Sing Holdings's Travelodge Docklands hotel valuation could take hit from Covid-19

THE auditor of Sing Holdings's trusts in Australia has flagged that the valuation of hotel Travelodge Docklands in Melbourne might have "materially changed" by the date of its report.

This was due to the impact of the Covid-19 pandemic on demand for travel and accommodation services in Australia, the mainboard-listed property development and investment group disclosed in a regulatory filing on Sunday.

The trusts' auditor had included an emphasis of matter in its report on the trusts' financial statements for the financial year ended Dec 31, 2019. The financial impact of the novel coronavirus pandemic could not be reasonably predicted as at the date of the auditor report, the filing noted.

That said, the auditor's opinion on the trusts' financial statements remained "not modified" in respect of the emphasis of matter. This was due to the virus outbreak occurring before the financial year-end, hence no adjustments were made as at Dec 31, 2019.

The hotel has a fair value of S$97.3 million as at Dec 31, 2019, according to an external valuation expert engaged by the group. It also represents 95.9 per cent of the group's non-current assets and 19.7 per cent of total assets.

Travelodge Docklands has seen its occupancy rates take a hit towards the end of March, since the implementation of stringent measures to contain the Covid-19 situation in the middle of the month. These measures include the closure of borders and the shutdown of non-essential services in Australia.

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The hotel's average occupancy rate for the first quarter ended March 31, 2020 stood at 77 per cent, compared with 95 per cent a year ago. Rental income received/receivable fell 39 per cent to A$1.2 million (S$1.1 million), from A$2 million a year ago.

The hotel also obtained a self-isolation business contract from the Victoria state government for all the rooms for one month starting end-March. The contract may be subjected to further extension, Sing Holdings said.

As the virus situation is still evolving, Sing Holdings's board said it is unable to assess Covid-19's impact on the group's consolidated financial results for the financial year ending Dec 31, 2020.

Travelodge Docklands is a freehold 291-room limited-service hotel which the group acquired in January 2017 for A$107 million. The hotel is located at 66 Aurora Lane, Docklands in Melbourne. It is under a long-term lease to Australian hotel company TFE Hotels group and operates under the Travelodge brand.

Sing Holdings shares were trading flat at S$0.33 as at 1.35pm on Monday.