Lasseters expects Malaysia hotel to generate revenue after planned soft opening in July

CATALIST-LISTED Lasseters International's property and hospitality development business in Malaysia - the Mercure hotel - has received its Certificate of Practical Completion in mid April, and targets to obtain its vacant possession by the end of the month.

The group is planning a soft opening in July, subject to market conditions and travel restrictions, and expects the hotel to generate revenue from then on, the integrated resort operator said on Thursday, in response to queries from the Singapore Exchange (SGX) on the status of its Malaysia projects.

SGX had flagged that Lasseters' casino as well as spa and wellness business in Australia account for almost 100 per cent of the group's revenue. "While the group has ventured into property and hospitality development in Malaysia, the revenue is still insignificant," the exchange noted.

Lasseters said its management is in the midst of taking over physical possession of the hotel in stages, and is rectifying defects.

The Mercure hotel, located at an integrated development in Shah Alam, Selangor, is operated by a joint-venture company owned by Lasseters and Malaysia-based property developer Paramount Corporation. It was initially planned to open in end-2019.

Lasseters had on Monday proposed a disposal of its Australian assets for A$105 million (S$108.5 million), an amount nearly six times that of the group's market capitalisation of S$18.8 million before the announcement was made.

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Two of its wholly-owned subsidiaries have entered into various agreements with entities under Sydney-based integrated development and hospitality group Iris Capital. These agreements would see Lasseters selling various assets associated with its casino, hotel, convention centre and health club operations in Australia.

The announcement caused its shares to jump to an intraday high of 6.6 Singapore cents on Tuesday morning. The last time the counter traded near this level was in October 2017.

In its response to SGX filed on Thursday, Lasseters said it is negotiating "several proposals with potential parties" for property development projects within Malaysia.

"Whilst business during pandemic is volatile, it also poses opportunities to the group to acquire viable projects on a lower entry point and maximise future potential post pandemic. The group will make the relevant announcement in due course, should any of the projects currently in negotiation materialise," said its non-executive chairman Jaya JB Tan.

Lasseters said on Monday that its subsidiary, Ford Dynasty, has entered into a separate brand licence deal with Iris Capital entity Alice Springs Operations, to grant an exclusive, royalty-free licence to use the Lasseters brand in Australia.

Asked about the rationale for this arrangement, Lasseters said the Iris Capital entities had intended to purchase the assets and business together with the Lasseters brand, which is "synonymous with the casino that has been in operations since 1981".

This approach grants them the exclusive right to use the brand, with Lasseters retaining brand ownership and goodwill. This also avoids costs associated with name changes at the listed company level.

"The group will maintain its hospitality business as one of our core businesses, and is not adverse in getting involved in casino businesses again if opportunity arises in Australia or elsewhere," Mr Tan said.

He said the group arrived at its estimated consideration for the disposal by taking into account the multiple on a normalised earnings before interest, tax, depreciation and amortisation, factoring the age and condition of the property, its potential future capital expenditure requirements, as well as financial strength of the businesses.

The company intends to use 61 per cent of proceeds from the disposal to repay bank loans, while another 28 per cent will go towards working capital and investments in the property management and property development business.

It expects to allocate 40-60 per cent of the working capital for potential investments in property development, it said, but added that this is a preliminary allocation.

Lasseters shares closed 1.9 per cent or 0.1 Singapore cent higher on Thursday, at 5.3 Singapore cents.