Financial Times

Asian Hotels to earn Rs 2.5b profit from ‘Monarch’
Asian Hotels and Properties Ltd., the John Keells subsidiary that owns Colombo Plaza and Trans Asia hotels, is expected to earn a profit of Rs 2.5 billion over a three-year period from its investment in ‘Monarch’, the 30-storey up-market luxury condominium complex, a stock broker has said.

Lanka Orix Securities estimated that revenue generation from apartment sales is Rs 5.2 billion while the estimated cost of the project is Rs 2.7 billion.
Apartment prices range from US $ 150,000 for a single bedroom apartment up to US $ 1 million for a 5,100 sq ft, two level penthouse. Pre-selling of apartments commenced in May 2004 and all units have now been pre-sold.

Asian Hotels and Properties Limited (AHPL), which also runs the Crescat Property Division, has a tax holiday till 2014. The ‘Monarch’ condominium complex has a maximum capacity of 234 units. Construction work began in January 2005 and the complex, which will also have a swimming pool and gym, is scheduled to open in June 2007. Lanka Orix Securities said the proposed re-branding of hotels belonging to John Keells Holdings (JKH) Group under the Cinnamon brand would be a positive development for AHPL.

“The concept of promoting a chain of hotels under one brand is a new concept for Sri Lankan hotel groups,” it said in a research report. “A single brand name which is uniquely identifiable with Sri Lanka would enable both Colombo Plaza and Trans Asia to leverage on JKH Group’s strengths in overseas marketing.”
The brokers said they expect the firm’s performance to bounce back strongly on the back of profits from the property development division during FY 2005/06.

“The revenue recognition of the Monarch project is likely to commence during the 2Q FY 2005/06 and is expected to contribute significantly to the bottom-line,” Lanka Orix Securities said.
They forecast that during the financial years 2005/06, 2006/07 and 2007/08 the revenue from property development would be Rs 1,040 million, Rs 1,537 million and Rs 2,623 million respectively.

The total revenue for FY 2005/06 is forecasted as Rs 3,913 million (a 60 percent increase year on year) mainly due to the higher level of revenue recognition from property development.

“The profitability of the hotels sector too would be encouraging with the capacity expansion of Colombo Plaza to be completed by the beginning of winter 2005/06,” the brokers said. “We do not expect the upcoming presidential elections to deter travellers to Colombo and hence do not foresee a drop in occupancy level in city hotels.”

Both Trans Asia and Colombo Plaza are reporting increased occupancies and earnings. The on-going refurbishment of a previously unoccupied wing comprising of 252 rooms in Colombo Plaza is expected to be completed by end of November 2005 after which it will have 501 rooms of five-star class and would be one of the largest hotels in Colombo.

“We expect both Trans Asia and Colombo Plaza to report higher earnings this financial year as a direct consequence of higher occupancies.” Orix forecast the 358-room Trans Asia’s profits would grow 53 percent to Rs 408 million with the hotel being able to charge higher rates after its recent refurbishment.

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