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PR Newswire
10-07-2023, 10:07 AM
There are more than a hundred companies under the Bursa Malaysia property counter. But when you look at them, you will find that most of them have various types of property related activities such as:
Many of the property companies also have not property business eg MKH has plantations.
All the segments are driven by different economic forces so that when looking at the fundamentals of property companies, you have to look at the performance of the various segments. Any valuation should then be based on a sum-of-parts basis.
This applies to Plenitude which has two major potential profit contributors – property development and hospitality.
Property development has been contributing to the bottom line, even in the 2020/21 pandemic years. With the opening of the economy, I expect the contribution to be better. The property development segment was the major contributor to the Group’s performance.
Plenitude started as a property developer but in 2001 diversified into the hospitality business. Today the hospitality business is the largest segment in terms of the Total Capital Employed. But it was not profitable since 2013.
The hospitality segment’s poor performance was due to competitive pressures. The Group had refurbished and rebranded the hotels to address this. At the same time, it had also focused on efficiency to improve the margins. There are signs that gross profit margins are improving but the jury is still out on whether revenue will improve. The hospitality business is a turnaround case. Because of its size, the creation of shareholders’ value will depend on a successful turnaround.
![[Image: Plenitude.png]](https://i.postimg.cc/KcnjzFtK/Plenitude.png)
Moral of the story - you have to dig deep if you are a fundamental investor.
- Property development where the earnings is from developing land into building for sales.
- Property investment where the earnings is from rental income.
- Hospitality segment where the earnings is from operating temporary lodging
Many of the property companies also have not property business eg MKH has plantations.
All the segments are driven by different economic forces so that when looking at the fundamentals of property companies, you have to look at the performance of the various segments. Any valuation should then be based on a sum-of-parts basis.
This applies to Plenitude which has two major potential profit contributors – property development and hospitality.
Property development has been contributing to the bottom line, even in the 2020/21 pandemic years. With the opening of the economy, I expect the contribution to be better. The property development segment was the major contributor to the Group’s performance.
Plenitude started as a property developer but in 2001 diversified into the hospitality business. Today the hospitality business is the largest segment in terms of the Total Capital Employed. But it was not profitable since 2013.
The hospitality segment’s poor performance was due to competitive pressures. The Group had refurbished and rebranded the hotels to address this. At the same time, it had also focused on efficiency to improve the margins. There are signs that gross profit margins are improving but the jury is still out on whether revenue will improve. The hospitality business is a turnaround case. Because of its size, the creation of shareholders’ value will depend on a successful turnaround.
Moral of the story - you have to dig deep if you are a fundamental investor.