Singapore property and resources group Straits Trading’s loss-making hospitality business could turn profitable by the second half of 2012 on the back of strong tourism outlook and refurbishments across its hotels such as its flagship Rendezvous Hotel, its executive chairman said.
Chew Gek Khim also told Reuters that Straits Trading’s (STCM.SI) resources division, which reported a net profit of $13.9 million for the first six months of the year, is expected to deliver a comparable performance in the second half as underlying global demand for tin remains strong.
The firm’s hospitality business reported a net loss of $4 million for the second quarter. But as a whole, Straits Trading’s net profit had tripled to $49.3 million from a year earlier, lifted by higher tin prices, fair value gains in investment properties and improved operating performance.
Straits Trading owns, leases and manages a total of 14 hotels in Singapore, Australia, China and New Zealand.
“The tourism outlook is bullish,” Chew said, adding that if all goes according to the plan, the hospitality segment could turn profitable in the later part of next year.
“The plan is for the refurbishments to result in higher RevPAR and occupancy, together with improved systems,” she said. RevPAR refers to revenue per available room.
The firm recently invested around S$25 million to refurbish its Rendezvous Hotel in Singapore, which is slated to be completed in November. RevPAR for the hotel last year was $158.
“We are fairly optimistic Rendezvous Singapore will benefit well given its location and the strong pick-up in tourism,” she said.
In the first half ended June, tin mining and smelting contributed around 85% to revenue of $769.5 million from its business segments. Hotels constituted about 10% while the remaining was from property. At the end of June, the company had cash and cash equivalents of around $135 million.
Turning to the company’s Straits Trading building in Singapore’s prime office district, Chew said it currently enjoys an occupancy rate of 100% and she is optimistic that it will remain full in the next 12 months.
The asking rent as of July was in the range of $11-$12 per square foot and the tenants at the building were mostly law firms and banks.
Straits Trading’s subsidiary Malaysia Smelting Corp (MYSC.SI) (MSCB.KL), which is dual-listed in Singapore and Kuala Lumpur, operates two tin mines in the Malaysian state of Perak and Indonesia’s Bangka Island. It also processes tin at its two smelting plants in Penang and Bangka.
Tin prices had come off the record high of US$33,600 per tonne ($40,384 per tonne) hit in April amid a weakening global economy, but Chew said the underlying demand for tin, which is widely used for soldering in the electronics industry, is still resilient.
Reuters
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