Shangri-La poised for hotel industry upturn

NEWS of Shangri-La's confirmation of plans to list on the stock exchange during the year will not come as a surprise to local hotel industry buffs.

The Kuok family has been considering the proposal seriously for at least 18 months, but market downturns and uncertainty in the territory put these tentative plans on hold.

Much depends on the quality of assets that the Kuoks inject into the new listed-vehicle, Shangri-La Asia, but the offer of shares in the group should be well supported by the market.

The group has a well-earned blue-chip name with quality hotels spread throughout the region in reasonable locations.

After Mandarin Oriental there is little for the investor to choose from, as institutions hold many of the larger groups like Hongkong and Shanghai Hotels and Miramar in low regard.

The sector has capitalisation of around $26 billion, representing less than three per cent of the market total.

The regard with which the industry is held from an institutional point of view is illustrated by an SG Warburg Securities report.

Of the seven stocks followed by the broker, all were rated sell or reduce, with the exception of an add recommendation for Mandarin and a hold.

However, Shangri-La's listing comes at a time when earnings over the next few years can expect an upturn in Hongkong and Asia. Occupancy rates are expected to increase, rising to 86 per cent in 1993 to 91 per cent in 1994 and 95 per cent for 1995, according to Standard Chartered Securities.

The impact on room rates during this period is obvious, as supply of rooms is expected to grow by only some three to four per cent from 1993 to 1995.