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TA Enterprise injects hotel into property arm

KUALA LUMPUR: TA Enterprise Bhd (TAE) has proposed into inject its hotel in Singapore to 69.66%-owned subsidiary TA Global Bhd (TAG) for RM651.8 million.

TAE had announced previously that it would do so when it acquired the hotel for RM635.8 million last November.

According to the respective statements on Thursday March 11, TAE proposed to dispose of its entire stake in Quayside GEM Ltd (QGL) to TAG in exchange for shares. QGL is the ultimate owner of the Swissotel Merchant Court Singapore.

TAE had obtained a loan facility of S$160 million (RM378.92 million) from United Overseas Bank Ltd with RM388.7 million still owing. In addition, there are two inter-company loans owing by TAE to QGL for a total of RM9.93 million.

Thus, the final purchase consideration for the disposal comes to RM253.2 million, which will be satisfied by the issuance of 506.4 million new TAG shares of 50 sen each. TAG’s share price ended yesterday at 44 sen, down one sen.

Once the exercise is complete, TAE’s stake in TAG will increase to 73.4% as the latter’s share base increases to 4.1 billion shares from 3.6 billion.

TAG already owns and manages the other three hotels in the TA Group namely the Westin Melbourne, Radisson Plaza Hotel Sydney and the Aava Whistler Hotel in Canada.

TAG said the proposed acquisition was expected to bring synergistic benefits to TAG as it would further enhance the group’s hospitality operations in major cities around the world, and increase its existing portfolio of hospitality properties, leveraging on the group’s experience and competence as owner of hotel properties.

It added that the acquisition would contribute positively to the group’s earnings from the financial year ending Jan 31, 2011.

According to the announcement, the market value of the hotel stands at S$261 million while its net book value is S$249.3 million. The average occupancy rate for the hotel for FY2010 was 78.5%, while its gross operating profit for the financial year ended Dec 31, 2009, was S$21.8 million.

Going forward, despite the drop in Singapore’s tourism activity as a result of the global financial crisis, the sector appeared to have turned a corner during the last quarter, according to TAG’s announcement.

“This is with a rebound in econo-mic confidence and anticipated completions of exciting mega-projects such as the integrated resorts as well as other tourism activities,” said TAG.
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