JKH poised for growth under new blood
As the country recovers from the nation’s worst political crisis in recent times, the country’s most diversified conglomerate, John Keells Holdings (JKH) PLC is gearing to partake in Sri Lanka”s growth story.
Mr. Krishan Balendra.
JKH’s new Chairman, the young Krishan Balendra in an exclusive interview to the Business Times this week noted that the group is betting on tourism and MICE with Cinnamon Life, consumer growth with the new ice cream plant and new soft drinks and ice cream flavours, new convenience food products, more super markets, continued growth in demand for apartments with their latest complex -Trizen, growth in banking and life insurance, etc and growth in the port and logistics business.
He noted that tourism continues to be one of the fastest-growing and most dynamic sectors in the country, which is why they are making big investments in it.
This thinking, he says is further bolstered by the fact that almost a decade after the end of its civil war, Sri Lanka has been named the best country in the world to visit in 2019 by Lonely Planet. The country has become one of the leading destinations after it was dubbed one of the world’s greatest tourist hot spots by several international publications in recent years.
Better transport links, new hotels and a growing number of activities were cited as the reason the country was chosen for the top spot in the guidebook publisher’s annual Best in Travel awards.
Apart from the mega Cinnamon Life project that’s coming up, JKH is re-constructing the old Bentota Beach Hotel and also the four-star hotel called Hakura Huraa in the Maldives.
When asked that some investors are concerned about JKH’s growing exposure to the real estate sector as opposed to being diversified and that at times the market may not place a high price to earnings multiple for a conglomerate which is heavily into real estate, Mr. Balendra contradicted this saying that both tourism and real estate sectors in JKH’s portfolio stand as important sectors in the current context with the country’s tourism sector taking off.
He stressed that the popular thinking which says Colombo’s hotel rooms outstrips tourist demand when compared to the region is not quite true. “Based on the regional experience, demand for rooms will increase over time to absorb the new supply.” He says that compared to Kuala Lumpur, Bangkok, Jakarta and other Asian cities, Colombo doesn’t boast that many rooms.
According to latest data, Sri Lanka has 146 hotels comprising 14,800 rooms. The country offered some 5.2 million room nights in 2017.
Mr. Balendra says while Sri Lanka attracted more than 2.1 million tourists last year, there is potential for more tourists. “For an example, Jakarta has recorded 14 million tourists in 2017. I feel that the potential for arrival numbers hasn’t been met as yet.”
He backs this argument by presenting some important data. While Colombo has about 5,000 rooms, Bangkok has 60,000 rooms, Manila has 31,719 rooms, Kuala Lumpur has over 30,000 rooms, Jakarta has 26,000 rooms and Ho Chi Minh has 9,100 rooms.
Mr. Balendra sees attracting the ‘right mix’ of high spending tourists along with international hotel brands as the challenges for tourism as an industry.
With Cinnamon Life, John Keells’ magnum opus and Colombo’s most awaited integrated development, the conglomerate aims to make Sri Lanka a hub for meetings, incentives, conference is and exhibitions (MICE) tourism. “Cinnamon Life will bring the ability to host conferences – large scale ones – making Sri Lanka a hub for such events. We are ideally positioned next to the world’s fastest growing ‘large’ economy – India -which makes it easier for us to leverage on this opportunity,” Mr. Balendra explained.
The conferencing capacity is approximately 5,000 pax at Cinnamon Life and the car park facility is 2,450 slots.
Mr. Balendra noted that almost 90 per cent of the structural construction is done despite the initial challenges they had with the piling. By 1Q next year, the two apartment towers at Cinnamon Life will be completed.
JKH owns one of the largest privately held land banks in prime city locations. The developable freehold land within the city limits includes a 9.38 acre land at Vauxhall Street, Colombo 2. The group is eyeing a possible development at this site as well. “This land has unhindered views of the Beira Lake over Vauxhall Street. That is what makes it attractive since opposite Vauxhall Street is a green zone where nothing can be built blocking this view,” Mr. Balendra explained. But this development will be at a future date and not immediate.
Addressing the looming question, the sale of the two city hotels – Cinnamon Grand and Cinnamon Lakeside – that JKH owns, he noted that the sale of any hotel is not imminent, putting the speculation to rest.
The group aims to introduce healthier products under their F&B sector apart from the sugar-free versions for a lot of their traditional flavours like Necto, Cream Soda, etc in addition to water, milk and tea flavoured drinks.
JKH share saw a large outflow of foreign share ownership last year. The above average selling has not been because the share has been out of favour with the foreigners, but because JKH has one of the biggest foreign shareholdings and foreign selling has been seen in most emerging markets during last year, Mr. Balendra explained.
When queried if he was concerned with the new shareholding structure, he pointed out that the group always had a wide shareholder base. “We are an independent company which is a positive and one of our strengths is that we have always had a professional management team.”
JKH’s youngest chairman says that the main concern is the impact of the unstable political environment on business and investor sentiment.
“There should be a clear focus on development and economic growth.”