Hotel Royal exploring regional acquisitions for growth: chairman

Singapore

EMERGING from a challenging year in which lower tourists arrivals in Singapore hit its domestic hospitality operations, Hotel Royal will explore hotel and investment property opportunities in Asia Pacific to fuel its growth, chairman Lee Keng Thon said.

"Moving ahead, the group intends to continue its strategy of growth through acquisitions, particularly in the Asia Pacific region," Mr Lee said in the 2014 annual report issued recently.

Acquisition for growth is not new for the group. In July 2014, Hotel Royal bought the 186-room Burasari Resort in Phuket, Thailand, and the 97-room Peranakan heritage boutique hotel - The Baba House - in Malacca, Malaysia.

The hotel group was listed on the mainboard of the Singapore Exchange in 1968 and has since diversified into property and financial investments.

Besides its flagship 356-room Hotel Royal, which sits on a freehold site of about 7,200 square metres on Singapore's Newton Road, and the 231-room Hotel Royal @ Queens in the central civic district, the group has hotels in the Malaysian cities of Kuala Lumpur, Penang and Malacca.

While its Singapore hotels experienced lower occupancy rates and had to lower room rates to counter keen competition, the group's net profit for 2014 was up 15.9 per cent from 2013, at S$11.18 million. Hotel operations generated about S$10.85 million, with those in Singapore contributing S$9.07 million.

Revenue grew 10.7 per cent to S$56.69 million. This was boosted by the maiden contribution from its newly acquired Burasari Resort in Phuket, improved room and occupancy rates at its hotels in Malaysia, and higher rental income from its investment properties in New Zealand, Singapore and Malaysia.

Hotel operations contributed to 83 per cent of the group's revenue last year, while property investments contributed 16 per cent and financial investments one per cent.

As a result, the group's earnings per share for the year rose from 11.48 Singapore cents to 13.31 cents in 2014, while net asset value per share increased from S$6.05 to S$6.40 as at Dec 31, 2014.

Mr Lee expects this year to be "more challenging" due to slower tourist arrivals, the relatively stronger Singapore dollar compared to regional currencies, and volatile economies.

"Profitability will continue to be influenced by the foreign exchange fluctuations such as NZD, USD, RM and THB against the SGD as well as changes in our investment portfolio," he said.

A higher supply of hotel rooms and shortage of labour in Singapore add to the challenge, but Mr Lee said the group will continue to actively market its investment properties in New Zealand to maximise rental income.

Higher contributions can also be expected from Hotel Royal Bangkok @ Chinatown, which has completed a major upgrading and soft-opened in December 2014.

Financially, the group is healthy. Last year, it generated a net cash flow of S$14.7 million from operating activities, which it says will provide the necessary capital for growth and expansion. It ended 2014 with S$17.11 million in cash and cash equivalents. Adjusted net asset value amounted to S$701.57 million, and net gearing ratio hovered at around 22.1 per cent.

"We envisage that we have sufficient headroom to execute further acquisitions," Mr Lee said. The group has a market value of about S$320.88 million.

At its current price of S$3.80 a share, Hotel Royal Limited is valued at 28.5 times its earnings.