[SINGAPORE] Shares of Hotel Properties Ltd : H15 +2.31% (HPL) jumped almost 10 per cent in active trading on Friday (May 16) morning, prompting queries from Singapore Exchange Regulation (SGX RegCo).

 

At about 11.30 am, the counter was up 9.2 per cent at S$4.72 with over 350,000 shares traded, an unusual volume for the tightly held property and hotel group. But by mid-afternoon, it had given up more than half the day&rsquo s gains and closed at S$4.42, up S$0.10 or 2.3 per cent.

 

After news broke that founder and erstwhile managing director Ong Beng Seng was stepping down, there has been talk that new players may be keen on the company. The Business Times columnist Leslie Yee also argued that with Ong&rsquo s exit, selling his stake is the logical next step.

 

HPL had announced on Apr 14 that Ong, 79, would relinquish his position as managing director to manage a medical condition &ndash multiple myeloma, a form of white blood cell cancer. He also stepped down as a director of the company after not seeking re-election at the company&rsquo s annual general meeting on Apr 29.

 

On Friday, the local bourse regulator asked the company to explain the stock&rsquo s &ldquo unusual price movements&rdquo . Any previously unannounced materially sensitive information that may explain the trading should be disclosed promptly, SGX RegCo&rsquo s query stated.

 

The regulator also queried if the company was aware of other possible explanations for the trading activity, while asking HPL to affirm its compliance with listing standards. It added that, if appropriate, the company might want to request a trading halt.

 

Responding to the query on Friday afternoon, HPL said that it was not aware of any unannounced information that might explain the trading. It said it was in compliance with SGX RegCo&rsquo s listing rules, particularly its obligation to disclose any material information concerning the company.

 

Ong, known for bringing in the Formula 1 night race to Singapore, is embroiled in the high-profile conviction of former transport minister S Iswaran for accepting gifts as a minister and obstructing justice.

 

On Apr 24, the court granted Ong permission to leave Singapore for over two weeks, to allow the businessman time to obtain further reports from his doctors on his medical condition. A spokeperson said he would travel to England, the US and Italy between Apr 28 and May 16 for both medical and work-related purposes.

The hotelier and property magnate was named in some charges to which Iswaran pleaded guilty, including abetting a public servant in obtaining gifts, and one charge of obstruction of justice.

 

The Malaysian had previously been scheduled to plead guilty to both charges on Apr 2. The hearing was rescheduled to Apr 25, then again to Jun 10.

A new controlling shareholder might help deliver better results on the potential mega Orchard Road redevelopment  

 

[SINGAPORE] Since news broke in mid-July 2023 of the Corrupt Practices Investigation Bureau&rsquo s questioning of Ong Beng Seng regarding his dealings with former transport minister S Iswaran, Ong has tenaciously held on as managing director of Hotel Properties Limited : H15 0% (HPL).

 

However, Ong, who is HPL&rsquo s co-founder and a member of its board of directors since 1980, will relinquish his managing director role soon. He will not seek re-election at HPL&rsquo s forthcoming annual general meeting on Apr 29. 

 

The Malaysian tycoon was scheduled to plead guilty to charges of abetting a public servant in obtaining gifts and obstruction of justice on Apr 2. The hearing was rescheduled to Apr 25 to allow Ong time to obtain further reports from his doctors on his medical condition.

 

Given his legal and medical troubles, should 79-year-old Ong have stepped aside from leading HPL sooner?

HPL&rsquo s ownership

Despite Ong&rsquo s imminent departure from HPL&rsquo s board and none of his family members sitting on the company&rsquo s board, he can continue wielding much influence at HPL.

 

Based on the latest annual report, Ong has a direct interest of 20.9 per cent and a deemed interest of 39.5 per cent in HPL&rsquo s shares.

 

The other big shareholder of HPL is linked to Hong Kong tycoon Peter Woo, former chairman of Wheelock and Company and The Wharf (Holdings), who has a deemed interest of 22.3 per cent.

 

Meanwhile, around 12 per cent of HPL&rsquo s issued ordinary shares are held in public hands. 

 

Like many local-listed property groups, HPL&rsquo s share price is undervalued. As at Apr 17, HPL traded at a discount of 13 per cent to its end-2024 net asset value (NAV) per share of S$4.14. 

 

HPL&rsquo s NAV is likely to be highly conservative. It does not capture potential upside from redeveloping the trio of prime Orchard Road area assets &ndash the Forum, voco Orchard Singapore and HPL House.

 

Also, there is likely to be upside from hotel assets that are carried at cost less accumulated depreciation and any impairment losses.

 

While Ong&rsquo s physical health is ailing, might the dealmaker, who featured in successful contested takeovers of NatSteel and Singapore Press Holdings excluding its media business, try to privatise and delist asset-rich HPL? Likely, private equity groups will be happy to work with Ong on a proposed privatisation of HPL.

 

Selling controlling stake

However, what may benefit both Ong and HPL&rsquo s minority shareholders more is for Ong to sell the shares where he has direct and deemed interest in.

 

Perhaps Ong can also interest Woo in having the latter&rsquo s deemed interest in HPL put up for sale too. Should these two tycoons come together to sell their HPL interests, an incoming buyer will be well-positioned to take control of all of HPL.

 

The timing looks right for shareholder changes at HPL. 

 

In late August 2023, HPL announced that it received the grant of provisional permission to redevelop the Forum, voco Orchard Singapore and HPL House from the Urban Redevelopment Authority under the strategic development incentive.

 

The above properties sit on freehold/999-year leasehold land with a total land area of about 150,987 square feet (sq ft). 

 

A redevelopment could see the building of a mixed development with total gross floor area of over 1.2 million sq ft, which includes hotel, retail, office and residential components.

 

When completed, the above development can become the focal point to the north-west of Orchard Road and a gateway destination on Singapore&rsquo s prime retail street.

 

Certainly, redeveloping HPL&rsquo s trio of Orchard Road area properties could yield substantial benefits. For one, Singapore&rsquo s efforts to draw high-quality visitors will get a major boost from having a mega development that enhances Orchard Road&rsquo s attractiveness as a retail and lifestyle destination.

 

The redevelopment project offers HPL the chance to earn development profits as well as boost recurring income from owning the non-residential components of the new development.

 

However, executing a large-scale development project entails substantial risks. Construction costs will be hefty and there will be loss of income from the existing buildings as they undergo redevelopment. 

 

Given the project&rsquo s complexity, there are risks of delays in project completion, which will add to costs.

 

Crucially, an integrated development with multiple components needs to be well-conceptualised such that the individual components have distinct identities while being seamlessly connected. In short, top-notch development and asset management skills are needed if the mega redevelopment of HPL&rsquo s Orchard Road area properties is to deliver the top integrated development in Orchard Road and possibly islandwide.

 

Besides the potential redevelopment project, other key aspects of HPL&rsquo s business include its interests in 41 hotels &ndash largely in the luxury segment &ndash across 17 countries as at end-2024. The group recently inked an agreement to buy The Intercontinental Auckland in New Zealand.

 

Possible suitors

Having a new controlling shareholder who is financially strong and capable across office, retail, residential and hospitality segments can arguably help drive HPL&rsquo s growth.

 

Think of the likes of Hongkong Land : H78 +1.94% working together with Mandarin Oriental Hotel Group : M04 0% or Allgreen Properties working alongside Shangri-La Asia : S07 +0.5% to bring HPL&rsquo s business to new heights. 

 

HPL could be a good fit for Pontiac Land, which is focused on high-end properties and owns properties near the Forum, voco Orchard Singapore and HPL House. Might buying into HPL be a smart way for property and hotel group City Developments Limited : C09 +1.28% to do a reset following : C09 +1.28%the highly public spat between executive chairman Kwek Leng Beng and son Sherman Kwek?

 

Parties such as CapitaLand Group and Mapletree Investments who have strong capabilities spanning from property development to fund management might also be drawn to buying HPL.  

 

While he leaves helming HPL&rsquo s management soon, Ong holds the key to what is next for the group. For Ong as well as HPL&rsquo s minority shareholders, finding a new controlling shareholder appears compelling.

No successor has been named, but Ong&rsquo s exit could remove some uncertainty for HPL

 

[SINGAPORE] Hotel Properties Limited (HPL) : H15 +3.5%announced on Monday (Apr 14) that managing director Ong Beng Seng will be stepping down from the position to devote more time to manage his medical condition.

 

The company said in a bourse filing that Ong, 79, will not be putting himself up for re-election as a director as well. He will no longer hold both positions following HPL&rsquo s annual general meeting to be held on Apr 29.

 

&ldquo As Mr Ong wishes to devote more time to manage his medical conditions, he will not be putting himself up for re-election as a director,&rdquo HPL said in the SGX filing. The company did not state who Ong&rsquo s replacement in either position would be.

 

In February, it came to light that the tycoon was receiving treatment for cancer &ndash multiple myeloma, a form of white blood cell cancer.

 

Ong, known for bringing the F1 night race to Singapore, has been embroiled in the high-profile conviction of former transport minister S Iswaran for accepting gifts as a minister and obstructing justice. It marked the first time a former Cabinet minister was sentenced.

 

The hotelier and property magnate was named in some charges to which former minister Iswaran pleaded guilty, including abetting a public servant in obtaining of gifts, and one charge of obstruction of justice.

The Malaysian had previously been scheduled to plead guilty to both charges on Apr 2. The hearing was rescheduled to Apr 25 to allow the businessman time to obtain further reports from his doctors on his medical condition.

 

Ong originally made millions at Kuo International, an oil trading company owned by his father-in-law Peter Fu Yun Siak which he joined in 1975. Ong is married to Fu&rsquo s daughter, COMO Group owner Christina Ong. The couple rank among Singapore&rsquo s wealthiest couples, estimated by Forbes to have a net worth of US$1.7 billion as at August 2022.

 

The Malaysian businessman later moved into the hotel and properties business, founding HPL in 1980. Among the company&rsquo s early ventures was the Hilton Singapore hotel, which Ong bought for S$72 million. Singapore-listed HPL is now a conglomerate with interests in hotel ownership, management and operations, property development, and investment holdings.

 

Ong is also known for being one of those responsible for first bringing the Formula 1 night race to Singapore in 2008, and owns the rights to the Singapore Grand Prix (GP). Then junior trade minister, Iswaran was involved in negotiations with parties including Ong&rsquo s HPL and then F1 boss Bernie Ecclestone.

 

On July 11, 2023, Ong and Iswaran were arrested after the former minister was revealed to be assisting the Corrupt Practices Investigation Bureau (CPIB) with investigations on an undisclosed case.

 

Iswaran was later charged with 27 counts of corruption and obtaining gratification from Ong in January 2024, with charge sheets stating that he received more than S$300,000 in tickets to shows, football matches and flights between November 2015 and December 2022.

 

The former minister pled guilty to four charges of receiving gifts while in office and 1 charge of obstruction of justice. He was convicted of all 5 charges on Sep 25, 2024, and sentenced to 12 months imprisonment on Oct 3. On Feb 7 this year, he was placed on the Home Detention Scheme after the prisons service found him to be suitable for the scheme.