Shangri-la draws attention

KUALA LUMPUR (Aug 13): A sharp increase in the share price of Shangri-La Hotels Malaysia Bhd last week has prompted speculation on the stock — ranging from its possible privatisation to the stock giving better returns on the account of higher occupancy rates.

However, a fund manager said that there was nothing extra-ordinary happening in Shangri-la Hotels, which is 52.78% owned by the Kuok Group and controls six hotels in Malaysia.

The head of equities of Hwang-DBS Investment Management Gan Eng Peng felt it was business as usual for the group.

The tightly-held Shangri-La has seen its price increase by 20% or 73 sen from RM3.64 on Aug 1 to RM4.37 on Aug 9, its all time high in 52 weeks. Its share price retracted 15 sen last Friday, closing at RM4.22.

Over the past year, the share price has almost doubled, climbing steadily from RM2.50 on Aug 10, 2011.

According to an analyst, the market was abuzz with speculation of a possible privatisation following the jump in its share price last week but added there was nothing substantive to the speculation because the stock is already tightly held.

The second largest shareholder of Shangri-La is Standard Chartered Private Equity Ltd with 22.28% followed by Aberdeen Asset Management with 10.78% based on the latest annual report.

Hence, there is little retail investment in the stock, said the analyst. Another analyst said that Shangri-La was already expensive.

“In terms of pricing, the current level is already expensive, given that its book value per share is RM1.94 and current price earnings ratio (PER) is over 30 times, near its peak of 33 times in 2009,” Lee Cherng Wee, an analyst at JF Apex Research, told last Thursday.

For its financial year ended Dec 31, 2011, the group recorded a 1.83% decline in revenue to RM429.73 million from RM422 million in 2010. Meanwhile, its net profit fell 13.44% to RM60.56 million from RM69.96 million a year earlier.

In its 2011 annual report the group acknowledged that as the overall economic outlook for 2012 remained uncertain, it could have a broader impact on hotel and travel industry as the year progressed.

It added that it was likely to see a limited demand in growth from its major long haul markets like the UK and Europe in light of the global situation.

However, it was bullish that it could be able to take advantage of the “encouraging trends in both business and leisure travel, particularly in key regional markets.”

Shangri-La chairman Tan Sri Abdul Razak Ramli had said in a statement the group’s investment properties should yield some improvement in occupancy levels as the prime office rental market was expected to stay stable. However, he added that it was to face more pressures on occupancy and rental rates due to the growing supply in KL city.

For its first quarter ended March 31, Shangri-La’s net profit slipped 1.49% to RM18.41 million compared with RM18.69 million a year earlier while its revenue fell 3.12% to RM109.13 million from RM112.64 million.

The group attributed the fall to lower operating profit from its Rasa Ria Resort which has been  undergoing a phased renovation programme for its Garden Wing guestrooms since March 2011.

This article appeared in The Edge Financial Daily on August 13, 2012.

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