Fragrance Group lists Global Premium Hotels at S$0.26 per share

GPH plans to add 200-300 rooms within 1-2 years of listing and is committed to an 80% payout of its FY12 net earnings.

Strong tourist arrivals and the opening of several attractions have caused an overall increase in average occupancy rate and average revenue per room in the hospitality sector. In Singapore GPH has a 12.2% market share in the budget hotel industry.

Here's more from Maybank Kim Eng Singapore:

Fragrance Group has successfully spun off its hotel arm under GPH for a public listing and will own a 55% stake post-IPO. Compared to high-end hotels, budget hotels have been more resilient in cyclical downturns. As evidence, GPH has enjoyed average occupancy rate of 90% and average revenue per room of SGD133 as at 9M11. Its realised gross and net margins stood at 88.3% and 44.5%, respectively, for the same period. The group plans to add 200-300 rooms within 1-2 years of listing.

Boosted by Singapore’s strong tourist arrivals last year and the opening of a number of attractions, the hospitality sector has seen AOR and ARR rising across the board. According to the Singapore Tourism Board, AOR is expected to remain above 80% during 2011-15, while ARR will grow at a moderate pace. As of 2010, the total retail value of Singapore’s budget hotel market is worth SGD340m. GPH has a 12.2% market share, trailing behind Hotel 81’s share of 29.2%.

GPH raised SGD171m in net proceeds from its IPO. It plans to use SGD30m to expand operations, SGD74.6m for debt repayment, SGD7.3m for working capital requirements and the rest for IPO-related expenses.

GPH is committed to paying out 80% of its net earnings in FY12. If its 9M11 results were annualised, estimated EPS would be SG2.3cents, which would imply a highly attractive yield of 6.5%. After the IPO, GPH would be holding SGD463m of debt with an interest rate of 2-3% pa. As of 9M11, the group’s interest coverage ratio is at 10.8x, which implies the group is sufficient in covering any rise in interest expense.

GPH’s landbank has been valued at SGD747.6m, assuming that Fragrance Hotel-Riverside is fully completed now.

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