Yong Tai Bhd, a tourism-related property developer, announced on Wednesday the sale of its five-star Courtyard by Marriott Melaka hotel for RM160 million. This sale follows a report by The Edge Malaysia in late July, confirming speculation about the sale of the 248-room hotel. The hotel, which began operations in April 2022, had a net book value of RM113.84 million according to Yong Taiโs 2023 annual report.
In a filing with Bursa Malaysia, Yong Tai revealed that its wholly owned subsidiary, Apple 99 Development Sdn Bhd, entered into a conditional sale and purchase agreement with Southern Envoy Sdn Bhd (SESB) for the disposal. SESB, a company primarily involved in IT services, is diversifying its business to include hospitality and hotel management services. The directors of SESB are Ong Yoong Nyock, Ong Wei Kuan, and Datuk Seri Lee Ee Hoe.
Details of the Sale
The RM160 million selling price represents a 5.88% discount from the hotelโs market value of RM170 million, as appraised by Nawawi Tie Leung Property Consultants Sdn Bhd. Despite the discount, Yong Tai anticipates a gain of RM45.86 million from the sale. The hotel had recorded an occupancy rate of 68.2% and a net operating profit of RM6.24 million in the first half of 2024.
Special Share Issue to Raise RM57 Million
Alongside the sale, Yong Tai has proposed a special issue of up to 190.05 million new shares, or up to 30% of the companyโs issued shares, to third-party investors. The special issue is expected to raise approximately RM57.02 million.
Based on an illustrative issue price of 30 sen per share, Yong Tai plans to allocate the proceeds as follows:
- RM15 million to repay term loans and bank overdrafts.
- RM20 million to partly finance three existing projects with a total gross development value (GDV) of RM1.4 billion and a gross development cost (GDC) of RM1.23 billion.
- RM15 million for future land bank acquisitions and/or property development projects.
- RM7.02 million for working capital and estimated expenses related to the special issue.
As of the end of March 2024, Yong Taiโs total borrowings amounted to RM169.65 million, with cash and bank balances of RM7.5 million.
Financial Performance and Market Response
Yong Tai has faced annual losses since the financial year ended June 30, 2019 (FY2019). The companyโs most challenging year was FY2022, with a net loss of RM346.63 million, narrowing to RM21.67 million in FY2023. For the first nine months ending March 31, 2024 (9MFY2024), the companyโs net loss further narrowed to RM6.09 million. The losses were attributed to interest expenses on term loans and the delayed resumption of daily shows at Encore Melaka.
Yong Taiโs share price has gained nearly 13.56% year-to-date, closing two sen or 6.35% higher at 33.5 sen on Wednesday, giving the company a market capitalisation of RM142.3 million.
Conclusion
The sale of Courtyard by Marriott Melaka and the proposed special share issue mark significant steps in Yong Tai Bhdโs strategy to streamline its operations and improve its financial standing. The companyโs focus on reducing debt and financing new projects could set the stage for a more stable financial future, despite the challenges it has faced in recent years. Investors will be watching closely as the company implements these changes and seeks to capitalize on new opportunities in the Malaysian real estate market.
