Singapore is learning to live with Covid after we have reached a high level of vaccinations in the country. Even though we are seeing thousands of Covid cases per day, the majority of the vaccinated suffer either mild or no symptoms.
As long as our healthcare facility can handle serious cases, we will continue to open up the economy. One of the first steps is to open up our borders, allowing more travellers in and out of Singapore without too much hindrances (such as long quarantines).
Singapore VTL Countries
Brunei and Germany were the first two countries under the Vaccinated Travel Lanes (VTL) scheme on 8 Sep 2021. Eight more countries were added in Oct 2021 – Canada, Denmark, France, Italy, the Netherlands, Spain, the UK and the US. From November 2021, South Korea will be included in the VTL too.
These are popular destinations and as we approach the end of 2021, I believe there will be a good number of people looking to travel – especially hodophiles who have been suppressed for too long.
I am not thinking of travelling, at least not yet. But, I am more interested in brainstorming which stocks may benefit from VTLs and here are 10 possible beneficiaries.
#1 – Singapore Airlines SIA (SGX:C6L)
This is obvious.
Having more vaccinated travel lanes means more people would want to fly, given the opportunity. SIA is one of the popular airlines and is so well-loved by Singaporeans that we crashed their website soon after VTLs were announced. The travel thirsty even started queuing at SIA’s service centre in ION!
SIA’s share price has also jumped 10% following the VTL announcement. The excitement fizzled after a while and SIA would need to report better financial results in the coming quarters for the share price to sustain the climb.
Currently, SIA is still operating way below its passenger capacity since the Covid-19 pandemic struck.
It has relied on cargo revenue (68% of Q1 revenue) for the time being while rebuilding its passenger capacity. The VTLs will definitely accelerate its rebuilding and SIA expects to increase its passenger capacity to 37% of pre-Covid levels by the end of 2021 (at 32% in Sep 2021).
I believe with more VTLs announced in the future will bring SIA closer to pre-Covid operating levels.
#2 – SIA Engineering (SGX:S59)
More flights would also mean more maintenance demand and SIA Engineering will definitely see its business improve. The stock market agreed with this thesis and we saw SIA Engineering share price jump 3% (not as much as SIA) the day after more VTL countries were announced.
SIA Engineering should see improvements in revenue from its airframe and line maintenance segment. This segment’s revenue has declined more than 50% compared to pre-Covid period. So there’s some room to catch up.
Under this segment, SIA Engineering provides maintenance and overhaul, modification and refurbishment programs. It also provides aircraft certification and technical ground handling services such as push-back and towing, and the provision of aircraft ground support equipment and rectification work. Hence, it is obvious that increased flights (especially from SIA) will bring higher revenue to SIA Engineering.
Side note: SIA has a 77.58% stake in SIA Engineering.
#3 – SATS (SGX:S58)
Update: On 28 Sep 2022, SATS announced a proposed acquisition of Worldwide Flight Service.
SATS provides a variety of services needed at the airport – airfreight and baggage handling, aviation security as well as inflight catering. The demand for these activities fell with the lack of flights since Covid. The saving grace for SATS was that its food catering, processing and distribution services were not completely related to the travel sector (for example it owns SFI which provides food to the SAF.)
Even so, SATS’ FY21 revenue has declined by 50% compared to FY20 (pre-Covid). Notably, the aviation revenue has plunged 66.5%. A resurgence of flights should recover the lost revenue.
SATS share price jumped 4% after the VTL announcements.
#4 – ComfortDelGro (SGX:C52)
I was once in a taxi and remarked that the business should be better because people are returning to the office (when the restrictions were lifted). But the driver shared with me that the tourists were important during non-peak hours for his business. It contributed to about half of his earnings!
With the VTL, we should also see more travellers visiting Singapore and taxi drivers should see an uptick in their takings. ComfortDelGro would be able to halt its taxi rental waivers or driver relief and finally improve its revenue.
The rental waivers were substantial to their revenue. You can see that the taxi segment revenue segment declined from 17% in 2019 to 12.5% in 2020:
#5 – Jumbo (SGX:42R)
Jumbo was a popular hunt and a must-try restaurant for the famous Singapore chilli crab among tourists, pre-Covid. As Singapore continues to restrict dining to 2 pax, JUMBO had been hit by a double whammy, losing business from larger gathering of folks who wished to dine out to celebrate occasions. It has been tough on the restaurant chain.
Its FY2020 revenue has dipped 36% compared to the previous year.
If we dive deeper into their geographical segments, we can see that Singapore, which was the main revenue centre, was hit more than the PRC segment. That’s a 45% revenue decline for Singapore versus a 22% drop in PRC business. This shows that Jumbo badly needs the tourists to patronise again.
#6 – Far East HTrust (SGX:Q5T)
Besides travelling around and eating, tourists will need a place to stay. The hospitality sector’s future has never looked so grim before. It could have been worse if not for the business of housing quarantined individuals.
Although average hotel occupancy has been improving, it remains low at 63% in Sep 2021.
Far East HTrust runs 3 hospitality brands (Village, Oasia and Quincy) in Singapore and would benefit from Singapore’s border opening.
#7 – Ascott Trust (SGX:HMN)
Ascott Trust would be another beneficiary as it runs service apartments and would cater to the increasing number of business travellers. The share price jumped 6% after the VTL announcement.
#8 – Genting (SGX:G13)
Genting was another business that was badly hit by Covid. Its revenue has tanked 57% in 2020!
This is not surprising as it needs tourists to contribute a large part to its revenue, be it Resort World Sentosa, casino or hotels.
Genting runs one of the two integrated resorts in Singapore and is a key attraction for tourists. VTLs are definitely good news for the company.
The share price did well, jumping 5% upon the VTL announcement.
#9 – PropNex (SGX:OYY)
This is probably the least obvious link to VTLs. What has real estate agencies got to do with travellers? We have to understand that Singapore is a hot destination for property investors in the region.
The number of foreign buyers had dwindled during the heights of Covid-19 because it can be difficult to make big purchases without being about to view the properties. Hence the travel restrictions kept the foreign buyers at bay.
VTLs should bring more interested buyers to visit Singapore again and make deals. In fact, the number of foreign buyers buying luxury apartments have almost doubled in 2021 as travel restrictions have eased. But this is still below the pre-covid levels and therefore, there’s room to grow.
Both PropNex and APAC Realty have done very well in the past 1 year as the property market soared. Singapore private home prices have soared for 6 quarters consecutively. The inflow of foreign buyers may just add more legs to the bull run.
Although its association with the VTL is less direct, investors seem to be bullish about PropNex’s prospects going forward. That said, I wouldn’t attribute PropNex’s ~3% increase to the VTL announcement:
#10 – APAC Realty (SGX:CLN)
The same goes for APAC Realty. Its share price would likely be more sensitive to its earning results and upcoming strategic moves.
That said, APAC Realty has had a good run since I mentioned about Singapore property stocks back in Aug 2020.
Which stock do you think would be the biggest beneficiary of VTL?
I believe Singapore is unlikely to impose another lockdown-like measure and will want to live with Covid. That means we will be opening up our borders and allowing inbound and outbound travels. This is good news for companies that have suffered a big impact due to Covid.
I have suggested 10 stocks that may benefit from VTLs. I believe there can be other stocks that I may have missed out. Let me know in the comments if you have better ideas. Also, let me know your favourite bet.
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