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■ At least 150 people were killed in a series of coordinated terrorist attacks in Paris on Friday, 13 Nov. News reports say ISIS is widely believed to be behind these attacks.
■ This has raised fears across Europe of more attacks to come. There are rumors that Rome, London and Washington could be ISIS’s next targets.
■ GL may be affected should there be any weakness in London’s tourist arrivals. Nevertheless, we remain positive on GL’s long term outlook. Maintain Add.
Deadly attacks in Paris on Black Friday
● Paris saw an unprecedented series of terrorist attacks on the night of Friday, 13 Nov. At least 150 people were killed and many others were injured in a number of shootings and explosions. Some reports say that Islamic State of Iraq and Syria (ISIS) is behind for the terror attacks. According to reports, the attack is believed to be in retaliation for the killing of British ISIS butcher Jihadi John by a US drone strike in Syria just hours earlier.
Massacre may spread fear across western cities
● After the deadly attack, the French government declared a state of emergency, tightened its border controls and heighten police powers as it mobilised the military in the national emergency. There are rumors that Rome, London and Washington could be ISIS’s next possible targets.
European hospitality industry likely to be affected
● The threat of possible terrorist attacks could negatively affect sentiment for travel to and within Europe in the near term. The hospitality businesses in European gateway cities, particularly Paris, London and Rome, are likely to be affected.
Negative near term implications on GL Limited
● GL, with its 15 hotels situated in the prime locations of London, may be adversely affected by potentially slower tourist arrivals.
● In FY6/15, 90% of GL’s net profit was derived from the hotel business and we expect the hotel contribution to increase to 93% in FY6/16F.
● We believe the current occupancies of GL’s London hotels are in the 80-90% range (London hotels average: 84%). Based on our sensitivity analysis, every 1% drop in room occupancy could lower our FY6/16F EPS by c.3% (FY6/17F EPS by c.4%).
Crisis may present a good buying opportunity
● London has been a long-loved tourist destination for the city’s extensive cultural, sporting and historical attractions. We believe the recent terrorist threat is only a nearterm hiccup, and remain optimistic on the long-term outlook for GL’s UK hotel business. We keep our Add call on GL. Our target price of S$1.26 is based on a 25% discount to the CY16 RNAV. (Read Report)