SINGAPORE (Oct 15): Tan Eng Teong, founder and chairman of hotel operator Hotel Grand Central, has been steadily buying its shares from the open market for over a year.
The most recent purchase was made on Oct 9, where Tan added 69,900 shares at an average price of $1.36. He now has a deemed stake of nearly 394.7 million shares, equivalent to 54.32% of the company. Tan’s purchases were made via an entity called Tan Chee Hoe & Sons Holdings, which is used to hold the shares in Hotel Grand Central.
Tan’s brothers Teck Lin and Eng How also have a deemed interest in Tan Chee Hoe & Sons Holdings. All three brothers sit on the company’s board, as does Hwa Lian, Tan’s daughter.
Trading in Hotel Grand Central shares has remained tight. Year to date, the shares have dropped just 2.1% to close at $1.37 as at Oct 10. At this price, which is close to what Tan paid for his most recent purchases, the group is valued at 25.07 times earnings, or $995.4 million. Its net asset value as at June 30 was $1.92.
Hotel Grand Central celebrates its 50th anniversary this year. According to its FY2017 annual report, it owns 14 hotels in Singapore, Malaysia, Australia and New Zealand. The group also owns six investment properties in these markets.
Most of these properties are freehold. The exceptions include a hotel in Sihui, China, which has a 35-year leasehold tenure starting from 2008, and Hotel Chancellor@Orchard in Singapore, which has a 99-leasehold tenure starting from 1978. Hotel Grand Central, the group’s namesake, sits on a 1,239 sq m freehold site off Orchard Road, in the vicinity of the Istana.
The other hotels are mainly located in Australia. They are in the cities of Adelaide, Brisbane and Melbourne, as well as relatively small locations such as Launceston, Palm Grove and Townsville.
Hotel Grand Central’s investment property portfolio consists largely of five mixed=use developments in New Zealand, in the cities of Wellington and Christchurch. They include the freehold James Cook Arcade and Office Tower in Wellington, which has a net lettable area of 2,253 sq m, and the Grand Central Building in Christchurch, which has the largest NLA of 14,118 sq m among the entities in the group’s investment portfolio.
In addition, the group holds a 23.79% stake in a listed Malaysian associate, Grand Central Enterprises. Tan and his family, via an entity called Tan Chee Hoe & Sons, hold a direct stake of 43.67% in Grand Central Enterprises.
For the three months ended June 30, Hotel Grand Central reported earnings of nearly $6.8 million, an increase of 11% y-o-y. Revenue in the same period was nearly $38.8 million, up 3% from the year-earlier period. The bulk of revenue was from hotel operations. This segment, however, was down 1% to nearly $33.7 million.
The group attributes the higher earnings to contributions from investment properties acquired in New Zealand last year. For this current full year, Hotel Grand Central expects higher income contribution from these properties.
In its 2QFY2018 earnings announcement on Aug 14, the group said it was expecting an improvement in the hotel business for the year, thanks to a sustained improvement in global economic growth.
