GLOBAL PREMIUM HOTELS’ 1Q net profit came in 46.9% higher year-on-year at $6.4 million.
Revenue increased 28.8% y-o-y to $14.9 million on contribution from three new hotels launched in 2011 -- Parc Sovereign, Fragrance Hotel-Elegance, and Fragrance Hotel-Riverside.
The Group’s average occupancy rate (AOR) in 1Q 2012 improved 15.7 percentage points to 91.7%, with new hotels achieving occupancy of 89% to 98%.
For more information, read the company's press release on the SGX website.
Below is a summary of the Q&A session at Global Premium Hotels’ briefing on Tuesday (15 May). The replies were made by Mr Eddie Lim Chee Chong, the CEO, and Ms Mey Chen, the CFO.
Photo by Leong Chan Teik
>> Questions related to financials:
Q: How do you think the company will do in 2012?
4Q is typically our strongest quarter and 1Q, the weakest. With 1Q 2012 results outperforming 4Q 2011, we are cautiously optimistic that we will do better this year.
Q: What is your total amount of borrowings after listing?
As at 10 May 2012, the Group has fully settled the purchase consideration of S$558 million and utilised the total credit facilities of $463.2 million. Our total borrowings now comprise of short-term borrowings of $20.2 million and long-term borrowings of $443.0 million.
Our long-term borrowings comprise interest-bearing loans ranging in tenure from 5 years to 20 years. A balance of $10.0 million credit facilities remains unutilised.
Currently, our gearing ratio is approximately 1.6x and net cash gearing is approximately 1.35x.
Proceeds and corresponding expenses from the IPO, as well as expected higher interest expenses will be reflected in the Group’s subsequent financial results.
Q: What is your average interest rate?
2% to 3% per annum.
Q: At what level of gearing will you be comfortable with?
A gearing below 70% is acceptable.
Q: Are you concerned that your gearing is higher than the industry average?
When making a comparison with other companies, it would be ideal to take into consideration the time of listing. Usually companies that recently list have a higher gearing as compared to those which have listed for a longer period of time.
Q: What is your target RevPAR growth rate this year?
Conservatively, our target RevPAR growth rate is approximately 2-3% for 2012.
Q: Excluding the new hotels, what is the Group’s AOR in 2011?
Approximately 85-86%.
Q: What is the Group’s NAV?
After adjusting for the estimated net proceeds from the issue of new shares and based on the post-invitation share capital of 1,000,000,000 shares, the NAV for the Group is approximately 30.39¢.
Q: Which are the top 5 hotels in terms of revenue contribution?
The top 5 revenue contributors are Parc Sovereign, Fragrance Hotel-Riverside, Fragrance Hotel-Selegie, Fragrance Hotel-Bugis and Fragrance Hotel-Ruby.
Q: When do you usually revalue the assets?
December.
>> Questions related to operations
Q: Will you convert your economy-tier hotels to mid tier hotels after asset enhancement?
Unless there is a significant development in the area causing a drastic shift in demographics, we will not convert our economy-tier hotels to mid-tier hotels.
When accessing the type of hotels, it is important to understand expectations of the hotel guests in each area which will in turn determine the pricing of the rooms.
Q: What is your visibility like for the various types of booking (eg. tour agencies, online)?
For tour agencies, we have a visibility of approximately 3 months while online bookings are usually made at the last minute.
Q: What is the breakdown of bookings?
Approximately 75% of our hotels are pre-booked, with tour agencies contributing 30% while the other 45% is made by way of email, calls and online.
Q: Who are your top 5 customers in terms of nationality?
A majority of our guests are from the Asia-Pacific region, especially the People’s Republic of China, Indonesia, Philippines, India and Malaysia.
>> Questions related to expansion
Q: What is your strategic expansion plans moving forward?
We are confident of acquiring a land site for a 200-300 room hotel within the next 1-1.5 years. Based on our previous track record, we will be able to commence operations within 1-2 years of acquiring the land. We hope to expand at a rate similar to our past track record.
Another area that we intend to go into is hotel development. If the price is right, we will consider selling the development to a third party. For example, after converting and renovating our Fragrance Hostel into Fragrance Hotel-Elegance in 2011, we subsequently sold it to IPAH Hotels (Pte) Limited for $14.5 million to take advantage of the attractive sale price offered. We have since entered into a tenancy agreement for a two-year period with an option to renew for another year.
In addition, we will tap into our hotel management experience and enter into management contracts as and when the opportunity arises.
Q: What is the expected capex for new development?
The capex will be dependent on the location acquired. Currently, a piece of land for a 200-300 room hotel near the city costs approximately S$100 million as compared to S$50–S$80 million for an area in the city fringe. The cost of constructing the hotel is approximately S$100-S$120 million.
Q: What type of hotel will you be expanding into?
Our choice of hotel will depend on the size of the land acquired. Mid-tier hotels will require a larger land area.
Q: Will you consider going into luxury hotels?
We prefer economy-tier hotels as they more resilient to market volatility as compared to higher-tier hotels. In addition, economy-tier hotels generally operate at higher gross profit margins.
Q: Will you continue the 80% dividend payout policy beyond FY2012?
We will strike a balance between growth and giving out dividends. Ideally, we would like to follow the lead of Fragrance Group Hotel, our parent company who has been sharing the growth with shareholders consistently after listing.
Q: Will upcoming hotels affect the demand of hotel rooms?
Although an additional 2,052 hotel rooms are expected to open in 2012, we believe that new tourist attractions such as International Cruise Terminal, Gardens by the Bay, River Safari, Mandai Fourth Gate and Jurong Lake will be able to attract more tourists which can help to off-set the increase in supply of hotel rooms.
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