SRI LANKA: The Distressed Tourism

Sector On The Verge of a Boom

Sector fighting hard amidst hope of a
gradual correction in SL’s economic woes…

Analyst : Shadini Silva January 2023

A BLOOMING MEDIUM TERM OUTLOOK
• Arrivals for 2022 touched ~720k whilst navigating through the present challenging economic sentiments

• Arrival numbers likely to double in 2023E to reach +1.5 mn and then by 2024E likely to surpass its historic high of ~2.3 mn
arrivals boosted by revenge travel and LKR dip

• Local Resort occupancies may improve to c.75% levels and could witness a possible upward trend in room rates from Dec
2022E – 1Q2023E

• Leading local hotels with Maldivian exposure expected to thrive amidst rising arrivals in Maldives and higher ARRs

• Local City Hotels to benefit in the medium term with a gradual recovery in country’s economic and political outset and expect
occupancy levels to be north of ~60% given the fast tracking of major development projects including Port City

• A probable boost in Sri Lankas top five tourist source markets including India, China and UK amidst continuous efforts by the
Government to attract high spending tourists from Western Europe whilst tapping into new markets could re-rate selected
stocks with stable fundamentals

Key picks with 12 Months Fair Values :

Aitken Spence Hotels (AHUN.N: LKR50.8) – TP: LKR69.0
John Keells Hotels (KHL.N: LKR16.5) – TP: LKR21.8
Asian Hotels and Properties (AHPL.N: LKR37.4)- TP: LKR71.7
Aitken Spence (SPEN.N: LKR128.0) – TP: LKR180.0
John Keells Holdings (JKH.N: LKR137.7) – TP: LKR190.0

Softlogic Stockbrokers (Pvt) Ltd 2

 SECTOR SNAPSHOT
Share Price Annual Rev Fair Value -
Price NAV Price to TTM EPS
Ticker 02.01.2023 per Room Gearing (%) PBV (x) Medium Upside
YoY % (LKR) Sales (x) (LKR)
(LKR) (LKR mn) term (LKR)
AHPL SL 37.4 -15% 7.7 71.3 6% 2.5 -0.6 0.5 74.2 98%
KHL SL 16.5 12% 12.2 23.8 61% 1.1 -0.3 0.7 27.8 69%
RCH SL 66.1 -35% 3.0 249.1 0% 8.9 84.2 0.3 109.6 66%
RENU SL 368.8 4% 1.4 1,332.7 0% 19.0 580.7 0.3 586.4 59%
SHOT SL 8.1 -61% 1.3 22.9 39% 1.0 -4.6 0.4 12.6 56%
RPBH SL 22.5 -18% 3.7 53.0 1% 2.4 0.1 0.4 34.4 53%
CHOT SL 17.0 -8% 1.4 47.2 20% 4.2 4.3 0.4 25.9 53%
AHUN SL 50.8 20% 12.4 64.0 71% 0.5 2.3 0.8 74.9 47%
PALM SL 55.3 -54% 45.7 241.7 45% 1.8 -73.9 0.2 79.8 44%
LHL SL 30.0 -14% 7.3 66.5 12% 2.2 -1.6 0.5 43.2 44%
CITH SL 5.0 -26% 8.6 16.2 41% 1.8 -1.9 0.3 7.1 43%
KHC SL 7.2 -14% 1.5 15.0 8% 15.0 -0.1 0.5 9.7 35%
PEG SL 32.5 -15% 4.8 65.7 13% 1.6 -4.8 0.5 42.7 31%
TANG SL 59.1 -10% 2.6 157.7 2% 2.8 -3.7 0.4 75.7 28%

Source : Bloomberg/ SSB Research

Softlogic Stockbrokers (Pvt) Ltd 3

 A TECHNICAL EXPLANATION: Lucrative growth in the near term

The consumer services index is the benchmark index for the overall tourism sector. A benchmark index analysis could shed some light on the mid-term
expectations for the entire industry. The index has been experiencing ranging price action after a retracement from its upward trend which broke the
market structure to the upside. Currently it's hovering around its support zone as the overall market is in a retracement stage. While the index is below
both its 50-day and 20-day moving average, a break above the averages and the resistance trendline induced by positive news from the tourism sector
could propel the index with its counters to move higher.

Softlogic Stockbrokers (Pvt) Ltd 4

 Arrivals during 2022 surged by +3x YoY and touched 720k amidst lifting of
travel advisories and stringent management processes followed by SL…
The country observed encouraging tourist arrivals during 2022 which touched ~720k mainly owing to the lifting of many Covid-19
related travel bans which prevailed across main source markets during previous years. Moreover the stringent processes followed by
the country in order to overcome certain shortages in essential commodities such as fuel, food and medicine during the period
concerned acted as a major boost to entice arrival numbers.

Monthly Tourist Arrivals to SL has seen a stable improvement during 4Q2022 with Dec’22 arrivals hitting ~92k
300,000 (Monthly Arrivals)

250,000

200,000

150,000

100,000

50,000

-
January February March April May June July August September October November December

2019 2020 2021 2022

Source : SLTDA/ SSB Research

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 Sri Lanka could hit an arrivals number of +1.5 mn tourists for 2023E …
Light at the end of the tunnel: Given the unprecedented situation that occurred in the country owing to the economic crisis, which has led
to shortages of necessities including fuel, food and medicines and an unstable security situation, many nations including UK issued travel
warnings to their citizen to avoid non-essential travel to Sri Lanka. Nevertheless, with the implementation of necessary and quick
measures, these issues has thus far seen immense improvements. Hence this may pave the way for a rise in arrival numbers from 1Q2023E
onwards and more towards 2023E and likely to record an inflow of +1.5 mn arrivals whilst driving earnings north of USD2.5 bn.

A gradual uptick in arrivals may result earnings above USD2.5 bn in 2023E

2,500 4,500
4,000
2,000 3,500
3,000
1,500
2,500
2,000
1,000
1,500
500 1,000
500
- -

Tourist Arrivals ('000) - RHS Tourism Earnings (USD mn) - LHS

Source : SLTDA/ SSB Research

Softlogic Stockbrokers (Pvt) Ltd 6

 Depreciating LKR cf. many currencies remain favorable for travelers…
LKR depreciation to entice arrivals to SL: Given the steep depreciation of LKR by ~80% YTD against the greenback, makes it more
affordable and worth the spend for all tourists when visiting SL which greatly compensates for the price increases that has taken place
amidst soaring inflation in the country.

LKR dipped ~80% YoY cf. USD LKR slipped ~64% YoY cf. GBP LKR slipped ~64% YoY cf. INR
500
400
450 6
350 400
5
300 350

250 300 4

200 250
3
200
150
150 2
100
100
50 1
50
0 0 0
Oct-18

Oct-19

Oct-20

Oct-21

Oct-22
Jan-18
Apr-18

Jan-19
Apr-19

Jan-20
Apr-20

Jan-21
Apr-21

Jan-22
Apr-22
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22

Oct-18

Oct-19

Oct-20

Oct-21

Oct-22
Jan-18
Apr-18

Jan-19
Apr-19

Jan-20
Apr-20

Jan-21
Apr-21

Jan-22
Apr-22
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22

Oct-18

Oct-19

Oct-20

Oct-21

Oct-22
Jan-18
Apr-18

Jan-19
Apr-19

Jan-20
Apr-20

Jan-21
Apr-21

Jan-22
Apr-22
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22
Source : Bloomberg/ SSB Research

Softlogic Stockbrokers (Pvt) Ltd 7

 Rapid currency dip may pave the way to see an uptick in daily spend
of a tourist…
Depreciation a blessing in disguise: Given the rapid LKR dip witnessed against many major currencies, the average daily spend of a
tourist has been on the rise over the past 10 years increasing over the period to touch around USD190 in 2022 cf. USD 103 in 2012.

Receipt from a tourist per day (USD) on the path to recovery led by LKR dip

200.0 190
180.0
160.0
140.0
120.0
103.0
100.0
80.0
60.0
40.0
20.0
0.0

Source : SLTDA/ SSB Research

Softlogic Stockbrokers (Pvt) Ltd 8

 Sri Lanka’s top 5 source markets account for +75% of arrivals in normal
circumstances…
High spenders might relook at SL: India, China and UK have been the key source markets for SL over the past years. With the gradual
normalization of the pandemic spread in all parts of the world, we could expect the main source markets to see renewed interest in Sri
Lanka amidst the country being much more affordable to the high spenders than before.

SL’s Key Source Markets in 2018

3% India
4%
5% China
5% 26% United Kingdom
Germany
7%
Australia
7% France
Maldives
10% 17% United States Of America
Russia
16% Netherlands

Source : SLTDA/ SSB Research

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 Tourism earnings could boom from 2023E amidst increased room nights…
Earnings likely to pick up from 2023E onwards: Despite the setbacks observed during 2019 – 2022 owing to various reasons such as
Easter Sunday attack and the pandemic spread, we believe now the things are falling back in place for Sri Lanka. Hence expect the
annual room nights to take a spur from 2023E to around ~15-18 mn levels boosting overall tourism income north of USD2.5 bn.

30,000 Tourist room nights peaked in 2018 hitting an all time high of ~25 mn

25,000

20,000

15,000

10,000

5,000

Tourist Nights '000 (LHS)

Source : SLTDA/ SSB Research

Softlogic Stockbrokers (Pvt) Ltd 10

 Revenge travel and attractive large scale projects over medium term may
drive occupancies in local resorts and city hotels respectively…
SL resorts may see higher demand over the near – medium term fuelled by revenge travel. We believe, losses at local resorts could
curtail by 4Q-2022E with an anticipated revival in the persistent economic shocks. Conversely, efficient roll out of vaccines in SL and
around the world may further uplift the appetite for revenge travel and reinforce SL’s leisure industry with a probable increase in
forward bookings over the medium term for the segment to sustain its profits.

Business travel may increase with the commencement of many large scale projects such as Port City. This hence will result in a rise
in occupancy rates at SL City hotels over the forecast years north of ~60% cf. current ~30% levels bolstering overall segmental profits
of the main city hotel operators.
100 JKH Occupancy (%)
450 ARR (USD)
90
400
80
350
70
300
60
250
50

40 200

30 150

20 100

10 50
0 0
1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23
City Hotels Resorts Sri Lanka Resorts Maldives City Hotels Resorts Sri Lanka Resorts Maldives

Source : JKH Reports/ SSB Research

Softlogic Stockbrokers (Pvt) Ltd 11

 Hotels with Maldivian exposure to be more insulated than the rest…

Listed hotels with exposure to Maldivian resorts to see a special thrust: Since Maldivian borders were re-opened on 15th Jul’20
amidst strict health & safety guidelines, the arrivals to Maldives have been on the rise recording much higher numbers of arrivals when
compared to SL arrivals. Hence, the listed hotels which has a notable exposure to Maldivian resorts such as KHL and AHUN may see a
strong earnings growth triggering from its Maldivian Leisure segment which may bode well to compensate for the short lived losses
that could arise from the local hotel operations.

Maldivian Tourist Arrivals has already crossed pre-pandemic Tourist Arrivals to Maldives showcased a robust
levels and reached 1.6 mn as of end-Dec’2022 growth outperforming arrivals to SL in 2022

200,000 180,000
180,000 160,000
160,000 140,000
140,000 120,000
120,000 100,000
100,000 80,000
80,000 60,000
60,000 40,000
40,000 20,000
20,000 -
-

Tourist Arrivals - To SL Tourist Arrivals - To Maldives

2019 2020 2021 2022

Source : Ministry of Tourism Maldives/SLTDA/ SSB Research

Softlogic Stockbrokers (Pvt) Ltd 12

 Sector however remains highly geared and could be impacted from soaring rates;
Nevertheless extended moratoriums to be of some comfort to bounce back…
Debt moratoriums for tourism sector to aid the listed players to find some breathing space: The tourism sector was under a moratorium
scheme from mid-2020 amidst pandemic induced negative sentiments whilst it came to an expiry on 30th Jun 2022. Many local hotel
operators in the listed space thus came under distress with the cash crunch experienced amidst their refurbishment and expansion plans and
surging cost pressures intensifying working capital management. Conversely given the decision taken by the Central Bank (CBSL) to urge
banks to extend the debt moratorium to all businesses including Tourism and individuals hit from the ongoing economic crisis would be a
major positive for the tourism sector. Moreover, this should be an added benefit for all renown local hoteliers to get back on track once the
industry recovers over the coming quarters.

Refurbishment plans and working capital requirements expanded the gearing of listed hotels
140%

120%

100%
Gearing Ratio (%) as of 3Q2022

80%

60%

40%

20%

0%

Source : Bloomberg/ SSB Research

Softlogic Stockbrokers (Pvt) Ltd 13

 Tourism Snapshot
Share Price Annual Rev Currency
Market Cap Price YoY TTM EPS TTM PER TTM Adj Net Price to
Ticker 02.01.2023 Shares mn per Room PBV (x) NAV (LKR) Gearing (%) Adjusted EV EV/Room
(LKR mn) % (LKR) (x) Sales (LKR mn) Sales (x)
(LKR) (LKR mn) (LKR)
KHL SL 16.5 1,456.15 24,026.4 12% 12.2 -0.28 - 0.7 23.80 18,018 61% 1.09 76,184.4 51.6
AHUN SL 50.8 336.29 17,083.5 20% 12.4 2.31 22 0.8 64.00 35,155 71% 0.47 97,178.0 34.4
AHPL SL 37.4 442.78 16,559.8 -15% 7.7 -0.56 - 0.5 71.32 6,490 6% 2.52 21,687.3 25.6
EDEN SL 17.6 528.00 9,292.8 -47% 5.9 -7.39 - 0.6 30.92 1,371 40% 6.67 38,746.5 165.6
TRAN SL 45 200.00 9,000.0 -18% 8.1 0.42 107 1.6 28.54 2,806 16% 3.21 10,055.9 29.1
GHLL SL 12.5 500.83 6,260.4 -44% 2.4 -0.21 - 0.8 16.62 1,059 0% 5.92 3,337.4 7.5
JETS SL 10.4 563.52 5,860.6 -7% 5.8 -2.32 - 2.1 4.86 1,853 69% 3.62 12,645.7 39.9
KHC SL 7.2 577.50 4,158.0 -14% 1.5 -0.14 - 0.5 14.97 277 8% 14.99 4,867.9 27.0
SERV SL 8.5 484.00 4,114.0 -11% 11.8 -0.60 - 5.2 1.64 2,949 74% 1.40 6,271.6 25.1
CHOT SL 17 180.03 3,060.5 -8% 1.4 4.34 122 0.4 47.16 742 20% 4.15 5,017.7 9.5
NEH SL 1265.25 2.19 2,765.9 2% 5.7 40.50 31 0.6 2,260.59 882 0% 3.14 1,597.5 10.3
RCH SL 66.1 40.30 2,663.7 -35% 3.0 84.18 1 0.3 249.06 298 0% 8.93 3,913.6 39.5
RENU SL 368.75 7.00 2,581.3 4% 1.4 580.66 1 0.3 1,332.67 136 0% 18.96 -5695.1 -57.5
PALM SL 55.3 43.27 2,392.7 -54% 45.7 -73.86 - 0.2 241.70 1,371 45% 1.76 36,275.9 1,209.2
CONN SL 21.1 103.17 2,176.8 -6% 1.9 -11.16 - 1.2 17.59 1,282 63% 1.38 5,104.1 7.4
STAF SL 31.7 63.24 2,004.8 0% 3.1 -2.35 - 0.6 57.00 322 24% 3.47 2,245.1 21.6
RHTL SL 15.9 110.89 1,763.1 19% 8.9 0.99 16 1.1 14.53 470 4% 3.75 1,351.7 25.5
REEF SL 6 267.23 1,603.4 -33% 4.8 -2.32 - 0.6 10.80 1,163 48% 1.40 6,622.8 27.6
CITH SL 5 284.90 1,424.5 -26% 8.6 -1.91 - 0.3 16.23 777 41% 1.83 5,254.3 58.4
CITW SL 2.5 559.86 1,399.6 -32% 3.1 -0.96 - 0.6 3.94 472 49% 2.97 3,452.6 23.0
LHL SL 30 46.00 1,380.0 -14% 7.3 -1.63 - 0.5 66.47 620 12% 2.23 1,794.6 21.1
TANG SL 59.1 20.00 1,182.0 -10% 2.6 -3.72 - 0.4 157.68 458 2% 2.75 850.5 4.8
RPBH SL 22.5 50.00 1,125.0 -18% 3.7 0.10 230 0.4 52.99 474 1% 2.37 654.0 5.1
PEG SL 32.5 33.77 1,097.5 -15% 4.8 -4.75 - 0.5 65.66 639 13% 1.61 1,263.1 9.5
SHOT SL 8.1 111.53 903.4 -61% 1.3 -4.63 - 0.4 22.93 885 39% 1.01 5,700.6 8.1
BERU SL 1.2 537.84 645.4 -20% 2.0 -0.55 - 14.8 0.08 207 82% 3.09 1,417.6 13.4
MRH SL 12.5 47.07 588.3 -27% 4.5 -4.13 - 0.9 14.44 500 34% 1.18 915.4 8.2
BRR SL 10 53.73 537.3 -7% 2.4 0.15 75 2.2 4.46 71 0% 8.23 572.7 19.1
RFL SL 26.2 20.00 524.0 19% 1.6 -0.13 - 0.9 28.52 71 1% 7.41 520.7 11.6

Source : Bloomberg/ SSB Research

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 PALM, AHUN and KHL lead the pack with the highest revenue per room
Annual Rev per Room (LKR mn)
50.0
40.0
30.0
20.0
10.0
-

AHUN, SHOT and KHL has the lowest Price to sales

Price to Sales (x)
20.00
15.00
10.00
5.00
-

Source : SLTDA/ SSB Research

Softlogic Stockbrokers (Pvt) Ltd 15

 PALM, RCH and RENU has the highest disparity in Share Price vs. NAV
2500 500%
2000 400%
1500 300%
1000 200%
500 100%
0 0%

Share Price 02.01.2023 (LKR) -LHS NAV (LKR) - LHS Price vs NAV - RHS

Many hotel stocks currently trade below book

PBV (x)

6.0
5.0
4.0
3.0
2.0
1.0
-
PALM RCH RENU CITH SHOT CHOT TANG RPBH LHL KHC PEG AHPL REEF STAF NEH EDEN CITW KHL GHLL AHUN MRH RFL RHTL CONN TRAN JETS BRR SERV
SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL SL

Source : Bloomberg/ SSB Research

Softlogic Stockbrokers (Pvt) Ltd 16

 KEY PICKS
John Keells Hotels (KHL SL: LKR16.5) – TP: LKR21.8
Share details
KHL operates 12 resorts with a total room capacity of +1,400 spread across Sri Lanka and Bloomberg Ticker JKHL SL
Reuters Ticker KHL CM
Maldives under the Cinnamon brand. In Sri Lanka, the group operates 8 resort hotel Market Cap. (LKR Bn) 24.0
properties accounting for nearly 1,022 rooms and in the Maldives, the properties account for (USD Mn) 65.6
N - Issued Shares (mn) 1,456.1
a total room capacity of 454. Given the rising arrival numbers to Maldives, KHL’s occupancy Free Float (%) 19.7
rate at Maldivian resorts rose to 86% in 2Q’23 cf. 76% in 2Q’22. Further occupancies
increased at SL resorts up to 31% in 2Q’23 cf. 18% in 2Q’22. Conversely Maldivian resorts SHARE MOVEMENT YTD 3M 12M
touched an ARR of USD316 which is almost the pre pandemic levels and remain promising N- High (LKR) 17.0 18.5 20.9
Low (LKR) 16.1 15.0 9.3
over the forecast period given the encouraging tourist arrivals to Maldives where the YTD KHL.N (%) 3.0 3.1 4.3
arrivals till end Dec’22 rose upto 1.6 mn. Furthermore, SL resorts ARRs too grew to USD57 cf. Avg. Daily T/O (LKR Mn) 0.2 3.1 4.3
ASPI (%) 0.3 (8.3) (33.8)
USD38 in 2Q’22. With an expected bounce back in overall sentiment of the country with the
expectation of striking a deal with IMF to sort out some of the dire conditions and regain ASPI Vs Share Price
some forex flows to purchase the much needed items, may further bode well and could boost
14000 22
tourist arrivals to SL from 1Q2023E which is also the peak season for the island nation. 13000 20
12000 18
Valuation: Based on a replacement cost valuation KHL derives a TP of LKR19.7. Further 11000
16
10000
14
based on an implied PBV multiple of 0.9x and with an expected increase of ~20% in NAV, KHL 9000
8000 12
derives a fair value of LKR23.9. Hence the stock derives an average TP of LKR21.8 (upside of 7000 10
+32%) and has value enhanced by an expected normalization of sentiments in SL and faster 6000 8

Aug-22
Apr-22
Jan-22

Jul-22

Sep-22

Jan-23
Mar-22

Nov-22
May-22
Dec-21

Feb-22

Jun-22

Oct-22
growth in Maldivian arm.

CSEALL Index (LHS) JKHL SL Equity (RHS)

Prices as of 2nd Jan’23

Softlogic Stockbrokers (Pvt) Ltd 17

 A TECHNICAL EXPLANATION ON KHL

The counter is currently bouncing from its upward trendline in an attempt to get above its horizontal resistance and to build a base above its 50-day
moving average. In order for the counter to reach higher prices, a break above its resistance trendline is crucial while maintaining its position above both
the moving averages.(20-day and 50-day MAs)

Resistance: Horizontal resistance and the two moving averages

Risk management: A confirming break below the upward trendline would invalidate our upward thesis.

Softlogic Stockbrokers (Pvt) Ltd 18

 KEY PICKS
Share details
Aitken Spence Hotel Holdings (AHUN SL: LKR50.8) – TP LKR74.9 Bloomberg Ticker AHUN SL
Reuters Ticker AHUN CM
AHUN is Sri Lanka’s largest hotel operator (1,564 rooms), whilst also has a strong presence Market Cap. (LKR Bn) 16.5
across Asia (Oman – 386 rooms and India 140 rooms) and is the largest international resort (USD Mn) 44.9
N - Issued Shares (mn) 336.6
chain operator in Maldives (750 rooms). AHUN’s total assets base stood at LKR 118 bn as of Free Float (%) 25.4
end 1HFY23. Whilst holding a NAV of ~LKR64, the stock with great exposure to USD linked
revenue streams would be the driving factor for AHUN given the steep LKR depreciation SHARE MOVEMENT YTD 3M 12M
which would boost its revenue generation. Additionally, AHUN being the largest local N- High (LKR) 50.0 59.6 68.0
Low (LKR) 49.0 49.0 28.0
hotelier with the highest number of rooms in Maldives would see incremental earnings SPEN.N (%) (3.5) (14.3) 16.9
growth in the Maldivian segment over the coming quarters. Avg. Daily T/O (LKR Mn) 1.1 2.2 3.3
ASPI (%) 0.3 (8.3) (33.8)
However, the stock has a relatively higher gearing ratio of ~71% given the increased
ASPI Vs Share Price
borrowings. This may be a negative given the steep rise in interest rates. Nevertheless, with
the extension of the debt moratoriums granted for the Tourism sector, it could give some 14000 70
13000
breathing space for the group to gradually bounce back in the coming quarters. 12000
60
11000 50
Valuation: Based on an implied PBV multiple of 0.9x and with an expected increase of 10000
40
9000
~30% in NAV, AHUN derives a fair value of LKR74.9 which indicates a price upside of +47% 8000
30
7000
to the CMP. Hence the stock remains attractive given its higher exposure to overseas hotel 6000 20
operations, specially given the higher exposure in Maldives coupled with a gradual

Jul-22

Sep-22
Jan-22

Mar-22

Apr-22

Nov-22

Jan-23
May-22

Aug-22
Feb-22

Jun-22

Oct-22
Dec-21
recovery expected in the local leisure operations over the coming quarters.
CSEALL Index (LHS) AHUN SL Equity (RHS)
Prices as of 2nd Jan’23

Softlogic Stockbrokers (Pvt) Ltd 19

 A TECHNICAL EXPLANATION ON AHUN

The counter is currently testing its lower bound support with a possible bounce from its support range. While the counter is reaching a demand zone, a
possible bounce from the zone which induces price to break above its resistance trendline would enable price to move higher.

Resistance: 20-day and 50-day moving averages and its resistance trendline

Risk management: A break below both its support zones should be concerning leading to an invalidation of our thesis.

Softlogic Stockbrokers (Pvt) Ltd 20

 KEY PICKS
Asian Hotels and Properties (AHPL SL: LKR37.4) – TP : LKR71.7 Share details
Bloomberg Ticker AHPL SL
AHPL is JKH’s city hotel arm which comprise two leading hotels Cinnamon Grand with a Reuters Ticker AHPL CM
total room inventory of 501 and Cinnamon Lakeside having a total room count of 346. Market Cap. (LKR Bn) 16.4
(USD Mn) 44.9
Furthermore, the stock holds a prime freehold land bank of ~8 acres in central Colombo N - Issued Shares (mn) 442.8
(the premises of Cinnamon Grand). This holds as a greater value given the appreciating Free Float (%) 4.0%
land prices in the country which has seen a steep rise thus far. Meanwhile AHPL’s city
SHARE MOVEMENT YTD 3M 12M
hotels occupancy went up to ~29% in 2Q’23 cf. 20% in 2Q’22 whilst ARRs for City hotels
N- High (LKR) 37.0 41.9 49.4
too grew to USD62 in 2Q’23 (cf. +USD50 levels before). Low (LKR) 35.1 33.5 27.0
AHPL.N (%) (6.1) (12.7) (19.5)
Moreover, with the expected revival in business travel, with many mega mixed projects Avg. Daily T/O (LKR Mn) 0.4 0.4 0.7
ASPI (%) 0.3 (8.3) (33.8)
including Port City getting back to full swing over the coming years amidst a gradual
normalization of SL’s economic sentiments, the local city hotels including AHPL will see ASPI Vs Share Price
improved occupancy over the coming quarters. 14000 55
13000 50
Valuation: Given the prime land bank AHPL holds, based on a replacement cost valuation 12000
45
11000
AHPL derives an average TP of ~LKR121 which derives a potential price upside of +100%. 10000 40
9000
Further based on an implied PBV multiple of 0.7x and with an expected increase of ~10% 35
8000
in NAV, AHPL derives a fair value of LKR54.3. Hence the stock remains attractive in the 7000 30
6000 25
listed City hotel space and on average derives a TP of LKR71.7 (upside of +92%) over the

Apr-22
Jan-22
Feb-22
Mar-22

Jul-22

Sep-22

Nov-22

Jan-23
May-22

Aug-22
Jun-22

Oct-22
Dec-21
medium term.
CSEALL Index (LHS) AHPL SL Equity (RHS)
. Prices as of 2nd Jan’23

Softlogic Stockbrokers (Pvt) Ltd 21

 KEY PICKS
Share details
John Keells Holdings (JKH SL: LKR135.25) - TP: LKR190.0 Bloomberg Ticker JKH SL
Reuters Ticker JKH CM
Being the holding company of AHPL and KHL having a direct ownership of +78% and +80% Market Cap. (LKR Bn) 190.8
respectively, JKH remains as a direct beneficiary of the improved performance in its Leisure (USD Mn) 520.5
N - Issued Shares (mn) 1,384.9
arm with an anticipated recovery in country’s sentiments in the near – medium term. Free Float (%) 98.9%
Hence, we remain bullish on JKH as well.
SHARE MOVEMENT YTD 3M 12M
N- High (LKR) 163.8 151.0 170.0
Low (LKR) 118.3 128.5 116.3
Leisure contributed ~11% to JKH’s topline in 2QFY23 whilst narrowing losses JKH.N (%) (3.5) 8.8 0.5
Avg. Daily T/O (LKR Mn) 154.5 120.1 149.0
ASPI (%) 0.3 (8.3) (33.8)
1%
5% Retail ASPI Vs Share Price
11% Consumer Foods 14000 170
13000 160
4% 35% Transportation
12000 150
Financial Services 11000
5% 140
10000
Others 130
9000
120
Leisure 8000
7000 110
27% Property 6000 100
12%

Jan-22

Mar-22
Apr-22

Jan-23
Jul-22

Sep-22

Nov-22
Aug-22
May-22
Jun-22

Oct-22
Dec-21

Feb-22
Financial Services

Prices as of 2nd Jan’23 CSEALL Index (LHS) JKH SL Equity (RHS)

Softlogic Stockbrokers (Pvt) Ltd 22

 KEY PICKS
Aitken Spence (SPEN SL: LKR128.0) – TP: LKR180.0 Share details
Bloomberg Ticker SPEN SL
Being the holding company of AHUN having a direct ownership of +71%, SPEN remains as a Reuters Ticker SPEN CM
direct beneficiary of AHUN’s anticipated revival in the near – medium term. Hence, we Market Cap. (LKR Bn) 51.9
(USD Mn) 141.8
remain bullish on SPEN when considering the Tourism sector along with the other positive N - Issued Shares (mn) 406.0
contributions from its core segments including Strategic investments and Logistics. Free Float (%) 45.7

SHARE MOVEMENT YTD 3M 12M

Leisure contributed to ~48% of SPEN’s topline in 2QFY23 N- High (LKR) 130.0 144.5 155.0
Low (LKR) 127.3 120.8 60.0
Services sector SPEN.N (%) (0.6) (3.0) 57.1
2% Avg. Daily T/O (LKR Mn) 1.0 8.8 16.9
Strategic ASPI (%) 0.3 (8.3) (33.8)
investments
23%
ASPI Vs Share Price
14000 160
13000 140
Tourism sector 12000
48% 11000 120
10000 100
9000 80
8000
7000 60
6000 40
Maritime &

Aug-22
Jan-22

Apr-22

Jul-22

Sep-22

Jan-23
Mar-22

Oct-22

Nov-22
May-22
Dec-21

Feb-22

Jun-22
logistics
27%
CSEALL Index (LHS) SPEN SL Equity (RHS)
Prices as of 2nd Jan’23

Softlogic Stockbrokers (Pvt) Ltd 23

 SRI LANKA EQUITY RESEARCH Softlogic Stockbrokers (Pvt) Ltd
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Achindi Silva achindi@equity.softlogic.lk Colombo +94 11 7277000, +94 773825087
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Ashean Irugalbandara
ashean.irugalbandara@softlogicstockbrokers.lk Krishan Williams krishan.williams@equity.softlogic.lk Negombo +94 31 7451000, +94 773569827
+94 76 8882110 Lakshan Rathnapala lakshan.rathnapala@softlogic.lk Colombo +94 11 7277000, 077 8329698
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