Hotel Royal

[dydx]

With the latest 30Sep10 announcement on the completion of the acquisition of the Coronade Hotel Kuala Lumpur....
http://info.sgx.com/webcoranncatth.nsf/V...D0028ED66/$file/HRL-AnnouncementProposedAcqusition30Sept10.pdf?openelement
, with full details of the acquisition in an earlier 4Mar10 announcement....
http://info.sgx.com/webcoranncatth.nsf/V...C00373360/$file/Announcement-4-Mar-10.pdf?openelement
Hotel Royal now owns a total of 4 hotels - 2 in Singapore, and 1 each in Kuala Lumpur and Penang - all sited on freehold land with good long-term value and redevelopment potential.

With the recently completed (in Jul10) 2-for-5 rights issue at $1.50 - raising $36m in gross proceeds - Hotel Royal now has 84m issued shares. Based on the last done share price of $2.38, market cap now stands at $199.9m. I think this is a clear case of gross under-pricing by Mr Market, bearing in mind, apart from the 4 hotels, Hotel Royal also owns -
(1) a freehold apartment block (under construction) at 1A Surrey Road (right next to Hotel Royal on Newton Road);
(2) a shopping centre/office complex in Wellington, New Zealand;
(3) a few other smaller commercial/industrial units in Singapore; and
(4) a portfolio of quoted securities with market value of some $10m as at 30Jun10.

Full details of Hotel Royal's property assets are contained in page 71 of the latest FY09 AR.....
http://www.sgx.com/wps/portal/marketplac...al_reports

Based on the 30Jun10 NAV/share of $4.17 from the 1H-FY10 results announcement.....
http://info.sgx.com/webcoranncatth.nsf/V...B0014238C/$file/HRL2Q2010.pdf?openelement
post-rights issue adjusted NAV/share is $3.41.

In his Chairman's Message in the FY09 AR, Chairman Dr Lee Keng Thon mentioned that if a $95.9m revaluation surplus (net of tax) on the Group's hotel and investment properties is included, Hotel Royal's net asset value (after revaluation) would have increased from
S$4.19 to S$5.79 per share as at 31Dec09. Adjusting for the rights issue, post-rights issue RNAV/share would be still a whopping $4.56!

As $4.56 appears to be conservative still, Hotel Royal looks like a great value investing opportunity!

[pianist]

hi does anyone knows how come a Branch is needed when operating a hotel? What does a branch means? is it the same context as that of a Bank opening a Branch in overseas?

"The Board of Directors of Hotel Royal Limited (the "Company" or the "Group") wishes to announce
that the Company has registered a branch in Malaysia (the "Branch").
The purpose of the Branch is to facilitate the Group's operations in Malaysia."

[dydx]

Should shareholders of Hotel Royal get worried over today's announcement entitled "Profit Guidance"??.....
http://info.sgx.com/webcoranncatth.nsf/V...F000CC3BB/$file/HRL-ProfitGuidance.pdf?openelement

[cif5000]

How would you compare between Hotel Royal and Hotel Grand Central?

I mean, why one over the other, if one were to make a choice?

[violinist]

or Hotel Plaza, now Pan Pacific?

[dydx]

How would you compare between Hotel Royal and Hotel Grand Central?

I mean, why one over the other, if one were to make a choice?

I have not dug into Hotel Grand Central, so I have nothing much to share except that presumably, the company also holds some good property/hotel assets, and the counter is also likely under-priced by Mr Market.

I can accept Hotel Royal because its controlling shareholder - Lee Family, headed by Lee Chin Chuan - has a good reputation, and OCBC (through Great Eastern Life Assurance) is a long-standing shareholder currently holding a 12% stake. The existing old Hotel Royal located at 36 Newton Road should be due for redevelopment - hopefully into a high-end condo - soon.

By the way, today Hotel Grand Central also made an announcement on a similar - but much larger - impact on P&L due to the recent change in tax laws on tax depreciation on buildings in New Zealand.....
http://info.sgx.com/webcoranncatth.nsf/V...00028D2A1/$file/HGCImpactofdeferredtaxchangesinNewZealand.pdf?openelement

[cif5000]

I have not dug into Hotel Grand Central, so I have nothing much to share except that presumably, the company also holds some good property/hotel assets, and the counter is also likely under-priced by Mr Market.

I can accept Hotel Royal because its controlling shareholder - Lee Family, headed by Lee Chin Chuan - has a good reputation, and OCBC (through Great Eastern Life Assurance) is a long-standing shareholder currently holding a 12% stake. The existing old Hotel Royal located at 36 Newton Road should be due for redevelopment - hopefully into a high-end condo - soon.

By the way, today Hotel Grand Central also made an announcement on a similar - but much larger - impact on P&L due to the recent change in tax laws on tax depreciation on buildings in New Zealand.....
http://info.sgx.com/webcoranncatth.nsf/V...00028D2A1/$file/HGCImpactofdeferredtaxchangesinNewZealand.pdf?openelement

Thanks for your thoughts. I asked because both companies carry properties mainly in Singapore, Malaysia and New Zealand, and New Zealand has the tax news.

On HGC, I have no idea the background of the controlling shareholder Tan Eng Teong. His brothers also sit on the board and his daughters and niece are in the management team (this is a non-sexist statement). They also control the associate company listed on Bursa.

In Singapore, HGC's hotel along Orchard Road should worth some money and can also be redevelop as the area renews itself.

I don't understand your meaning of "much larger". Are you referring to the absolute figure? The tax impacts for Hotel Royal and HGC are $4.7m and $12.8m respectively. If we base them on 1H10 pre tax earnings, then that impacts represent 90% for HR and 113% for HGC. Comparable I would say. The main reason is of course HR has a slightly lower percentage of property asset in NZ - 17% vs 22%.

[sgd]

Just to share some infor.......

A few years ago, I get to interact with a bunch of people who works in the Hospitality sector(Top Level). One of them told me about one of the hotel discussed above. The rooms are all fully booked by masseuers and when the hotel needs a room, the masseuers will then 'release' a room. Hanky panky business. Not sure they still do it but if one is going to invest, got to check them out instead of looking at numbers alone

Almost all the hotels are infected or knowingly involved in this kind of hanky panky business. Look at some of the budget hotels listed in sgx the oddest places where they locate their hotels are in secluded or industrial areas where there are not likely to have any tourist but ideal for couples who urgently need a "distraction" for a few hours. taxi drivers say that on weekends there is usually a long queue of filapinas and banglas waiting in line. -kachiing!- high room turnover.

[cif5000]

Comparison of Hotel Royal and Hotel Grand Central - a non-technical review.

It looks like Mr. Market (to sound cool) is responding differently to the New Zealand tax thing when viewed over this very short term.

[Image: z?s=H12.SI&t=3m&q=l&l=on&z=l&c=H18.SI&p=...&region=SG]

[dydx]

The Q3-FY10 results announcement released on 12Nov10 (last Friday) makes interesting reading.....
http://info.sgx.com/webcoranncatth.nsf/V...800088A97/$file/HRL3Q2010..pdf?openelement

As expected, the recent change in tax laws concerning tax depreciation on buildings in New Zealand has given rise to a $4.701m (NZ$4.821m) provision for deferred tax liability in a New Zealand subsidiary (see Note 7, p5), and that has dragged Hotel Royal to record a $3.193m net loss in Q3-FY10 at the group level. In Q3, there was also a $0.346m net forex loss (see Note 6, p4), $0.848m in one-off fees paid on the acquisition of The Coronade Hotel Kuala Lumpur (see Note 4, p3), and a chunk of also one-off legal fees (amount unknown) incurred to arrange a MYR60.0m loan facility in Malaysia to partially finance the acquisition of the hotel (see Note 3, p3). If we adjust for the above, PBT would increase to at least $3.117m, and NP would increase to at least $2.702m - i.e. a better operating and overall performance compared to Q3-FY09.

I think it is relevant to note the healthy increase in room revenue (under Note 1, p2) - the most important item contributing to Hotel Royal's recurrent profits - in Q3 and also for the 9-month period. In Q3, room revenue increased 27.1% yoy to $6.257m; for the 9-month period, it has increased 16.6% yoy to $16.869m. Based on the outlook statement given in the announcement, the positive underlying trend is sustaining.

It is also relevant to note that Hotel Royal will have new revenue and profits from (1) The Coranade Hotel Kuala Lumpur, and (2) a major new tenancy at the Grand Complex in New Zealand, from Q4 onwards.