I might not be a self-proclaimed staycation expert, nor do I jet-set around the world frequently.
But I count myself lucky to have experience a handful of 5-star hotels. Whether it’s staying overnight, or just having a meal at their restaurants, I’d like to think I know a thing or two when it comes to posh hotel service and experiences.
Banyan Tree Holdings Ltd (SGX: B58) is in a class of its own. Although my past experiences were limited to venturing into Banyan Tree KL for spa and dinner a few years back, the experiences has always been special.
Not that the likes of St Regis, Marriott and Ritz-Carlton aren’t great, but Banyan Tree just has that something that resonated with me.
For those unaware, Banyan Tree is proudly Singaporean, and is one of the few multinational independent hospitality brands out there.
And as we all know, revenge travel has come and gone, so why is Banyan Tree the hotel stock that is sitting at almost a +100% gain?
It’s another David vs Goliath story
When comparing Banyan Tree side by side with other well-known hospitality players, we see yet another David vs Goliath story.
Genting Singapore Ltd (SGX: G13) is the most well-known and integrated hospitality and leisure business, and it’s relatively larger than the rest of the other players. Hotel Properties Ltd (SGX: H15), a renowned operator of hotel brands including the likes of Four Seasons, COMO and Concorde, also has a collection of hotels globally. Acrophyte Hospitality Trust (SGX: XZL) on the other hand, operates Marriott, Hyatt and Hilton hotels but its portfolio is predominantly in the US.
The operating income supremacy
Operating income wise, Banyan Tree reported a staggering YoY growth of +1,247% for FY23, followed by another +100% YoY for FY24. The sudden surge was most likely due to one-off profits, as it is mainly due to a S$2.7 million fair value gain on investment properties, which reflects an increase in the appraisal value of some of its owned or leased properties.
Let’s also not forget the S$0.6 million gain from a bargain purchase, resulting from the TRL (The Royal Le Meridien) transaction, likely involving favourable acquisition terms or asset revaluation.
That said, if judged by net margins excluding extraordinary gains, Banyan Tree’s profitability, while still superior to most of its peers, is still behind Genting Singapore.
Revenge travel is clearly over
Is Banyan Tree’s top line still riding on revenge travel? A quick look at the revenue growth YoY suggest otherwise, as top line growth has definitely normalised since FY2021, which marked the peak of the revenge travel wave.
So even though Banyan Tree’s one-off profits have lifted stock prices up by +100% this year, this feat could just be temporary.
And the company isn’t really a dividend player, so any future shareholder returns of similar magnitude might be fairly remote.
Verdict
Some companies are great from a consumer’s lens, not so much from an investor’s lens.
For me, Banyan Tree falls into this same category – similar to Singapore Airlines Ltd (SGX: C6L), they might get punished during the pandemic, but recovers swiftly when things normalised. Sometimes even outperforming the overall index.
But when investing is viewed as a marathon and not a sprint, the last 10 years have seen the SPY and STI return more than Banyan Tree.
To reiterate, traders who’ve spotted the potential rally should take position and ride it out, but for long-term investors, at least I have not observed clear indications that the stock would be a great hold over the long haul.
It’s +100% YTD is impressive, but it would take a fair bit more for this kind of performance to be replicated in the upcoming fiscal years.
What do you think?
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