The Motley Fool

Global Premium Hotels Limited Sees 9% Drop in Quarterly Profits

Owner of Fragrance brand chain of hotels, Global Premium Hotels Limited (SGX: P9J) posted its first quarter results on Wednesday. It is one of Singapore’s largest chains of hotels with 22 hotels, of which 21 hotels are operated under the “Fragrance” brand and one hotel under the “Parc Sovereign” brand.

The company derives revenue from two sources – provision of hotel rooms and rental of commercial units within the hotels.

Hotel room revenue for the quarter decreased 5.2% year-on-year to S$13.6 million. This was mainly due to lower contribution from Fragrance Hotel – Pearl due to temporary closure to carry out asset enhancement initiatives; lower revenue recognised from the remaining hotels; and closure of Fragrance Hotel – Elegance in the fourth quarter of last year due to cessation of tenancy agreement.

Revenue from rental income declined 12.0% to S$221,000. This was because of lower recognition of rental income mainly from three commercial units.

In all, total revenue dipped 5.4% to S$13.8 million while net profit slumped 8.7% to S$4 million.

The average occupancy rate (AOR) decreased from to 86.0% in the latest quarter from 89.6% in the previous year while Revenue Per Available Room (RevPAR) decreased from $91.40 to $91. RevPAR is a performance metric used in the hotel industry.

As of 31st March this year, the hotel operator had a total debt of S$482 million and a cash balance of S$16.5 million. This is an improvement as compared to three months ago, where it had S$11.6 million in cash. Total debt then was the same. Another plus point for the quarter was that free cash flow came up to S$5.5 million, while that last year was at S$4.4 million.

The firm feels that there may be limited upside opportunity to RevPAR due to the uncertain economic climate and ample new supply of rooms that will come onboard to the industry. The shares last changed hands at S$0.33, valuing the company at 18 times its historical earnings.