The Kuok-family controlled hotel chain suffered from a selldown last year because of the protests in Hong Kong. Its portfolio of properties contributes to a strong balance sheet; its well-recognised brand makes it a favourite of travellers.

SINGAPORE (Jan 23): Hong Kong-listed Shangri-La Asia is recognised by travellers for its posh hotels but overlooked by investors as shown from its undervalued share price. The company, part of the Kuok family’s empire, owns and manages hotels under four brands: Shangri-La Hotels and Resorts, Kerry Hotels, Hotel Jen and Traders Hotels. Its largest geography by assets and revenue is China, with around 40%, followed by Singapore and Hong Kong at around 10% each.

Based on Shangri-La’s share price and fundamentals over the past 15 years, it appears to be significantly undervalued given the negative price growth and positive value growth. Chart 1 shows the 1-year, 3-year, 5-year, 10-year and 15year CAGR for Shangri-La’s share price against its weighted value. The weighted value comprised of revenue, adjusted net profits, retained earnings, operating cash flow and free cash flow in order of increasing weight. It is important to note that the adjusted net profits has grown at an average rate of 9.4%, which led to growing dividends for the investor since its dividend policy is tied to recurring operating profits. Secondly, ShangriLa has generated consistent, positive operating cash flow for the past 15 years, but only turned free cash flow positive in FY2017. This trend is seen to continue.

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