Shangri-La announces SGD 7Y senior unsecured notes at IPG of 3.70%

Shangri-La Hotel Limited (“Shangri-La”) plans on issuing new SGD 7-year senior unsecured notes at the initial price guidance (“IPG”) of 3.70%. It is expected to be issued on 24 July 2025, with a maturity date of 24 July 2032. The proceeds will be used for general corporate purposes. We wish to highlight that the new issuance is made available only for accredited and institutional investors.

Shangri-La Asia Limited was incorporated in Bermuda and is listed on the Mainboard of the Stock Exchange of Hong Kong. Headquartered in the Hong Kong SAR, the Shangri-La Group is part of the Kuok Group—one of Asia’s most prominent multinational conglomerates with interests spanning property, logistics, agribusiness, maritime, and hospitality.

Since opening its first hotel in 1971, Shangri-La has grown into a global hospitality and real estate group with a diverse, integrated portfolio. As of 31 December 2024 (“FY24”), the company owns, operates, or manages over 100 hotels across Asia Pacific, the Middle East, Europe, and North America under four brands: Shangri-La Hotels and Resorts, Kerry Hotels, JEN, and Traders.

In addition to hospitality, the company’s portfolio includes high-quality real estate, investment properties, wellness facilities, and lifestyle destinations. With properties located in some of the world’s most iconic addresses and exotic locales, Shangri-La continues to focus on long-term value creation by enabling people to live, work, play, eat, and rest well within its integrated spaces.

Shangri-La’s core business remains anchored in hotel operations, which is the largest contributor to company revenue. In FY24, hotel operations (hotel properties and hotel management and related services) accounted for ~93% of the company’s total revenue, with investment properties and property development for sale and other business making up the remainder.

Geographically, Mainland China remains the company’s most significant market, making up ~34% of revenue from the hotel business. This is followed by Hong Kong (17%), Singapore (13%), and other parts of Southeast Asia, as well as increasing contributions from the Middle East and Europe as part of Shangri-La’s ongoing international diversification efforts.

In FY24, Shangri-La Asia Limited reported a consolidated revenue of USD 2.19 billion, marking a 2.0% YoY increase from USD 2.14 billion in FY23, driven by further business recoveries in Hong Kong and the Philippines. Despite the revenue growth, the company's effective share of EBITDA declined by 13.0% YoY to USD 760.1 million, down from USD 873.6 million in FY23. This decrease was primarily due to an 87.9% YoY reduction in EBITDA from the Property Development for Sale segment.

Profit attributable to owners of the company decreased by 12.3% to USD 161.4 million, compared to USD 184.1 million in the previous year. This decline was attributed to the aforementioned decline in EBITDA and a USD 9.6 million drop in net gains from non-operating items. Looking ahead, the company remains cautiously optimistic, focusing on strategic growth opportunities, operational excellence, and aiming to deliver exceptional guest experiences across its diverse portfolio.

In terms of operational performance, the company's weighted average occupancy for its hotels increased to 63% (breakeven EBITDA is at an average occupancy of 45%), while the weighted average revenue per available room (RevPAR) remained flat at USD 108. More importantly, its operating cash flow increased by 7.8% YoY to USD 392.7 million, reflecting strong financial resilience amid cost pressures.

In terms of credit profile, the company's net borrowings (total bank loans and fixed-rate bonds less cash and bank balances and short-term fund placements) decreased by USD 296.3 million YoY to USD 4,421.3 million, driven by robust cash flows and restrained capital expenditure. Consequently, the net gearing ratio improved to 81.3% from 86.3% in the previous year.

Moreover, the company has fulfilled FY25 refinancing needs and has a cash position of USD 1,931 million and undrawn committed facilities of USD 1,333 million, which would be sufficient to cover its debt till the end of 2026. Notably, none of its assets are used as collateral for its loans which suggests that the company has greater financial flexibility in obtaining loans in the future.

Our recommendations

Table 1: Comparable real estate developers SGD papers

Table 2: Shangri-La bonds

In our view, Shangri-La’s financial performance is decent. However, given the cyclical nature of the hotel industry, demand could soften in the coming months amid a slowing global economy.

At the IPG of 3.70%, we believe this new issue is fairly priced. For context, Shangri-La’s recent issuance, SLHSP 3.540% 17Jun2032 Corp (SGD), also launched at an IPG of 3.70%. We expect the final pricing guidance (FPG) for this new bond to tighten somewhat, likely ending close to, but slightly above, the yield of the SLHSP 3.540% 17Jun2032 Corp (SGD).

Compared to peer issuers with bonds of similar tenor, Shangri-La is likely to offer a higher FPG than UOL and CapitaLand, which both have stronger credit profiles.

We continue to prefer WINGTA 3.830% 10Jun2032 Corp (SGD). Wing Tai Holdings is an issuer whose credit profile we are comfortable with. While also a real estate developer, it has higher asset exposure to China—albeit in different sectors from Shangri-La. WINGTA 3.830% 10Jun2032 Corp (SGD) offers a yield to maturity of around 3.5%, which is likely comparable to Shangri-La’s FPG but comes with a shorter tenor.

Overall, we think this new bond issue by Shangri-La would be suitable for investors looking for an intermediate tenor bond, which provides decent yield pickup against longer-tenor Singapore government bonds. It will also be suitable for those who are optimistic about the tourism sector in Asia, especially Mainland China, Hong Kong and Singapore.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report holds an NIL position in the abovementioned securities.

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