ECONOMYNEXT - Sri Lanka’s Jetwing Symphony hotel group is looking to enter growing markets in Myanmar and Indochina over the next three to five years after it concludes construction of seven properties in Sri Lanka.
After going public in December 2017, the hotel group began trading for the first time on the Colombo Stock Exchange on Friday, opening at 15 rupees a share, which was 1.4 times the company’s book value.
The stock was soon trading at 15.90 rupees by market close.
"If the next three to four years go as planned in Sri Lanka, we will invest in Myanmar, Vietnam,
Cambodia, and Laos,” says Hiran Cooray, Chairman, Jetwing Symphony.
"We like these places because they have a lot in common with Sri Lanka in terms of culture and product.”
Jetwing Symphony has five properties with two more in the pipeline expected to be completed by 2020.
"By then, we expect enough returns to be able to invest in Southeast Asia," says Ruan Samarasinghe, Managing Director at Jetwing Hotels, which manages 25 hotels including Jetwing Symphony properties, older hotels built by the Cooray family.
The Jetwing group was founded in the 1970s by Herbert Cooray, the father of the current Chairman.
“Over the years, many people wanted us to go public but my father didn’t believe in it,” Cooray says.
Jetwing Symphony was incorporated in 2011 and includes newer properties developed after the second generation took over the reins.
Cooray says the listing of Jetwing Symphony allows him to respect his father’s wishes to keep the older properties within the family and raise funds to build newer hotels.
The Jetwing group is no stranger to East Asia, and has had operations in Vietnam and Laos through its Jetwing Indochina Company in the past.
“We know these markets well because we managed properties for over five years," Samarasinghe says.
"We left when the investors sold the properties. Now, we want to invest in our own properties outside Sri Lanka.
"Over the next six months we will explore investment opportunities in Myanmar, Vietnam, Cambodia, and Laos so we can make timely investments when Jetwing Symphony starts making returns."
The five existing properties in Sri Lanka were built with debt amounting to three billion rupees.
Cooray says the group was likely to report a loss of 200-250 million rupees for the financial year ending March 2018 mainly due to loan interest payments.
"We’ve made it very clear that this is a medium term investment and most investors looked at it that way," Cooray says.
Real estate values will grow but financial returns will start coming in from 2019 onwards.
"We don’t expect any returns in 2018 which is a year of consolidation. Some of the IPO funds will be used to reduce debt and construct two more hotels in Kandy and Trincomalee,” he says.
The group is hoping to maintain a debt to equity ratio of 45:55 percent.
Around 60 percent of Jetwing Symphony’s 750 million rupee IPO was subscribed by two institutional investors: Amalean Investments, the investment arm of family-controlled MAS Holdings, a clothing manufacturer and exporter, and listed Seylan Bank.
The IPO was for about 10 percent of the company’s issued shares.
The group’s top three markets are China, India and the UK. It employs eight Chinese staff in Sri Lanka just to communicate with travel agencies and prospective tourists from China.
Annual average occupancy of the group ranges from 70-90 percent, but average room rates have fallen 5-10 percent over 2017, as the informal sector eats into market share of established hotel chains.
"We have gone through 30 years of civil war and hardly any tourists came here," Samarasinghe says.
"We survived and grew by maintaining product and service standards. This is what we will continue to do. Now the country is stable, infrastructure is improving so tourism will boom." (COLOMBO, January 05, 2018)