Hotel Royal

[ghchua]

Hi weijian,

- Minority shareholders have lost ~50% over the last 10years. Mini panadols in the form of 1-2% dividends annually.

I think it is unfair to say that minorities had lost 50%. They had the opportunity to participate in those rights issues, and if they have done, they would be looking at a lower loss number.

- The hotels are almost still as old but of course land value has surely appreciated. Can see but cannot touch.

Again, I disagree with you. They have renovated Baba House and Hotel Royale Chulan Bukit Bintang after purchasing them. I know minorities want them to do something to their Singapore hotels, but the problem is that if you start to renovate them, your revenue from those hotels are gone. So, it has to be a step by step approach. Wait for the revenue for other hotels to stabilise first before embarking on these projects. Singapore revenue is important for them as it consists of a major part of their whole group revenue.

- How many 10years do minority shareholders have?

Well, this is the part that is difficult to answer. Investors have to understand that hotel ownership is a "deep pocket" business, especially when you don't have scale like the major brands. You cannot expect high ROE from this asset heavy business, and normally the major gains will only be made via divestment. You have to be patient to reap the rewards.

[weijian]

hi ghchua,

To expand onto what VB sgpianolessons mentioned about rights issue:

Nov 2022 at $2 (100% subscription, 30% discount), and May 2018 at $3 (150% oversubscribed, 25% discount)

For minorities who have lost ~50% of initial capital since 2014, I am not sure if putting in more money in 2018 and 2022 to reduce one's cost base (and hence lower% of capital losses) is good comfort.

Of course, as a minority shareholder, the lower the cost base, the bigger the gains if the buildings/land are eventually monetized in the future. Whether is it really probable or when will it happen, that is what separates good and average investors. I have to admit I am just an average investor without 10year timeframe kind of patience.

Talking about potential upcoming refurbishment for its 2 Spore hotels, It will be cold comfort for minorities because that just implies more and new CAPEX is required after it completed its Msian properties' upgrade. Been capital intensive, Hotel Royal doesn't generate a lot of cash and only 3mil (out of 40mil) remains of its 2022 rights' issue proceeds (as per end FY23 results). More rights in the coming future?

Or the path of the middle - Selling 1 of its Spore hotels to fund a major upgrade for the remaining one? The Newton one looks like a good candidate since it is surrounded by residential developments but the boat seems to have passed for CCR property?

Does the Hotel Royal towkay has a history of asset divestments and rewarding minorities?

[ghchua]

Hi weijian,

Throughout the years, they did dispose some assets in their investment properties segment. But those are not really major disposals and therefore not much had been made from those disposals.

Their last special dividend declared was in 2019. Their biggest dividend declared from my recent memory was a bumper 25cts per share in 2006, to exhaust their section 44 tax credit to benefit shareholders.

[weijian]

SIAS has asked some good questions and Mgt's reply has given some insights on what to expect on this "asset-heavy" company.

RESPONSES TO QUERIES FROM SECURITIES INVESTORS ASSOCIATION (SINGAPORE) ON THE COMPANY’S ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

The Group is exploring the possibility to establish itself as a reputable franchise management company in the future. Before positioning ourselves towards this opportunity, it is imperative that the Hotel Royal brand strengthens both its brand desirability and enhance its profitability. Progress will be assessed through the success of the recently launched loyalty program, traveller reviews and sentiments, overall profit margins, and alignment with both industry benchmarks and the Group’s key performance indicators (KPIs).

The Group is not considering a phased exit from the company’s positions in quoted equity shares, quoted bonds, hedge and managed funds, or structured products at this time. These investments are managed as part of the company’s broader capital management strategy, which aims to optimise returns on surplus capital while maintaining liquidity and risk diversification.

https://links.sgx.com/FileOpen/HRL_Compa...eID=841918

[weijian]

SIAS has asked some good questions and Mgt's reply has given some insights on what to expect on this "asset-heavy" company.

RESPONSES TO QUERIES FROM SECURITIES INVESTORS ASSOCIATION (SINGAPORE) ON THE COMPANY’S ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

The Group is exploring the possibility to establish itself as a reputable franchise management company in the future. Before positioning ourselves towards this opportunity, it is imperative that the Hotel Royal brand strengthens both its brand desirability and enhance its profitability. Progress will be assessed through the success of the recently launched loyalty program, traveller reviews and sentiments, overall profit margins, and alignment with both industry benchmarks and the Group’s key performance indicators (KPIs).

The Group is not considering a phased exit from the company’s positions in quoted equity shares, quoted bonds, hedge and managed funds, or structured products at this time. These investments are managed as part of the company’s broader capital management strategy, which aims to optimise returns on surplus capital while maintaining liquidity and risk diversification.

https://links.sgx.com/FileOpen/HRL_Compa...eID=841918

Hotel Royal has updated their vision/mission to reflect their change of direction to become a "franchise management company".

ANNUAL REPORT 2025

VISION: To become a desirable franchise management company in Southeast Asia, renowned for delivering uniquely authentic and enriching experiences that celebrate the local cultures.

MISSION:  Our mission is to build a trusted reputation as a franchise management company known for delivering memorable guest experiences, while operating with efficiency, profitability, and accountability.

https://links.sgx.com/FileOpen/Hotel%20R...eID=881675

[weijian]

Hotel Royal AGM MoM is an interesting read and kudos to the Mgt for been detailed because even a reader (like me who isn't an attendee) is able to sense the "tension" in the meeting.

First, Mr Zach Lee can't blame OPMIs for not having "visibility of the broader context available to management" because Hotel Royal hasn't consistently published stats like RevPAR, basic stats that many other hotel operators/owners do so. Of course, Hotel Royal is just one of the many guilty ones who haven't done so on the local bourse. On one hand, one may argue that it is "confidential" especially if you are more owner than operator (eg. an operator like Marriott probably loves publishing these stats to signal their superiority to other owners to gravitate to their franchise), but on the other hand, I would believe such key operating stats are an important sign of public accountability.

Next, I can't believe that Lee Junior has just publicly compared themselves to 2 other named competitors. But I suppose his usage of accounting P/L is more objective than the subjective judgement of hotel decoration/layout. So he might be justified after all.

Finally, I find it amusing that Lee Junior has filed a badge of honor with been number 11 among ALL KL hotels on TripAdvisor. I don't deny that is a hospitality accomplishment but I would think twice if such an accomplishment will practically translate to profitable returns. TripAdvisor is a metasearch site ("top of funnel") - It used to a powerful distributor as metasearches were the preferable place for travelers to start their holiday destination research. But over the years, room distribution has largely evolved away from metasearches as travelers choose destinations via blogs/social media before using google search/OTA/brand loyalty networks to find accommodation. All these have largely replaced metasearch at the "top of funnel".

Minutes of the 57th Annual General Meeting of Hotel Royal Limited

Mr Zach Lee responded to the shareholder’s comments that, in relation to the comparison with peer companies such as Grand Central Hotel and Hotel Properties Limited, a review of their financial performance over recent years indicates that Hotel Royal Group has performed comparatively better over the corresponding periods. He further stated that the negative characterization of the Hotel’s decorations or interiors is subjective, and that it might be more appropriate to judge the Hotel based on its financial performance and online traveller’s rankings.

Mr Zach Lee responded that shareholders may not always have visibility of the broader context available to management, who have access to a wider range of operational and financial metrics relating to the hotel. He acknowledged that shareholders may, at times, rely on publicly available indicators such as online room rates as a reference for performance. However, he noted that such indicators represent only a limited perspective and should not be used in isolation as a measure of the hotel’s overall performance or success. He added that the Group focuses on several key performance indicators, with gross operating profit being one of the primary measures of concern.

Mr Zach Lee further explained that the market rankings and online reviews, including platforms such as TripAdvisor, Google, Agoda, Booking.com, and Trip.com, may vary depending on differing methodologies and perspectives, however, they collectively provide useful external benchmarks. He added that the Group actively monitors and benchmarks its performance against key competitors using such indicators. Mr Zach Lee then referred to Grand Central Hotel and Hotel Properties Limited, noting Hotel Royal Group has been recording increasing profits whereas its competitors have been reporting losses. He further noted that both groups operate under established hotel franchise brands. He added that, notwithstanding differing market perceptions, the financial performance of the respective companies is a matter of public record and should be assessed based on reported financial results. Mr Zach Lee further informed that Hotel Royal Signature is currently ranked number 11 on TripAdvisor among all hotels in Kuala Lumpur.

Mr Zach Lee said that room rates are not the sole driver of profitability. He explained that operational efficiency, cost management and the level of expenditure incurred to generate business also have a material impact on overall financial performance. He cited that significant investment could be made to enhance the physical condition of the properties and potentially support higher room rates. However, such expenditure may not always justify the investment, and it may take a considerable period of time to recover the cost.

https://links.sgx.com/FileOpen/HRL_AGM_%...eID=888797