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Katrina diversifies into hospitality, founder buys shares

Chan Chao Peh
Chan Chao Peh • 3 min read
Katrina diversifies into hospitality, founder buys shares
SINGAPORE (Feb 4): Katrina Group, whose core business is in F&B, is diversifying into property management. The couple controlling the company, executive chairman Alan Goh Keng Chian and executive director Madaline Catherine Tan Kim Wah, have been increasi
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SINGAPORE (Feb 4): Katrina Group, whose core business is in F&B, is diversifying into property management. The couple controlling the company, executive chairman Alan Goh Keng Chian and executive director Madaline Catherine Tan Kim Wah, have been increasing their stake by buying up shares over the past few months.

The most recent purchase, announced via the stock exchange on Jan 29, was made on Jan 25. Goh bought 40,000 shares at 19.7 cents each, raising his direct stake to 104,732,404 shares, or 45.24%, from 45.22% earlier. Coupled with Goh’s deemed stake held via his wife, Tan, his total stake consisting of both direct and deemed shares was 202,592,908, or 87.51%, up from 87.49% earlier. On Jan 23, Goh had bought 20,000 shares at 19.25 cents each.

Katrina shares closed at 20 cents on Jan 29. At this level, the company is valued at $46.1 million and 65.2 times historical earnings. Year to date, its shares have held steady, falling only 0.5%.

On Dec 10, the company completed the $358,000 acquisition of an entity called Straits Organization (SOPL), which manages 125 units spread out across 15 condominiums. SOPL is in talks to add more properties to its portfolio.

SOPL was founded in December 2017 and is owned by Goh. For the financial period from Dec 15, 2017 to Oct 31, 2018, SOPL posted earnings of $64,723. On Dec 4, the all-cash acquisition — to be funded by Katrina — was approved at an extraordinary general meeting by the 202.3 million vote shares present. As at June 30, 2018, Katrina had cash balances of $5.2 million, down from $7.4 million as at Dec 31, 2017.

According to Katrina, SOPL’s customer base is millennial travellers, corporate expatriates and medical tourists. Katrina hopes to capture a slice of the business travel market. Citing a forecast published by Allied Market Research, the world business travel market is seen to grow from US$1.3 trillion in 2017 to US$1.7 trillion by 2023. Asia-Pacific is seen to contribute more than 40% of this pie.

“This acquisition reinforces our strategy of diversifying the group’s revenue stream across businesses, markets and segments to mitigate against weaknesses from any one sector,” says Goh.

“SOPL not only opens the door to the hospitality segment for the group but also offers the possibility of cross-sector collaboration for our core F&B business and further regional expansion. It is an earnings-accretive acquisition that we believe bolsters the group’s growth potential and provides a stable base of recurring income.”

To grow a bigger stream of recurring income, Katrina could expand the property management business. “The group will take a prudent and measured approach to the expansion of the hospitality business with a view to enhancing long-term shareholder value,” the company states.

Besides diversifying into property management, Katrina — which runs restaurants under brands such as Streats, So Pho, Bali Thai and Hutong — recently acquired another restaurant brand. On Oct 1, 2018, the company announced the acquisition of two Japanese restaurants owned by Tomo Izakaya for $952,767.

For the six months ended June 30, 2018, Katrina posted higher revenue of $30.8 million, up 11% y-o-y. Earnings fell 96.7% over the same period, however, to just $11,000. The company attributes this drop to additional costs incurred by new outlets, and also commissions paid to online food delivery ordering platforms.

The company warns of ongoing “fatigue” in the local F&B industry as rising costs and intense competition add to the pressure.

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