PJ Development Holdings Bhd (PJD), which is in the process of being taken private by Tan Sri Ong Leong Huat’s flagship OSK Holdings Bhd, is looking to divest three of its hotels — one each in Pahang, Johor and Kedah — for an estimated RM200 million.

The planned sale is an outcome of the group switching its business focus from hotel ownership to hotel management. It now operates 11 hotels, 10 of which are in Malaysia and one in Australia. PJD’s hospitality arm, Swiss-Garden International Hotels, Resorts and Inns, owns and operates six hotels, including the one in Australia. The rest are properties it manages.

When contacted, PJD confirms that it plans to sell three of its hospitality assets.

“We are refocusing the business model of our hotel division and strengthening our resources towards becoming a leading hotel management company that runs third-party hotels, resorts and serviced apartments,” Swiss-Garden International Hotels, Resorts and Inns CEO Ricky Ang tells The Edge in an email.

“In line with that, the management has decided to streamline our hotel assets and explore the divestment of some of our existing properties, namely Swiss-Garden Beach Resort Kuantan, Pahang, Swiss-Inn Johor Bahru, Johor, and Swiss-Inn Sungai Petani, Kedah.

“We have engaged JLL (Property Services [M] Sdn Bhd) as our exclusive agent to conduct a formal sale process for Swiss-Garden Beach Resort Kuantan and Swiss-Inn Johor Bahru. And we are working with several agents to find potential buyers for Swiss-Inn Sungai Petani,” he says, adding that the disposal process is still in an early stage and that the group will consider its options carefully before making any firm decisions.

“The group is committed to its hotel business and we are now looking to grow our business further through the acquisition of third-party management contracts,” Ang explains. However, he would not disclose the expected price for each of the assets.

OSK Holdings had failed to take PJD private last year because its shareholding fell short of the 90% requirement for a compulsory acquisition. It had offered RM1.56 per share and 60 sen per warrant at the time.

In a second attempt in August this year, OSK Holdings offered PJD’s remaining shareholders RM1.50 per share and 50 sen per warrant. And on Oct 6, it extended the deadline to Oct 25.

As at last Thursday, OSK Holdings’ indirect/deemed interest in PJD stood at 95.103%.

It is worth noting that PJD’s share price has been on a downward trend since late last year.

The information memorandum on the hotel assets for sale — sighted by The Edge — was distributed by JLL to potential buyers in August, about the same time OSK Holdings made its fresh offer to PJD’s shareholders.

Industry players estimate the market value of the three assets to be around RM200 million. A source says the 304-room, four-star seaside resort in Kuantan could fetch between RM90 million and RM120 million. The 18-year-old hotel in Sungai Karang, Berserah, which has a built-up of 250,512 sq ft, is listed as one of PJD’s top 10 properties. Its net book value based on the company’s annual report for the six months ended Dec 31, 2015, is RM49.7 million.

The market value of properties is usually higher than their net book value.

The information memorandum, which also shows that JLL’s Hotels & Hospitality Group has been hired as an exclusive adviser, states that there is a possibility to acquire the adjacent land as it is owned by PJD. As at June 2016, the Kuantan hotel’s gross operating profit and net operating profit stood at 13.6% and 4.3 % respectively.

A search on the Companies Commission of Malaysia’s website reveals that the Kuantan hotel, held under PJD’s indirect unit, MM Hotels Sdn Bhd, posted a net profit of RM2.31 million on revenue of RM15.97 million in the six months ended Dec 31, 2015. For the full year ended June 30, 2015, the hotel posted a net profit of RM1.87 million on revenue of RM27.39 million. PJD has changed its financial year end from June 30 to to Dec 31.

Industry estimates place the market value of Swiss-Inn Johor Bahru at between RM50 million and RM80 million. The 205-room, three-star hotel commenced operations in January this year. PJD had acquired a piece of freehold land with a 10-storey office building on it for RM16 million in 2013, and later converted it into a hotel. The net book value of the property is RM29.12 million.

As for the 101-room, Swiss-Inn Sungai Petani, sources say this hotel could fetch around RM20 million.

PJD also owns and operates Swiss-Garden Beach Damai Laut, Perak, Swiss-Garden Hotel Kuala Lumpur and Swiss Inn Kuala Lumpur. It manages Swiss-Garden Residences Kuala Lumpur, Swiss-Garden Resort Residences Kuantan, D’Majestic Place By Swiss-Garden in Kuala Lumpur and Swiss-Garden Hotel & Residences Melaka, among others.

In 2018, PJD plans to open Windmill Upon Hills in Genting Permai on a sale and leaseback basis.

In the six months ended June 30, 2016, PJD, whose other business interests are property development, construction and power cable, posted a net profit of RM13.49 million on revenue of RM374.32 million.

In this period, its hospitality division registered a revenue of RM58.21 million and a pre-tax loss of RM7.61 million, due to low occupancy at some of its hotels. Nevertheless, it expects performance to improve in the second half of the year as it enters the annual peak tourist and holiday season.

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