IPC Corporation has reported after-tax profit of S$24.968 million for 2018 compared to losses of S$4.768 million for 2017.

IPC said the sharp improvement was due 
mainly to an undisclosed fair value gain in its preference shares investment in Nest Hotel Japan Corporation (NHJC).

Nest Hotel Osaka UmedaA new "nest": The exterior and lobby at the Nest Hotel Osaka Umeda which opened in Nov 2018. Photo: Company

The jump in fair value gain arose from the adoption of an accounting rule, SFRS(I) 9, on 1 January 2018. 

IPC owns preference shares in NHJC which was incorporated in 2013 in Japan, and currently manages 12 hotels in Japan, under the “nest”,” Bespoke” and “Tissage” brands.

 

Highlights (S$’000)

2018

2017

Revenue

9,019

4,070

Other gains/(losses), net

29,893

(861)

Profit/(loss) before income tax

25,039

(4,768)

Total profit/(loss)

24,968

(4,768)

Earnings per Share (S$ cents)

29.27

(5.59)

IPC reported revenue of S$9.0 million, up from S$4.1 million: This increase was mainly due to the sale of its interest in a piece of land held for development, offset against a decline in revenue in its hotel in Zhuhai.
 
Gross profit was S$0.678 million in 2018 while "other gains" totalled S$29.893 million.

The operational performance of NHJC was not consolidated into IPC's profit and loss statement.

Boosted by the "other gains", the net asset value (NAV) of IPC as at end-2018 rose to $1.25 from 97 cents a year ago.

(The NAV is largely contributed by property assets in China, including a hotel in Zhuhai).

Stock price

30 c

52-week
range

26 – 48c

PE (ttm)

--

Market cap

S$26 m

NAV

$1.25

Dividend 
yield 
(ttm)

--

1-year return

-29%

Source: Bloomberg

Thus, at 30 cents, the current stock price of IPC is at a sharp discount to the NAV. 

Meanwhile, NHJC is making further business headway with another 2 hotels to be managed in 2019 and 4 hotels in 2020, resulting in a total of 18 hotels.

The “nest” brand and its trademark are owned by IPC, and are licensed to NHJC under a licensing agreement.

(For more on how IPC played a key role in creating NHJC, see:
 )


Having built up its expertise in the hospitality industry, IPC intends to look beyond Japan.

In partnership with PhillipCapital Group-backed AP Asean Holdings (APAHL), an integrated real estate service platform with deep knowledge of local real estate markets across Asia, IPC aims to expand its hotel management business into new markets across the Asia Pacific region.

In the joint venture, IPC and NHJC each take a 37.5% stake while APAHL, 25%.

PatrickNgiam11.18IPC Chairman & CEO Patrick NgiamIPC Chairman and CEO Mr Patrick Ngiam said, “Leveraging on the established brands and expertise in hotel management, we will continue to expand our footprint in Japan.

"Beyond Japan, we are looking to expand our hotel management business into new high-growth markets across the Asia Pacific countries. Ultimately, these initiatives are in line with our long-term goal of enhancing shareholder value.”



See also the press release and check out the NJHC website here.

P/S (22 Feb 2019): IPC said the carrying amount of investment in NHJC as at 31 December 2018 was $34.6 million (the original cost of investment was $0.1 million). "The significant gain of $31.3 million in 2018 was mainly due to 100% increase in number of hotels being operated by NHJC by the end of 2018 from 6 to 12 hotels and by the end of 2020, another 6 hotels in the pipeline will be added, resulting in a total of 18 hotels that NHJC will manage in Japan." See announcement.

You may also be interested in:

  • images/stories/Misc_2018/IPC_nesthotel_hakataekimae.jpg IPC CORPORATION: Ready to scale up hotel management business
  • http://bizblogs.nus.edu/alumni/wp-content/uploads/sites/6/2015/07/bernard.jpg ASIAMEDIC: IPC's Ngiam brothers to take 10.24% stake

    Comments  

    0 #2 Connie 2019-01-31 14:48
    It probably started life as a peanut-size figure in the balance sheet!
    Quote
    0 #1 darthvadar 2019-01-31 10:14
    How did the value of the preference share increase by 30 mio or thereabouts?
    Quote

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