Hotel Grand Central: Selling Perth hotel

Hotel Grand Central: Selling Perth hotel
Hotel Grand Central (HGC) has just announced the sale of another asset.
This time it is a 280-room hotel in Perth, and the group will book in gain of
A$8.7m in FY07. We expect HGC to remain a beneficiary of the healthy
gains in the domestic hotel industry, where recent tourism statistics showed
sustained growth momentum. Average room rate (ARR) was more than
S$190 in April versus an average of S$164.40 in 2006. In addition, revenue
per available room (RevPAR) was at S$161.40 in April versus an average of
S$140.14 in 2006. We expect its recently clinched Belilios Road site to
be developed into a mid-tier hotel offering up to 400 rooms to complement
its existing operation in Singapore. HGC's shares have done well, up 51%
this year. Despite the sharp price appreciation, we are retaining our BUY
rating as the Belilios site gives us confidence that the group is developing
and expanding its Singapore operations. Our fair value estimate of S$1.13
is now deemed to be conservative in view of the improving business
prospects. We are raising our fair value from S$1.13 to S$1.25 (or 1x
book).


Hotel Grand Central (HGC) has just announced the sale of another asset.
This time it is a 280-room hotel in Perth, and the group will book in gain of
A$8.7m in FY07. We expect HGC to remain a beneficiary of the healthy
gains in the domestic hotel industry, where recent tourism statistics showed
sustained growth momentum. Average room rate (ARR) was more than
S$190 in April versus an average of S$164.40 in 2006. In addition, revenue
per available room (RevPAR) was at S$161.40 in April versus an average of
S$140.14 in 2006. We expect its recently clinched Belilios Road site to
be developed into a mid-tier hotel offering up to 400 rooms to complement
its existing operation in Singapore. HGC's shares have done well, up 51%
this year. Despite the sharp price appreciation, we are retaining our BUY
rating as the Belilios site gives us confidence that the group is developing
and expanding its Singapore operations. Our fair value estimate of S$1.13
is now deemed to be conservative in view of the improving business
prospects. We are raising our fair value from S$1.13 to S$1.25 (or 1x
book).

Selling hotel in Perth. Hotel Grand Central (HGC) just announced the
sale of the 280-room Hotel Grand Chancellor Perth for A$52m versus the
book value of A$38.8m. This means a gain of A$8.7m over its book value.
Last year, this property contributed A$1.87m in group pre tax profit.

Room rates are rising. The domestic hotel industry has seen good
improvement in the last 2-3 years. Recent statistics are impressive and the
momentum looks sustainable. Last year, the average occupancy rate (AOR)
was 85% and the average room rate (ARR) was S$164.40 (+20% YoY). For
the first four months of 2007, the momentum stayed strong and based on
the statistics from the Singapore Tourism Board (STB), ARR stayed above
the S$190 level for two months in a row (Mar and Apr). At an average of
S$193.15, this is up 17% from last year's average (as a comparison, this is
an almost doubling from the low in 2003 of about S$105). Another positive
indicator is that revenue per available room (RevPAR) was at S$161.40 in
April versus an average of S$140.14 in 2006. This means that the average
for Jan-Apr 2007 of S$160.93 is already up 15% from last year's average.

Will benefit HGC's hotel operations. HGC is likely to benefit from both
the healthy domestic tourism receipt numbers as well as an expected good
showing from its overseas hotel assets in Australia. Recently, it announced
its first foray into the local hotel development market with its win of a land
parcel at Belilios Road / Klang Lane for S$48.9m. This is a 99-year leasehold
site with a land area of 3087 sqm. To complement its existing hotel operation
in Singapore, we expect this to be another mid-tier hotel offering up to 400
rooms. Construction is likely to take 3 years and completion is likely in
2009. We expect this project to be funded by both internal resources and
bank borrowings.

Maintain BUY, but raising fair value to S$1.25. HGC's shares have done
well, up 50.6% this year and 24.6% last year. Despite the sharp price
appreciation, we are retaining our BUY rating as the Belilios site gives us
greater confidence that the group is developing and expanding its Singapore
operations. Our fair value estimate of S$1.13 is now deemed to be
conservative in view of the improving business prospects. We are raising
our fair value from S$1.13 (10% discount to book) to S$1.25 (or 1x book).