MANDARIN Oriental : M04 +1.25%saw its net loss widen to US$69.2 million for the first half of the year from US$18.3 million in the year-ago period.

 

The hotel investment and management group booked a net fair value loss of S$140.2 million on its investment assets &ndash a commercial property under development and a completed residential property. 

 

On Friday (Jul 28), Mandarin Oriental said the valuation of the Causeway Bay site under development decreased between Dec 31, 2022 and Jun 30, 2023, resulting in a non-trading loss for the group of US$141 million.

 

Loss per share came in at 5.48 US cents. The previous year&rsquo s loss per share was 1.45 US cents. 

 

H1 revenue rose 31 per cent to US$260.7 million, led by strong performance in the group&rsquo s hotels in Europe and the Middle East, which achieved record rates and strong occupancies.

 

This was slightly offset by a more gradual recovery of business in Hong Kong and the temporary closure of Mandarin Oriental Singapore in March 2023 for refurbishment, the group said. 

 

For the first half of 2023, combined total revenue of hotels under management was US$882 million, 30 per cent higher than the US$679.4 million recorded from the year before. Total revenue was also 38 per cent higher than the 2019 figure, before the Covid-19 pandemic hit. 

 

Net debt fell to US$233 million as at Jun 30, from US$376 million at the end of 2022. 

 

An interim dividend of 1.5 US cents was declared for the half year. It will be paid on Oct 11. 

 

Looking ahead, Mandarin Oriental said it has several new openings scheduled in the second half of 2023, including four new hotels, a rebranding project in Saudi Arabia and a standalone residences project in New York. 

 

It has secured four new hotel management contracts and a standalone residences project in Madrid, which will take the group&rsquo s pipeline to 27 hotels and two standalone residences over the next five years. 

 

Giving an update on Mandarin Oriental Singapore, group chairman Ben Keswick said the hotel is on track to re-open in September. 

 

DBS Group Research has initiated coverage on Mandarin Oriental : M04 0% with a &ldquo buy&rdquo call and target price of US$2.30 on the hotel group&rsquo s portfolio, which represents a 14 per cent upside from the counter&rsquo s last trading price of US$2.02 on Friday (Aug 26). 

 

Mandarin Oriental is a global hotels, resorts and residences operator in the luxury segment. The group currently operates 36 hotels and 7 residences in 24 countries and territories. 

 

DBS&rsquo s sum-of-the-parts valuation includes a 40 per cent discount on owned hotels and The Excelsior in Hong Kong, which is currently under redevelopment, as the brokerage believes the stock is more illiquid compared to its global peers. 

 

Its analysts note that the stock trades at a price-to-net asset value multiple of 0.75 times, which is &ldquo attractive&rdquo at current levels being half a standard deviation point below its 5 year historical mean. 

 

While DBS is cognisant that the hospitality industry was one of the hardest hit sectors by Covid-19, its analysts think the worst is now over for Mandarin Oriental as they anticipate continued heightened enthusiasm for travel due to &ldquo immense pent-up demand&rdquo . 

 

In their view, Mandarin Oriental particularly stands to benefit from less price-sensitive travellers, as being in the luxury segment relatively insulates the group from dampened demand due to increased travel cost pressures.  

 

Coupled with positive macroeconomic factors of low unemployment rates and high levels of excess savings, willingness to pay is high among the hotel group&rsquo s target customers and will give their performance a boost, said analysts of DBS. 

 

They are especially optimistic in the recovery of Mandarin Oriental&rsquo s occupancy rates, and expect the rebound to continue from H2 FY2022 onwards with revenue per available room (RevPAR) forecasts in FY2022 and FY2023 at US$251 and US$294, or 91 per cent and 107 per cent of pre-Covid-19 levels, respectively. 

 

DBS also foresees a turnaround in profitability and the resumption of dividend payouts by FY2023. 

 

DBS&rsquo s positive coverage on the stock is also supported by Mandarin Oriental&rsquo s strong development pipeline of managed properties that can be expected to help boost bottom-line growth upon completion. 

 

&ldquo With no equity investment required and higher margins for management contracts, we expect these managed properties to help boost bottom-line growth upon completion,&rdquo said the analysts.