Hotelier Amara Holdings expects 'severe' hit on earnings this year

AMID global travel restrictions and safe-distancing measures, property developer and hotelier Amara Holdings expects its financial performance for 2020 to be "severely impacted" from a broad weakness across all business segments, but it remains "optimistic" about the hotel industry's prospects over a longer horizon. 

Before the pandemic, local guests contributed to 23 per cent of the group's hotel-room revenue; the remaining 77 per cent came from international tourists, said Amara in a statement on Monday. 

In response to shareholder queries on Amara's "rather depressed" share price in recent months, the group said the dip in share price from March to April coincided with the Covid-19 outbreak, which affected various industries and "caused investors to turn bearish".

Since then, the share price - as at its closing price of S$0.41 on Monday - has recovered to about 85 per cent of its level on Jan 20, when Shanghai reported its first case of Covid-19. This suggests that some investor confidence has returned, said the group. 

"The management believes in the group's strong fundamentals and clear growth prospects, and will leave the share price to market forces, which we believe will reflect our focused efforts in time to come," it added.

When asked whether the group will maintain its dividend payout this year, Amara said it does not have a fixed dividend policy; the dividend given out depends on factors such as profit level, cash position and future cash needs. Its dividend payout ratio stood at 40.8 per cent in FY2019. 

"We will continue our ethos of redeploying surplus funds into higher-yielding business areas to enhance shareholders' value," said the group.  

Amara further noted that it will remain financially prudent and conserve essential resources to prepare for the post-pandemic recovery process. The group's gearing ratio "remained healthy", and it is also "well supported" by its principal bankers and available banking facilities, it said, and there are no material concerns over its ability to fulfil its near-term debt obligations. 

Amara's overseas operations in the hotel investment and management segment were first affected after initial reports of the Covid-19 outbreak in China in January. Its hotel in Shanghai, AmaraSignature Shanghai, has recorded low occupancy since late January, and its food and beverage (F&B) outlets were closed from February to April. 

Amara Bangkok has been affected by the virus outbreak since March due to global travel restrictions, and has been closed since April 10. Barring any unforeseen changes, it is scheduled to reopen in July. 

In Singapore, the group's two hotels, Amara Singapore and Amara Sanctuary Resort Sentosa, have also been affected since progressive border control measures imposed by the Singapore government started in late January. This is coupled with travel restrictions and lockdowns imposed by other countries, as well as the postponement or cancellation of MICE (meetings, incentives, conferences and exhibitions) and social events. 

The group said its property investment and development segment in Singapore has also been disrupted. All construction works on its property developments have halted since the imposition of the "circuit breaker" on April 7.  Consequently, the completion dates of the group's property development projects are expected to be delayed.

As for its investment properties, retail and F&B businesses in Singapore have been impacted by the decline in demand, strict safe-distancing measures and closures of non-essential services, said Amara.

Its specialty restaurants and food-services segment has continued operations throughout the circuit-breaker period, although only with delivery and takeaway services, and with safe-distancing measures in place. The revenue from this segment has also been affected with many offices closed and most people working from home.

"Amid challenging market conditions, we will continue to strive towards resiliency through a balanced asset portfolio that is geographically diversified, and an emphasis on cost prudence and efficiencies in the way we manage our businesses, both in Singapore and our overseas markets," said Amara. 

The group intends to focus on recurring income streams through its three inter-related segments: hotel investment and management; property investment and development; and specialty restaurants and food services. In particular, for property development, the group will clear its current stock of residential units and explore opportunities in the growing economies of the region. 

In light of the headwinds faced by the Singapore hospitality sector, Amara said it is also looking at broadening its online distribution channels, forming strategic partnerships with online travel agents, and boosting its attractiveness as a MICE destination.