THE Covid-19 pandemic has not been kind to Hiap Hoe Hiap Hoe: 5JK +1.52% , a real estate company with a range of properties in Australia, Singapore and the United Kingdom spread across the hospitality, retail, commercial and residential sectors.

 

As travel restrictions are lifted, however, the group could enjoy a revival in its fortunes. A potential collective sale of Orchard Towers is a sweetener for investors.

 

With the start of the pandemic, investors gave Hiap Hoe a wide berth. In 2020, its market capitalisation fell 20 per cent as investors anticipated a tough year.

 

Its financials have proven investors right. The company' s revenue fell 39.8 per cent to S$79.6 million from S$132.2 million in the financial year ended Dec 31, 2020 it posted a loss of S$36.7 million, down from the profits of S$22.1 million in FY2019.

 

The weak financial performance came largely from a 73.1 per cent decline in revenue from residential development properties, to S$3.2 million revenue from hotel operations and other related income fell 44.3 per cent to S$46 million.

 

In its annual report for FY2020, the company noted that travel restrictions following the outbreak of Covid-19 had affected the company' s hotel revenue, and that the demand for travel and accommodation would remain challenging until the pandemic abates.

 

But green shoots are now emerging.

 

For H1 2021, Hiap Hoe posted a net profit of S$7.4 million - reversing a loss of S$21.2 million in the year-ago period. The company' s revenue rose 5.8 per cent to S$45.4 million.

 

Hotel income was up 9.7 per cent, thanks to higher interstate travel in Australia, where state borders began gradually reopening in early 2021. Hotel income accounted for 59.8 per cent of the company' s revenue in the first half of 2021. Among the properties Hiap Hoe owns in Australia are The Four Points by Sheraton in Melbourne and Aloft Perth, both of which are managed by Mariott International.

 

Numbers could continue to improve for H2 2021 and H1 2022. Australia is expected to reopen its borders to vaccinated tourists from Feb 21.

 

Meanwhile, an early indicator of a recovery in Singapore is revenue per available room in Zhongshan Park. Hiap Hoe owns 2 hotel properties there - Ramada Singapore and Days Hotel Singapore.

 

The Singapore Tourism Board notes that RevPAR rose to S$133.23 last November. That is the highest it had been since January 2020, when the figure stood at S$191.53.

 

Additionally, Hiap Hoe has entered into a new lease for its A-grade commercial property at 130 Stirling Street in Perth, Australia, of approximately 7,910 square metres over 3 floors beginning early this year. It was 23 per cent occupied in 2020, with 11,863 sq m of office space and 486 sq m of retail space.

 

The biggest potential catalyst for Hiap Hoe, however, is the potential collective sale of Orchard Towers. Hiap Hoe owns 59 strata lots in the property. In its 2020 annual report, the group said that its 21 shops and 38 offices in the mixed-use development had an occupancy rate of 57 per cent - down from 66 per cent in 2019.

 

Last August, The Business Times reported that a collective sale committee had appointed an advisor last Friday (Feb 4), this paper reported that the committee had recommended a reserve price at S$1.6 billion.

 

Exactly how much Hiap Hoe would be entitled to is yet to be determined. Its lots represent 12,633 sq m of strata area out of the total gross floor area of 16,859 sq m.

 

Unit owners will vote at an extraordinary general meeting on Feb 18 on the proposed price tag and method of apportionment of sale proceeds, among other things.

 

After the news of a potential collective sale broke last August, Hiap Hoe' s share price rose to S$0.70, but enthusiasm has since waned. The counter closed Feb 9 at S$0.67, up 3.1 per cent for the year, giving it a market capitalisation of S$315.3 million.

 

That values Hiap Hoe at 42 per cent of its book value - not too far off the valuation of its peers Stamford Land and Sing Holdings, which trade at 57 per cent and 48 per cent of their book values, respectively.

 

Property analysts have flagged that the appetite for collective sales may be limited this year, but they have also said that properties in choice locations would still be in good demand. Hiap Hoe shareholders will be hoping the Orchard Towers address is choice enough.

PROPERTY developer Hiap Hoe, which owns 21 shops and 38 offices at Orchard Towers, has reiterated to its shareholders that there is no certainty that the mixed-use development' s intended collective sale will proceed or be completed.

 

There is also no certainty that the requisite 80 per cent consent from unit owners will be obtained.

 

" Accordingly, shareholders are advised to exercise caution in dealings with the shares of the company, to read this announcement and any further update announcement(s) released by the company carefully," the mainboard-listed firm noted in a bourse filing after market close.

 

On Friday (Feb 4) morning, The Business Times reported that the collective sale committee of Orchard Towers had recommended setting the reserve price at S$1.6 billion.

 

The unit owners will vote on whether to approve the proposed price tag and the method of apportionment of sale proceeds, among other things, at the upcoming extraordinary general meeting on Feb 18.

 

Before the marketing agent Edmund Tie can launch an en bloc tender, at least 80 per cent of the unit owners will have to agree to the collective sale.

 

Hiap Hoe said its board will provide further material updates of the en bloc sale at the appropriate time.

 

Last August, the company' s shares had risen sharply in early morning trade, after Hiap Hoe Hiap Hoe: 5JK 0% disclosed that it owned the 59 strata lots in Orchard Towers via its subsidiary Golden Bay Realty.

Its subsidiary is the registered proprietor of 59 strata lots at Orchard Towers

 

SHARES of Hiap Hoe rose sharply in early morning trade on Friday, after the company revealed in a regulatory filing after the market closed on Thursday that it owns 59 strata lots in Orchard Towers via its subsidiary, Golden Bay Realty.

 

As at 9.01 am, the mainboard-listed company' s shares hit an intra-day high of 69.5 cents, up 6.1 per cent or four Singapore cents, after 61,100 shares changed hands.

 

The shares closed at 67.5 cents, up 3.1 per cent or two cents on Friday.

 

No married deals were recorded, according to ShareInvestor data.

 

In its regulatory filing, the company said that its subsidiary is the registered proprietor of 59 strata lots at Orchard Towers, 21 of which are shops and 38 are offices.

 

The filing came after news broke that Edmund Tie has been named marketing consultant for the potential collective sale of Orchard Towers, while Legal Solutions LLC is the appointed law firm.

 

In a letter dated Aug 17 and seen by The Business Times, Orchard Towers' collective sales committee informed owners about the two appointments and has begun discussing the method of apportionment of the collective sale proceeds with the advice of both firms.

 

At least 80 per cent of the owners will have to consent before an en bloc tender can be launched.

 

In its filing, Hiap Hoe also noted that there is no certainty the collective sale of the mixed-use development will proceed or be completed, and that it will provide further material updates at the appropriate time.

Hiap Hoe, via a subsidiary Golden Bay Realty, has announced that it owns 59 strata units of Orchard Tower, which is in the process of being put up for collective sale.

Of the 59 units, 21 are shops and 38 are offices.

Callie Yah, chairman of the collective sales committee, was appointed chief operating officer of Hiap Hoe on April 19.

 

" Shareholders are advised that there is no certainty that the collective sale of Orchard Towers will proceed or be completed," the company adds.

" Accordingly, shareholders are advised to exercise caution in dealings with the shares of the company,&rdquo adds Hiap Hoe.

According to URA Realis data, a sixth floor office 786 sq ft unit at Orchard Towers changed hands for $2,113 psf in April, and another 958 sq ft unit, also on the sixth floor, was sold for $1,953 psf the following month.

The most recent retail unit transactions were in December 2020. A 312 sq ft unit on the second level sold $3,527 psf a fourth level unit of 258 sq ft changed hands at $2,926 psf and a 269 sq ft unit on the third level fetched $3,344 psf.

As at June 30 2021, Hiap Hoe&rsquo s net asset value was 157.76 cents, up slightly from 156.72 cent as at Dec 30 2020.

As at June 30, the company carries investment properties worth $593.8 million on its books.

PUBLISHED JULY 10, 2014

 

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