What's next for Ong Beng Seng's HPL?

Business Times

2 days ago

[SINGAPORE] While Hotel Properties Ltd (HPL) maintains a 'business as usual' stance after founder Ong Beng Seng's exit from management and his obstruction of justice trial, could privatisation be on the cards as the company navigates a handover?
On Monday (Aug 4), Ong pleaded guilty to abetting the obstruction of justice in a case involving former transport minister S Iswaran. The prosecution granted judicial mercy in sentencing Ong for his involvement in the case, as he has an incurable cancer.
Ong stepped down as HPL managing director in April, but remains controlling shareholder of the tightly held company. Together with his wife Christina, Ong controls a roughly 60 per cent stake. An HPL spokesperson said in April that board members Christopher Lim and Stephen Lau would continue to manage the company as executive directors, while Ong would provide strategic oversight and direction.
At the company's annual general meeting (AGM) on Apr 29, chairman Lawrence Wong said that Ong's involvement in the company will depend on 'how circumstances evolve'.
'His business acumen is widely appreciated, and we will consider how best to leverage his expertise,' noted Wong. 'At present, however, there is no specific arrangement in place.'
Over the last two years, HPL has dropped news of stepping up plans for its property assets but released few details, saying plans were still in the early stages.
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In April, HPL put in motion a new share buyback mandate.
Potential delisting
With only 11.99 per cent of its shares held by the public, HPL sought – and received – shareholder approval for a renewed share buyback mandate at its Apr 29 AGM, raising the prospect of a potential delisting.
The buyback mandate will allow the company to purchase up to 10 per cent, or 52.5 million of its own issued ordinary shares.
Terms state that the purchase price to be paid under a market share buyback must not be more than 5 per cent of the average closing market price. In the case of an off-market share buyback, the purchase price must not exceed 30 per cent of the same average.
For 'illustrative purposes', said HPL, the buyback could cost up to S$196 million at the maximum price of S$3.7317 per share for a market purchase, and up to S$242.7 million at the maximum price of S$4.6202 per share for off-market acquisitions.
Under Singapore Exchange (SGX) rules, a company must have at least 10 per cent of its total number of shares, excluding treasury shares, held in public hands. As at Apr 14, HPL's public float stood at 11.99 per cent, or just under 63 million shares.
This gives HPL theoretical headroom to repurchase up to 11.6 million shares without dipping below the free-float requirement, said the group.
When asked at the AGM about HPL's low share liquidity and possible delisting, Wong replied: 'Low share liquidity on its own does not trigger a delisting.'
He added: 'The decision to delist a listed issuer is influenced by a range of factors beyond just trading volume.'
He noted that HPL had previously bought back shares, especially for treasury purpose. Any capital-raising or liquidity-enhancement measures will be guided by the management's strategic objectives and the needs of the business, he said.
In June, HPL issued S$220 million in notes due in 2030, bearing interest at a fixed rate of 4.4 per cent.
HPL had earlier said in its letter to shareholders that 'it is also possible that the public float may also change from time to time and such flexibility will be reduced if the company seeks a lower limit based on the current level of the public float'.
The company emphasised that it would carry out buybacks only if the free-float requirement remained satisfied.
Redevelopment plans
At the AGM, shareholders pressed for details on the project that made headlines in 2023, a long-rumoured plan to redevelop its prime Orchard Road assets: Forum The Shopping Mall, voco Orchard Singapore and HPL House.
The group revealed in August 2023 that it had been granted provisional permission from the authorities to redevelop the sites.
HPL said then that it intended to turn the three sites into a massive mixed-use redevelopment with hotel and residential units, as well as retail and office space. It also had plans for a six-storey podium with a rooftop garden, a performance theatre and a basement car park.
Lim told shareholders that HPL was exploring enhancements to the development mix. But final approvals were still pending, and a definitive timeline yet to be confirmed.
At the same time, he pointed out interest from potential joint-venture partners for the redevelopment.
Shareholders also raised questions about Concorde Hotel and Shopping Mall, which the group acquired in November 2024 in a deal valued at S$821 million. As HPL already owned 95.4 per cent of strata-titled area in the property, the capital outlay required to acquire the remaining units was about S$75 million, HPL said.
The company has not submitted any formal development plans for the Concorde, but may explore 'mixed-use development options that include a residential component', Lim said.
Shareholders also queried HPL's recent overseas acquisitions, amid declining earnings, rising finance costs and a reduced dividend payout.
In March, the group proposed to acquire InterContinental Auckland in New Zealand for NZ$180 million (S$138.5 million) – its maiden foray into the market. HPL also opened two new properties in 2024: its first hotel in Japan, a Four Seasons in Osaka, and a boutique resort in Tioman.
Lim said: 'We are mindful that our earnings have declined, primarily due to the prevailing high interest rate environment. However, there are encouraging signs that interest rates, particularly on the Singapore dollar, are beginning to ease.'
HPL reported a steep drop in earnings in February. Net profit for the second half ended Dec 31 plunged to S$32.1 million, from S$578.2 million in the year-ago period.
For the full year, net profit dived 95.1 per cent to S$27.2 million, from S$561 million in the prior year. Revenue rose 7.9 per cent to S$692.9 million, from S$642.1 million.
Top-line growth was driven by the reopening of Six Senses Kanuhura – its Maldives resort that underwent refurbishment – in late 2023 and the Four Seasons Hotel Osaka.
Finance costs widened to S$105.6 million in the year ended Dec 31, 2024, from S$98.3 million in FY2023 on higher borrowings and interest rates.
In FY2024, HPL's business in the Maldives accounted for S$254.2 million, or 36.7 per cent of total revenue. In comparison, its Singapore business made S$206.3 million, or nearly 30 per cent of overall revenue. The rest of its business in Asia brought in S$203.4 million, or 29.4 per cent of revenue.
History of HPL
Founded in 1980, HPL was formed as a private limited company to purchase the Hilton hotel for S$72 million. Its incorporation and subsequent listing on the SGX in 1982 marked Ong's entry into the property, hotel, retail and lifestyle sectors.
As at Dec 31, 2024, the group has interests in 41 hotels across 17 countries, including Bhutan, Indonesia, Japan, Italy, the Maldives, Singapore and the US.
Its portfolio spans brands such as Como Hotels and Resorts, Concorde Hotels, Four Seasons Hotels and Resorts, Hard Rock Hotels, IHG Hotels & Resorts, Marriott International, and Six Senses Hotels & Resorts.
According to its latest annual report published on Apr 14, HPL's hotel business raked in S$667.6 million in revenue in FY2024, up from S$616.5 million in the prior year. Revenue from rental income was S$22.6 million, and that from management fees S$2.7 million.
It has stakes in residential and commercial projects in Osaka – Brillia Tower Dojima; and London – Paddington Square and Bankside Yards.
HPL also built luxury condominiums in Singapore in the past – the freehold Nassim Jade and Scott 28.