ECM Libra identifies hotel ops as new core business

This article first appeared in The Edge Financial Daily, on May 5, 2017.
ECM Libra identifies hotel ops as new core business
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KUALA LUMPUR: ECM Libra Financial Group Bhd has identified hotel management and ownership as its new core business after disposing of its investment banking and securities business in 2012.

The group is proposing to acquire a 50% stake in the subsidiaries of Singapore-based TP Real Estate Holdings Pte Ltd (TPRE) and three hotels from Tune Hotels Sdn Bhd (THSB) to venture into the hotel business.

The proposed acquisitions are deemed to be related party transactions by virtue of ECM Libra group managing director Lim Kian Onn’s controlling interest in Singapore-listed Plato Capital Ltd, which jointly owns TPRE with Tune Hotels.Com Ltd, in which Lim has a 13.6% stake. Lim is also a controlling shareholder of ECM Libra, with a 45.5% stake.

ECM Libra chairman Datuk Seri Kalimullah Hassan also owns a 13.5% stake in Tune Hotels.Com.

“The proposed acquisitions and collaboration will allow ECM Libra to diversify its revenue and earnings stream into a new business area that has potential for growth, while leveraging on Tune Hotels’ existing and established hospitality franchise,” said ECM Libra in a filing with Bursa Malaysia yesterday.

“Furthermore, assets from the proposed acquisitions are strategically located and have promising prospects, in line with the positive outlook for the tourism and hospitality industry in both Malaysia and Australia,” it added.

ECM Libra has entered into agreements to buy from TPRE half-ownership of TP Sepang Sdn Bhd, TP Hotel (Flinders) Trust (TP Flinders), TP International Pty Ltd and Yummy Kitchen Sdn Bhd for RM57.67 million via the issuance of 160.21 million new ECM Libra shares at 36 sen apiece.

TP Sepang holds a 17-year concession to construct and operate Tune Hotel klia2 in Sepang. TP Flinders, meanwhile, owns a two-storey building in Flinders Lane in Melbourne, Australia, which it intends to develop into a hotel.

Yummy Kitchen owns the Glasshouse Café at Tune Hotel klia2, and is providing food-catering services for the AirAsia lounge at klia2 for a tenure of three years.

ECM Libra also plans to buy Tune Hotel Penang, Tune Hotel Kota Kinabalu, and the rights to operate and manage Tune Hotel KLIA Aeropolis from THSB for RM30.93 million via cash and a share-swap deal.

“Of the RM30.93 million total, RM11.93 million will be satisfied via the issuance of 33.13 million new Tune Hotel Penang shares at 36 sen per share, while another RM19 million will be in cash,” said ECM Libra, adding that it will fund the cash payment via borrowings.

In connection with the proposed acquisitions, ECM Libra has also entered into a collaboration with Tune Hotels.Com (BVI) Ltd to further enhance, promote and develop new franchisees of the Tune Hotels brand after the completion of the proposed acquisitions from TPRE.

At the same time, ECM Libra said, it plans to dispose of its non-core assets comprising part of Bangunan ECM Libra and a semi-detached house here to Noblemen Holdings Sdn Bhd for RM28 million cash. Lim and Kalimullah are both directors of Nobleman with an effective interest of 40% and 60% respectively.

Part of the disposal proceeds will be used to pay its shareholders a special dividend of an amount which will result in the group’s net assets being adjusted to RM103.2 million or 36 sen per share, it added.

“Based on the consolidated audited NA (net assets) of ECM Libra of RM144.3 million or 50 per share as at Dec 31, 2016, and after taking into consideration the expected gain of RM3.3 million from the proposed disposals, the illustrative special dividend amounts to about RM44.5 million or 15.5 per share.

ECM Libra said it will be seeking the approval of its shareholders for the diversification of the group’s existing principal activities to include the business of hotel management and ownership.

It believes that the proposed acquisitions and diversification will contribute positively to the group’s future earnings and reduce its reliance on its current business.

ECM Libra shares gained one sen or 2.53% to close at 40.5 sen yesterday, giving it a market capitalisation of RM116.07 million.