SELANGOR DREDGING BHD (SDB) has put its only hospitality asset, Hotel Maya in Kuala Lumpur, on the market at an estimated RM230 million in order to focus on its core business of property development.
The 207-room five-star urban resort hotel on Jalan Ampang, close to the iconic Petronas Twin Towers, is believed to have already drawn interest from potential buyers, including foreign investors.
SDB (fundamental: 1.3; valuation: 3.0), when contacted via email to confirm if it was seeking to dispose of the asset, would only say that there had been interest in the hotel. “With regard to Hotel Maya, we have been getting strong interest in the hotel for the past six months,” Lina Othman, SDB’s head, communications and corporate affairs, tells The Edge.
“As a business owner, we are always open to any business opportunity that may arise and are also on the lookout for any prospective business development potential. As you know, SDB is a property company and our core business is property development,” she says.
SDB did not disclose the price at which it would be willing to let go of the property. The company’s 2014 annual report shows that the net book value of this freehold property was RM150 million as at March 31, 2014.
According to the project manifest prepared for potential buyers that was sighted by The Edge, the hotel was originally built with 280 rooms. Ten years later, in 2005, following extensive renovations, some rooms were merged to offer larger units. This resulted in the room inventory being reduced to 207. The new owner, however, has the option to revert to the original room count, if it wishes to.
The document also reveals that the asking price for this accommodation is RM800,000 per room. Based on the 280-room inventory, this works out to RM224 million. The owner is also asking RM22.35 million for the parking bays, bringing the total to RM246.35 million. The final asking price has been set at around RM231.35 million as the price is being reduced by a total of RM15 million in room conversion cost.
SDB has appointed Zerin Properties as its exclusive agent to conduct the sale.
In terms of performance, in the financial year ended March 31, 2014, the hotel’s average occupancy rate declined to 58.9% from 62.3%. Total hotel revenue in FY2014 rose 2.99% to RM27.5 million, contributing 7.3% to total group revenue of RM322.28 million. But in that same year, the hotel’s net operating profit slipped to RM428,000 from RM1.4 million achieved in FY2013.
SDB attributed the impact on its bottom line to lower occupancy and average room rate. There was also an impact from the introduction of the minimum wage, increase in energy tariffs and property assessment rates. SDB said it had also spent a significant amount on engineering expenses to look into wear and tear rectifications in the hotel building and operating equipment.
The project manifest projects that in 2016, with a 280-room inventory it will be able to achieve an occupancy rate of 72% and average room rate of RM450. It also forecast that the rooms will be able to rake in RM33.2 million in revenue while the food and beverage segment will add another RM17.88 million. It further indicates that the earnings after tax could be as much as RM11.47 million in 2016 and increase to RM14.69 million by 2020.
Meanwhile, in the nine months ended Dec 31, 2014, SDB posted a group revenue of RM296.12 million, up 7.37% from RM275.79 million in the previous corresponding period due to better work progress in two of its property development projects — Windows On The Park in Cheras and By The Sea in Penang.
The hotel operations contributed RM17.92 million in revenue in the first three quarters of FY2015, or just 6% of total revenue. Net profit for the period was lower at RM31.03 million, compared with RM33.41 million previously. This was attributed to the impact from the slowdown in the tourism industry, which adversely affected its hotel business.
In its 19-year history, the hotel has changed names at least four times. It first opened in 1996 as Radisson Plaza and subsequently operated as Park Plaza. Later, the owners decided to take over the management from the international operators and renamed it Grand Maya Hotel.
In 2005, after a RM46 million renovation, it reopened as Hotel Maya and was marketed as an urban resort hotel. Facilities include an indoor pool and a sky lounge. The building has a gross floor area of 38,991 sq m, with the hotel component taking up 26,229 sq m and the car park the remaining space.
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This article first appeared in The Edge Malaysia Weekly, on May 11 - 17, 2015.