Shang resting on its uptrend line

Background

Shangri-La Hotels (M) Bhd ['Shang'] is involved in the hotel operation & property investment. It owns 3 resorts, i.e. the Rasa Sayang Resort & Golden Sands Resort in Penang and the Rasa Ria resort in Kota Kinabalu, Sabah as well as 2 hotels, i.e. Shangri-La Hotel Kuala Lumpur and Traders Hotel Penang. For its property investment, it owns the UBN Tower which is located next to Shangri-La Hotel Kuala Lumpur.

Recent Financial Results

Shang has just announced its results for 1Q2008 (i.e. QE31/3/2008). Its topline & bottomline are marginally higher than those of the immediate preceding quarter, QE31/12/2007, but they are significantly better than those of the same quarter last year. Net profit has increased 62.7% y-o-y to RM25.6 million while turnover has increased by 15.8% y-o-y to RM112.8 million.



Shang has benefited from the re-opening of Rasa Sayang Resort in late September 2006 after its closure from December 2004 for a major redevelopment & repositioning program.

Valuation

Shang (closed at RM2.32 yesterday) is now trading at a trailing PE of 11.6 times (based on last 4 quarters' EPS of 20 sen) or at a P/Book of 1.4 times (based on NTA per share of RM1.70). At these multiples, Shang share is fairly attractive.

Technical Outlook

Shang is now resting on its medium-term uptrend line support of RM2.30. Its immediate horizontal support is at RM2.10, while its immediate horizontal resistance is RM2.50.


Chart: Shang's daily chart as at May 15, 2008 (source: Quickcharts)

Conclusion

Based on attractive valuation & good technical outlook, Shang is a good investment for the long-term.