TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issu...
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Ven Sreenivasan
13 September 2012
The recent successful listing of Far East Hospitality Trust (FEHT) - which attracted a subscription rate of over 30 times - has thrown the spotlight on the somewhat low-profile and under-researched Hotel Properties Ltd (HPL).
In a July 12 Maybank-Kim Eng report, analyst Alison Fok noted that Orchard Parade Holdings’ spin-off of Orchard Parade Hotel into Far East Hospitality had yielded a gain of $702 million for the listed entity. Turning to HPL’s own significant asset holdings - including two prime hotels in the Orchard Road belt - her report concluded that there was a huge “undervaluation of HPL’s assets in the Orchard Road area”.
Not surprisingly, activity in HPL’s stock has picked up significantly, with the counter now surpassing Ms Fok’s own target price of $2.75.
FEHT effectively encapsulates Far East group’s assets worth some $1.5 billion, re-valuing its 388-room Orchard Parade Hotel, which has a lease of 50 years, at $1.1 million per room key.
HPL’s own properties include the freehold Hilton Hotel, the 999-year leasehold Four Seasons Hotel and the 99-year leasehold Concord Hotel. Its other properties include the freehold Forum mall next to the Hilton, HPL House and Ming Arcade at Cuscaden Road, and the Concorde Shopping Mall. On the residential front, there is the 36-storey Tomlinson Heights, and shares in The Interlace and d’Leedon. It will soon be launching Beverly Mai, which was bought some six years ago. It also has about two dozen other good-class properties, comprising predominantly hotels, in Malaysia, Maldives, Thailand and Indonesia.
HPL has never re-valued its books to account for the appreciation of its properties, which were mostly bought in the 1980s and 1990s.
The FEHT restructuring and listing valued Orchard Parade Hotel at $1.1 million per room key. Applying a conservative 20 per cent premium to this valuation - to account for the fact that HPL’s hotels have much longer leases - would yield a valuation of $1.32 million per room key. Applying this to its three Singapore hotels - comprising 1,083 rooms - would place their value at about $1.43 billion.
HPL carries the three hotels in its books for some $440 million, or about 28 per cent of the value of total assets. So a revaluation would give HPL a potential realisable one-off gain of almost $1 billion.
As at June 2012, the net book value per HPL share was $3.08. Going by the current market prices, this should be at least 2.5 times higher, at $7.70 per share.
The under-valuation is glaring.
But even setting aside the re-valuation proposition, there are two more potential scenarios for HPL.
HPL’s properties - comprising its two prime hotels, Forum and HPL House - sit on a 2-hectare tract of land straddling the prime Orchard Road belt. At the western tip stands Wheelock Place, owned by the Wheelock group which controls 20 per cent of HPL. Also, there is the Anguilla Carpark, which sits between Four Seasons Hotel and Wheelock Place.
There has long been market speculation that at some point in time, sleepy HPL will stir from its slumber and look at redeveloping its Orchard properties. Such a redevelopment master plan could envisage the tearing down, relocation and rebuilding of all the existing HPL properties on Orchard Road into a contiguous lifestyle, shopping, hotel and residential development stretching from Cuscaden Road to Anguilla Park. Analysts estimate that such a redevelopment would yield a gross floor area of more than 1 million square feet and a market value well in excess of $2 billion, or $4 per share.
But HPL has shown little inclination so far to do much more than sit patiently on its precious assets.
However, market circumstances in Singapore have changed dramatically over the past decade. Today, Singapore is much more cosmopolitan and crowded. Could that prompt a strategy rethink within the company?
The latter certainly has enough cash to support a privatisation. Privatisations have been the rage lately for undervalued, under-appreciated and tightly controlled companies.
Given the fast-evolving market conditions, the folks running HPL will have to decide - sooner, rather than later - what to do about its hugely undervalued but precious assets. Mr. Ong is one of Singapore’s - if not the world’s - most savvy and best-connected businessmen. When he makes his move, the market will move with him.