HPL shares slide after Ong Beng Seng’s arrest, but company still ‘fundamentally strong’: Analyst

Hotel Properties Limited has an attractive land bank and other assets, but the issue of succession may arise if the CPIB probe leads to its managing director stepping down, a DBS Group Research analyst said.

HPL shares slide after Ong Beng Seng's arrest, but company still 'fundamentally strong': Analyst
Hotel Properties Limited (HPL) House at 50 Cuscaden road. (Photo: CNA/Jeremy Long)

SINGAPORE: Shares of Hotel Properties Limited (HPL) slipped as much as 6 per cent on Friday morning (Jul 14) after the company said its managing director Ong Beng Seng has been issued a notice of arrest.

The stock recovered slightly but closed 2.59 per cent lower at S$3.76 (US$2.85). DBS previously said HPL has a target price of S$4.35.

The Corrupt Practices Investigation Bureau (CPIB) asked Mr Ong to provide information in relation to his interactions with Transport Minister S Iswaran, who is assisting with a case it uncovered.

In a company announcement on Friday, HPL said no charges have been filed against Mr Ong.

“He will be travelling from Jul 14 and will be surrendering his passport to CPIB upon his return to Singapore,” the statement read.

HPL STILL “FUNDAMENTALLY STRONG”

But HPL remains a “fundamentally strong” company, a DBS Group Research analyst said.

As managing director, Mr Ong, 77, is the most senior executive in HPL and bears executive responsibility for the management of the company and the group, according to the company’s annual report.

DBS Group Research’s head of regional property research, Mr Derek Tan, said there is not enough information on the investigation, but HPL would be “particularly intriguing as a potential takeover play” if there ends up being a change in ownership or stewardship of the company.

“We understand that his children are not in the business,” said Mr Tan, pointing to the billionaire businessman’s age. “Consequently, the issue of succession will arise.”

Despite the investigation, Mr Tan said the company is strong and has an attractive land bank.

“While we lack verified information to form a definitive opinion by the announcement made by HPL’s managing director Mr Ong Beng Seng being called up for a meeting with CPIB, we believe that the company is fundamentally strong,” Mr Tan told CNA in an email.

The company’s most significant asset is a freehold plot of land on which Forum The Shopping Mall, HPL House and Voco Orchard hotel sit. Mr Tan said an application to develop that area has reportedly been filed, which could potentially increase the gross floor area by five times.

He also pointed to the stake that the company has in Cuscaden Peak and in a data centre in Genting Lane. Cuscaden Peak manages Paragon REIT, the real estate investment trust whose portfolio includes Paragon and The Clementi Mall.

“Where can we find such promising value for Singapore real estate? Apart from Bukit Sembawang, the developer of landed homes in Singapore, the next developer with such (an) attractive ‘landbank’ is HPL,” Mr Tan said.

“If a chance comes, we believe that every developer with the financial muscle will be interested to take over this ‘treasure trove’.”

Besides Singapore, HPL has a portfolio of hotels in 14 other countries, operating under brands such as Four Seasons Hotels & Resorts, InterContinental Hotels Group and Marriott International. It also has two office buildings in central London and operates Hard Rock Cafe outlets in the region.

For the full year that ended on Dec 31, 2022, HPL reported S$76.4 million (US$58 million) in net profit, compared to a S$7.7 million loss in 2021.

In a research note in March, DBS said it was positive on the continued recovery of HPL’s hotel segment.

“The group is expected to be a beneficiary of pent-up travel demand boosted by the return of mainland Chinese tourists, with its prime hotel exposure in tourist hotspots,” the note read, pointing to Bali and the Maldives.

Source: CNA/an(sn)