SINGAPORE (Oct 7): You may know Sam Goi Seng Hui is the chairman of Tee Yih Jia Foods, the manufacturer of popiah and prata as well as other frozen food products and ranked among the top 50 richest men in Singapore.
But do you know that Singapore-listed property group GSH Corporation (GSH), with asset size amounting to $1.1 billion as of June 30, is 59% owned by Goi? The group also boasts other notable stakeholders including group CEO Ee Guan Hui with an 8.09% stake and Far East Organization with a 5.04% stake.
GSH generates income through two segments: Property and hospitality. In the property segment, income comes from sale of properties which is seeing healthy sales from its developments while stable recurring rental income comes from its food logistics and hospitality businesses.
In Malaysia, the group has two luxury residential properties for sale. It also owns two land banks, one of which sits the 1,880-unit luxury residence in Kuala Lumpur’s Petaling Street. To be launched next year, the 50% joint venture property is a five-minute walk from Chinatown and offers views of the Petronas Twin Towers, Lake Gardens, KL 118 Tower, as well as Kuala Lumpur Sentral.
The other luxury residences in KL is Eaton Residences. It is over 70% sold and boasts unblocked views of the Royal Selangor Golf Club and the Petronas Twin Towers. The remaining 30% of units are set aside for Bumiputras although talks are underway to lower the limit.
In China, GSH also owns a 30% stake in an associate, Henan Zhongyuan Group, which operates one of the largest food logistics hubs in Zhengzhou.
In an Oct 2 unrated report by Phillip Securities, analyst Timothy Ang says GSH is seeing healthy sales from development properties despite high supply in Malaysia.
Last year, the launch of 100 units of its Coral Bay luxury residential project in Kota Kinabalu, Sabah, was oversubscribed.
“Overall, GSH’s management has shown diligence in selecting quality locations for development, prudently navigating the difficult Malaysian property sector,” explains Ang.
In addition, Ang says the cumulative revenue of $181 million from sold units as of June 30, are to be progressively recognised over the next two years. This would “improve the group’s financials moving forward”.
In the hospitality segment, GSH owns and operates the Sutera Harbour Resort in Kota Kinabalu, Sabah. This comprises two five-star hotels and a golf course, as well as the Sutera @ Mantanani Resort, a 30-room resort in Kota Belud.
In FY2018, the hospitality business contributed 63% of profit after tax from income-generating segments.
However, GSH’s hospitality has been hit by higher supply and the US-China trade war which saw a decline in Mainland visitors. The group posted a 5.8% year-on-year decline in hospitality business revenue for 1H19 as a result of new hotel openings in the city.
For 1H19 ended June, GSH reported earnings of $1.6 million, which came on the back of a 21.1% increase in group revenue to $57.3 million.
For 2H19, management has guided for a recovery as tourist arrivals to Sabah have seen double-digit growth in recent years and the group’s hotels have enjoyed occupancy rates of around 80% for FY18. This means expansion plans for the 30-room Sutera @ Mantanani Resort to 75 rooms by 2020 should help boost recurring income in the future.
Meanwhile, Tay says GSH’s net gearing ratio of 0.81:1 is also low compared to the group’s financial mandate of 2.25:1. According to management, 1:1 would be within comfort levels. As at June 30, 48% of the group’s properties, development properties and cash have been pledged for bank loans, leaving room for more pledged financing.
And after the maturity of the group’s 07/06/2019 5.15% bonds, Tay estimates GSH’s management still owns a total of $38.5 million, or 32%, of total outstanding bond issues.
As for GSH’s links to Goi, Tay says this allows the group to tap on a strong network of funding channels.
“We view this as a credit positive as the vested interest helps align management with bond investors’ interests,” says the analyst.
Year to date, shares in GSH are up 11% at 40 cents.
