Serendib goes for Rs. 650 m upgrade

Rs. 501 m to be raised via 1 for 4 Rights Issue after 5 into 1 share sub division; Post refurbishment 90-room Bawa-inspired Bentota resort to be repositioned as a “design hotel”

Hotel Serendib is to be refurbished and repositioned as a design hotel with an investment of Rs. 650 million, of which Rs. 501 million will be equity financed.

For the latter, Serendib Hotels Plc has announced a one for four rights issue after a sub division of five into one. These are for both voting and nonvoting shares. Voting rights issue will be priced at Rs. 24.50 each and nonvoting will be Rs. 18.25 each.

Yesterday investors toasted the announcement of fresh investment and repositioning as well as the rights issue as Serendib Hotels was among handful of companies to have enjoyed gain in its share price in an otherwise highly negative market.

Serendib’s voting shares traded between a high of Rs. 180 and a low of Rs. 157.50, before closing at Rs. 167.60, up by Rs. 6.20 whilst nonvoting closed at Rs. 127.10, up by Rs. 16.30 after peaking to a high of Rs. 140 and a low of Rs. 119.

Serendib Hotels’ existing number of issued ordinary shares is 12, 082,358 voting shares and 5,761,769 nonvoting shares. Post sub division, they will amount to 60,411,790 and 28,808,845 respectively. The sub division will be done without a change to the stated capital of the Company.

As per the planned Rights Issue post sub division, there will be 15,102,948 voting shares and 7,202,211 nonvoting shares.

Both subs division and rights issue are subject to regulatory and shareholder approval.

Serendib Hotels is 28% (voting shares) owned by Leisure Asia Investments and 21% by Hemas Holdings whilst Lodging Investment (Labuan) Ltd. owns 19.8% stake.

The Serendib Hotels Plc is also the major Shareholder of Hotel Sigiriya PLC, which owns Hotel Sigiriya in Sigiriya and Stafford Hotels PLC., which owns the Hotel Dolphin and Miami Cottages in Waikkal. These three resorts together consist of 320 rooms and suits.

The Company in the first nine months of 2010/11 saw its revenue rose by 65% to Rs. 151.4 million whilst pre-tax profit amounted to Rs. 46.2 million, as against a loss of Rs. 16.4 million a year earlier. After tax profit was Rs. 45.1 million, as against a loss of Rs. 15.4 million in the first nine months of 2009/10.

Group revenue grew by 28% to Rs. 543.4 million in the 2010/11 nine months. Pre-tax profit was Rs. 53.2 million, up from Rs. 11.5 million a year earlier and after tax profit was Rs. 37 million, up from Rs. 6.4 million last year. Net profit attributable to equity holders of parent was Rs. 41.2 million in comparison to a loss of Rs. 3.4 million in the first nine months of 2009/10.

Hotel Serendib in Bentota is themed on an 18th Century Dutch village by Sri Lanka’s world famous architect, Geoffrey Bawa. It has 90 rooms including 44 standard rooms, 42 superior rooms and one suite.

In 2009/10 financial year the company invested in upgrading 40 rooms, thereby improving the product offering to its guests.

The upgrading work of Dolphin Hotels PLC together with its 100% owned subsidiary Miami Beach Hotels Ltd. was completed during the period at a cost of Rs. 527.9 m.

In August 2010 Serendib Hotels acquired 19.9% of Cyprea Lanka Ltd.,the holding company of Kani

Lanka Resort & Spa for Rs. 325 million. The Company disposed 803,500 shares invested in Hotel Sigiriya PLC during June and July 2010. The disposal resulted in a profit of Rs. 44.4 m and Rs.38.8 m for the Company and Group respectively

Hemas Holdings’ leisure sector revenues in the first nine months of 2010/11 financial year grew 47% year-on-year, to close the nine months at Rs. 879 million, on the back of the tourism recovery in post-war Sri Lanka. Tourist arrivals to Sri Lanka totalled 654,476 in 2010, a growth of 46.1% over 2009.

“All our hotels are currently operating at high occupancies and are enjoying higher room rates,” Hemas CEO Husein Esufally said in a statement accompanying interim results. Sector profits for the nine months ended 31 December 2010 closed at Rs. 1.3 million compared to a loss of Rs. 25.5 million a year ago.