Shangri-La: Five-star assets and bonds within the SGD space

• Shangri-La’s FY25 revenue rose 2%, as Mainland China weakness offset stronger Hong Kong and regional growth.
• Core profitability improved with EBITDA rising 3%, though headline profit was influenced by several non-cash items.
• We expect Shangri-La to deliver modest improvement in FY26, due to expected stabilisation in Mainland China and continued momentum outside the Mainland.
• Free cash flow reached a record high, while Shangri-La maintains a significant liquidity buffer.
• Shangri-La remains an asset-heavy hotel owner with relatively high leverage, but management is actively deleveraging with net debt falling -2% in FY25.
• Shangri-La’s bonds remain attractive, with multiple SGD options across different tenors (2028 – 2032).

Shangri-La Asia Limited (Shangri-La) is an Asia-focused luxury hospitality group. As of December 2025, Shangri-La owned, leased, or managed 106 hotels and resorts across Asia Pacific, Europe, and Africa.

Its recent FY25 results showed a steady but modest recovery, with manageable credit metrics supported by strong liquidity, record free cash flow, and continued market access. We provide a more in-depth review of Shangri-La’s fundamentals and the attractiveness of its bonds.

Modest recovery in revenues, with Mainland China the key drag

(Unless otherwise stated: Results are in US Dollars [USD / $], and are based on Shangri-La’s consolidated HKFRS results. Growth figures are year-on-year [y/y].)

FY25 was another year of low-single-digit normalised growth for Shangri-La. Revenues rose +2% y/y to $2,234m, while effective share of revenue* also rose +2% to $2,712m, as growth moderated after the initial post-COVID recovery from FY20 to FY23 (Chart 1).

(*Effective share of revenue is a non-HKFRS measure that includes Shangri-La’s share of revenue from subsidiaries and associates based on its percentage of equity interest.)

Shangri-La’s revenues are still dominated by its ‘Hotel Properties’ segment, where revenues rose +2% to $1,974m. Within this segment, room revenue increased +4%, while F&B sales were broadly flat (-0.2%) and ancillary services revenue fell -6%. Outside ‘Hotel Properties’, ‘Investment Properties’ was the main positive contributor, with revenue rising +11%.

Geography remained an important driver of performance within ‘Hotel Properties’ (Chart 2). Mainland China revenues fell -4% y/y to $628m, driven by a -3% decline in RevPAR*, as average room rate fell -3% to $112 (FY24: $115) despite stable occupancy rates (64%). The weakness was more pronounced in Tier 3 & Tier 4 cities, where the average room rate fell by a greater -7% to $82 (FY24: $88), highlighting more price-sensitive demand in lower-tier markets.

(*RevPAR, or revenue per available room, is a common hospitality metric. It can b estimated by multiplying the average room rate by occupancy rate.)

By contrast, Hong Kong, the Philippines, and Malaysia all delivered decent growth, with management citing different idiosyncratic drivers for each market. Singapore was operationally stable with revenues falling just -2% due to lower room rates, while occupancy rose marginally by 1 pp. Management attributed this to normalisation after the strong initial post-COVID recovery.

Chart 1: Low-single-digit growth for Shangri-La in FY25

Chart 2: Mainland China was the key detractor; Hong Kong / Philippines / Malaysia did well

Core earnings improved despite non-operating noise

Core earnings improved modestly as Shangri-La maintained cost discipline despite muted revenue growth. Cost of sales rose +2% y/y, broadly in line with revenues, while gross profits increased +2% to $1,245m and gross margin was broadly flat (+0.06 pp). EBITDA, which measures core operating profitability, rose +3% to $521m, while effective share of EBITDA increased +2% to $778m (Chart 3). Similar to the revenue trend, hotel EBITDA was stable but muted, with weakness in Mainland China offset by strength elsewhere (e.g. Hong Kong).

However, profit after tax fell -30%, from $161m in FY24 to $112m in FY25. We attribute this mainly to non-operating and non-cash items rather than a deterioration in core operations. For instance, fair-value gains on investment properties held by associates fell to just $17m in FY25 (FY24: $147m). This was partly offset by lower net impairment losses on hotel properties compared with FY24. Both fair value changes and impairment losses are non-cash in nature.

Overall, we prefer to focus on Shangri-La’s stable core operations rather than its headline profit decline. From a credit perspective, FY25 was not a strong earnings rebound, but instead demonstrated resilience: EBITDA rose, operating performance remained stable, and Mainland China weakness was offset by stronger markets elsewhere.

Chart 3: Core earnings improved, with EBITDA up +3%

Outlook: Expect modest improvement in FY26

We expect Shangri-La to deliver modest improvement in FY26 compared with FY25. Management shared that, as of February 2026, group occupancy had improved +1.5 pp y/y to 63.7%. This included a strong +6.4 pp increase in Hong Kong to 88.7%, while even Mainland China saw a +1.0 pp improvement to 57.4%.

Growth outside Mainland China should remain supportive. In Hong Kong, positive momentum is expected to persist after an already decent FY25, supported by tourism recovery, the government’s mega-events strategy, and stronger business travel and MICE demand. Southeast Asia, excluding Singapore, should also remain a key tourism growth driver. Meanwhile, Shangri-La expects Singapore to deliver steadier growth from a normalised base, supported by continued APAC visitor arrivals.

Mainland China remains the key swing factor. Management has acknowledged ongoing pressures after weak FY24 and FY25 performances, but also pointed to early signs of stabilisation. This includes average room rates stabilising since 4Q25 after a prolonged correction from 2023 peaks. Management aims to capture growing domestic leisure demand and inbound travel, including through its new ultra-luxury Shangri-La Signatures brand in Hangzhou.

Official Chinese travel data points to a similar trend: travel demand is improving, but average spending remains muted (Table 1). We acknowledge that Shangri-La operates mainly in the higher-end hospitality segment, which may benefit less in an environment where consumers remain price-sensitive. Hence, we remain cautiously optimistic that Shangri-La can stabilise its Mainland China operations, but expect any recovery to be gradual rather than sharp.

Taken together, expected stabilisation in Mainland China and continued momentum outside the Mainland should allow Shangri-La to deliver modest improvements in FY26. However, we are not expecting a sharp recovery unless Mainland China average room rates improve more meaningfully.

Table 1: Mainland China travel demand picked up in FY25, but spending remains muted

Record free cash flow supports liquidity

Shangri-La maintains a significant liquidity buffer. It held $2,530m in cash and short-term deposits as of Dec 2025, comprising $2,241m in cash and $289m in deposits with maturities > 3 months. This was up from $1,931m as of 1 Jan 2025. Including $759m of undrawn committed facilities, total available liquidity stood at $3,289m, which is sufficient to cover current liabilities ($1,560m), including $665m of current debt.

Cashflows remain consistently positive with free cash flows (FCF) hitting a record high (Chart 4). Operating cashflows* (OCF) remained stable at $394m in FY25 (FY24: $393m), while FCF improved to $313m (FY24: $273m). This was broadly expected: OCF reflected Shangri-La’s muted but stable revenue performance, while the improvement in FCF reflected capex discipline, which management had previously guided for. These cashflows remain sufficient to cover its net finance costs (Table 2).

(*The $394m OCF figure is a non-HKFRS figure, which broadly includes cash from associates and interest income. Actual net cash generated from operating activities was $159m. The $313m FCF figure is based on the non-HKFRS $394m OCF measure.)

Chart 4: Free cash flow hit a record high in FY25

Table 2: Interest coverage remains adequate

Leverage remains high and Shangri-La remains asset-heavy, but debt is manageable

Shangri-La can remains an asset-heavy hotel owner and therefore carries relatively high leverage. However, we think its debt remains manageable, supported by strong liquidity, continued market access, and substantial asset backing.

Net debt ratios were little changed in FY25 despite management’s deleveraging efforts. Net debt including lease liabilities rose +2% mainly due to higher lease liabilities, while net debt excluding lease liabilities fell -2% as management accumulated cash. Net-debt-to-EBITDA and net-debt-to-equity ratios both improved (fell) marginally in FY25 (Table 3).

(Shangri-La’s hotel properties are stated at historical cost less depreciation and impairment under its accounting policies. The ‘fair value’ figure is therefore included only as a reference note.)

Gross debt increased in FY25, even though net debt was little changed due to the higher cash balance. As a result, Shangri-La’s indebtedness ratio, a gross debt metric, initially worsened in 1H25, improved in 2H25 rose (worsened) for the full year to 0.75x. We do not view the higher indebtedness as a near-term credit concern, as the increase was driven mainly by higher pre-funding and cash balances, while liquidity remains sufficient. Management also stated the group remained compliant with its loan covenants and reiterated its commitment to deleveraging.

Shangri-La’s debt maturity profile is well-distributed and manageable (Chart 5). Only $664m (~10% of gross borrowings) matures within one year in 2026, while the remainder is distributed across 2027 – 2030. Furthermore, the 2026 maturity of $664m and 2027 maturity of $1,210m are well covered by existing cash and liquidity facilities.

Shangri-La also continues to enjoy good access to funding markets. In FY25, Shangri-La secured multiple rounds of refinancing mainly in RMB and SGD terms, including two new SGD issuances in mid-2025. Its large RMB funding mix (68% of total borrowings) helped reduce the group’s average interest cost to 4.0% in FY25 (FY24: 4.5%), considering relatively lower interest rates in these markets (versus US interest rates).

Table 3: Net debt ratios remain little changed, but Shangri-La remains fairly leveraged

Chart 5: Debt maturity profile is well-distributed

Bond recommendations

To summarise, Shangri-La may not be a high-growth recovery credit, but is instead better described as a stable, asset-backed, and liquidity-supported issuer. We are not expecting strong growth given continued headwinds in Mainland China, but Shangri-La delivered steady recovery in FY25 and should continue to show modest improvement in FY26. Meanwhile, it maintains access to multiple funding channels, supported by its stable debt ratios.

Shangri-La’s bonds remain attractive to us as a hospitality pick, with multiple choices maturing in 2028, 2030, and 2032. Comparing with Hotel Properties Limited (HPL), Shangri-La’s bonds offer similar to slightly lower yields for comparable tenors. However, we continue to view HPL’s credit profile as relatively weaker, particularly because (i) Shangri-La has significantly fewer properties already pledged for secured borrowings; and (ii) Shangri-La generally provides more detailed financial disclosures, allowing for better visibility into the issuer.

Meanwhile, Shangri-La’s bonds also offer noticeably higher yields than other hospitality names like CapitaLand Ascott Trust (ARTSP) and Frasers Property Limited (FPL). However, we note that FPL has hospitality exposure primarily through one business unit, while Shangri-La has more direct hotel operating exposure and greater sensitivity to Mainland China.

Table 4: Bond recommendations (Shangri-La bolded)

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 hold NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.