Hotel Royal

[ghchua]

Hi weijian,

- Minority shareholders have lost ~50% over the last 10years. Mini panadols in the form of 1-2% dividends annually.

I think it is unfair to say that minorities had lost 50%. They had the opportunity to participate in those rights issues, and if they have done, they would be looking at a lower loss number.

- The hotels are almost still as old but of course land value has surely appreciated. Can see but cannot touch.

Again, I disagree with you. They have renovated Baba House and Hotel Royale Chulan Bukit Bintang after purchasing them. I know minorities want them to do something to their Singapore hotels, but the problem is that if you start to renovate them, your revenue from those hotels are gone. So, it has to be a step by step approach. Wait for the revenue for other hotels to stabilise first before embarking on these projects. Singapore revenue is important for them as it consists of a major part of their whole group revenue.

- How many 10years do minority shareholders have?

Well, this is the part that is difficult to answer. Investors have to understand that hotel ownership is a "deep pocket" business, especially when you don't have scale like the major brands. You cannot expect high ROE from this asset heavy business, and normally the major gains will only be made via divestment. You have to be patient to reap the rewards.

[weijian]

hi ghchua,

To expand onto what VB sgpianolessons mentioned about rights issue:

Nov 2022 at $2 (100% subscription, 30% discount), and May 2018 at $3 (150% oversubscribed, 25% discount)

For minorities who have lost ~50% of initial capital since 2014, I am not sure if putting in more money in 2018 and 2022 to reduce one's cost base (and hence lower% of capital losses) is good comfort.

Of course, as a minority shareholder, the lower the cost base, the bigger the gains if the buildings/land are eventually monetized in the future. Whether is it really probable or when will it happen, that is what separates good and average investors. I have to admit I am just an average investor without 10year timeframe kind of patience.

Talking about potential upcoming refurbishment for its 2 Spore hotels, It will be cold comfort for minorities because that just implies more and new CAPEX is required after it completed its Msian properties' upgrade. Been capital intensive, Hotel Royal doesn't generate a lot of cash and only 3mil (out of 40mil) remains of its 2022 rights' issue proceeds (as per end FY23 results). More rights in the coming future?

Or the path of the middle - Selling 1 of its Spore hotels to fund a major upgrade for the remaining one? The Newton one looks like a good candidate since it is surrounded by residential developments but the boat seems to have passed for CCR property?

Does the Hotel Royal towkay has a history of asset divestments and rewarding minorities?

[ghchua]

Hi weijian,

Throughout the years, they did dispose some assets in their investment properties segment. But those are not really major disposals and therefore not much had been made from those disposals.

Their last special dividend declared was in 2019. Their biggest dividend declared from my recent memory was a bumper 25cts per share in 2006, to exhaust their section 44 tax credit to benefit shareholders.