Mandarin Oriental

[weijian]

HK is MOI's key market with regards to recovery and possibility of monetizing its future commercial site.

Hotels and retailers doing brisk business four months after Hong Kong reopening

Hong Kong’s hotel occupancy rates in March reached 84 per cent – back to the levels seen in the second half of 2019, just months before the Covid-19 pandemic struck. The average revenue per available room in March stood at HK$1,170 (S$202).

Lee said that five- and six-star hotels have experienced the strongest revival in Hong Kong, a reflection of the recovery of business activity. She added that room prices may increase in the near future, as supply growth is curtailed.

On the economic front, the return of tourists has been a boon for Hong Kong. The 2.7 per cent year-on-year growth in real gross domestic product (GDP) in the first three months of 2023 ended a run of four straight quarters of contraction.

https://www.businesstimes.com.sg/interna...-hong-kong

[weijian]

Some time in the future, the trough will pass (on hindsight) and the upturn for HK's commercial properties will come.

Hong Kong’s office towers have never been so empty

A record 13 million square feet of office space sits empty. The overall grade A vacancy rate was almost 15 per cent in April, data from Colliers International Group show. That’s more than three times higher than in 2019, and tops Manhattan’s rate of 12.5 per cent, and the 4.6 per cent level in the rival Asian hub of Singapore.

Meanwhile, developers like CK Asset Holdings and Henderson Land Development keep building more skyscrapers. There will be at least seven million square feet of Grade A space coming on the market in the next three years, CBRE estimates. The annual absorption rate before Covid was just 1.8 million square feet, so it will take years to fill the new space, Kwok said.

“There is definitely a discount to the rate of absorption as global companies’ expansion slows and mainland Chinese companies are still taking their time to decide whether to come to Hong Kong,” he said.

https://www.businesstimes.com.sg/propert...n-so-empty

[weijian]

This is close to 2.2mil per room (while 3rd Avenue International Real Estate folks estimate MOI is trading at 0.2mil USD per room). Olayan already owns another European hotel (Madrid) with MOI and so MOI should be secured to continue the management of the Barcelona hotel. The next question will be, is Olayan interested in buying over MOI's 50% stake in the Madrid hotel so that the latter can continue to de-lever and deliver its HK commercial property?

Saudi Entity Olayan Acquires Mandarin Oriental Barcelona Sale Sets Record Price Per Key in Spain For €240m

No price tag was disclosed in the July 3 deal, but the guide price is reportedly €240 million ($261 million), according to Spanish newspaper El Pais. The price represents a healthy €2 million per key, which the newspaper said is a record in Spain.

Mandarin Oriental is expected to continue operating the hotel, which is located on Barcelona’s famed street Passeig de Gràcia. The nine-floor hotel opened in November 2019, according to CoStar, Hotel News Now’s parent company.

Olayan already has a partnership with Mandarin Oriental in the 50-50 ownership of the 153-room Mandarin Oriental Ritz, Madrid hotel, which was jointly acquired in 2015 for approximately €130 million.

https://pe-insights.com/news/2023/07/06/...for-e240m/

[weijian]

A good set of results as expected with Asia opening in 1H 2023. All other hospitality companies are reporting something similar. Underlying profit is on track to match to precovid in 2018, despite having 2 less hotels compared to then. The scalable nature of the Mgt business is evident.

The most interesting thing would be MOI selling MO Jakarta to Astra for 85mil (recording a 43mil, or 100% gain on disposal from BV), a related party transaction. This continues to improve the FCF to delever down and also provide headroom for the development of the commercial site.

MANDARIN ORIENTAL INTERNATIONAL LIMITED HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2023

HIGHLIGHTS
- Underlying profit of US$28 million in first half, more than double 2019
- Record fee income in Management Business, with particular strength in Europe and the Middle East
- Robust pipeline with several new openings scheduled in 2023
- Dividend payments recommence with interim dividend of US¢1.50 per share

https://links.sgx.com/FileOpen/MOIL.ashx...eID=766974

[weijian]

The ex-Excelsior site is probably ready for occupancy in 2H25 (~1 year from now) and has opened for leasing activities as per AR23. The Jardines should also be facing what Superman Li is experiencing as well. Nonetheless from parent JMH's 1Q24 update, it did a 5% block share purchase to raise its stake to 85%. There is only about ~300mil USD free float left.

In April, the Group acquired an additional block representing around 5% of Mandarin Oriental’s shares, taking its holding to 85.3%.

Li Ka-shing’s unfilled towers show deepening Hong Kong downturn

The city’s vacancy rate was at a historic high of 16.7 per cent in the first quarter, according to data from CBRE. Office rental prices fell 35 per cent since the peak in 2019.

Cheung Kong Center II, a smaller version of CK’s headquarters building, has only a fraction of the space in its 41 floors rented since pre-leasing started last year, according to brokers who market for CK.

CK Asset’s chairman Victor Li recently acknowledged that new demand for offices was not high in the short term, but that he was confident in the future of Cheung Kong Center II.

https://www.businesstimes.com.sg/propert...-downturn1

[weijian]

After the appointment of 2 "more suitably qualified" outsiders in 2021 - ex-IHG CEO and President of Greater China Kering Group, the Keswicks have continued to de-jardinize the BOD with 2 more similar appointments in July2024 - Chief Global Growth Officer of L'OReal and Chief Marketing Officer of Diageo.

To be honest, as a standalone and small luxury hospitality group, Mandarin Oriental lacks breadth and scale. The brand is definitely better off been part of a larger hospitality group, unlocking access its loyalty program and IT systems. Maybe the Keswicks could split the company into two - hotel ownership and hotel mgt as Marriott did 30years ago and more recently, Hilton as well, and then make ownership adjustments accordingly.

COMPANY BOARD CHANGES

https://links.sgx.com/FileOpen/MOIL%20SG...eID=809939
https://links.sgx.com/FileOpen/0731%20Co...eID=813630