong. Local media reported that the group was offered HK$30 billion for the property. The stock traded at an all-time high of US$2.81 on Sept 22, 2017.

Instead of selling the property, however, the group decided on a US$650 million redevelopment plan. Touted as the tallest hotel in Hong Kong, The Excelsior closed its doors in March this year after 46 years to make way for an office tower.

Another hotel giant Shangri-La Asia scored the second highest in its three-year shareholder returns. The group currently owns and/or manages hospitality properties under the brands Shangri-La Hotels and Resorts, Kerry Hotels, Hotel Jen and Traders Hotels. Under its portfolio, it owns a total of 82 hotels, manages 20 hotels and has 14 hotels under development.

Shares in Shangri-La Asia have increased at a CAGR of 8.4% from HK$8.62 on March 31, 2016 to HK$10.98 on March 31, 2019. For FY2018, the group paid out a total of 22 HK cents in dividends, compared with just 17 HK cents in FY2017.

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Amara enjoys broad-based gains from various segments

Amara Holdings came up as the winner in the hotels/restaurants sector under the Centurion Club Awards, as it scored the highest three-year shareholder return and growth in profit after tax among its peers in this sector. It also scored well in terms of return on equity.

The integrated lifestyle group with premium hotel, property, specialty restaurant and food service brands under its belt has been listed on the Singapore Exchange since Aug 15, 1997.

The company was founded by the late Teo Teck Huat. It was originally a building construction company. And now, under its portfolio, the group has four Amara hotels in Singapore, Thailand and China; two 100 AM integrated office and retail properties in Singapore and China; as well as six residential properties in Singapore.

In its latest 2QFY2019 results, Amara posted a 49% increase in profit attributable to shareholders to $1.6 million, from $1.1 million in 2QFY2018. However, revenue for the quarter was 4% lower y-o-y at $24.7 million, owing mainly to lower contribution in the group’s property investment and development segment, as well as hotel investment and management segment.

Amara believes that the hospitality market in Singapore will remain challenging, despite healthy visitor arrivals reported. Business remains uncertain, as tourist spending has fallen. Competition is also expected to be tough, owing to new supply and rising costs. The company warns that the 2019 property market is likely to be weaker because of the US-China trade tensions.