Friday 24 May 2024
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This article first appeared in The Edge Malaysia Weekly on January 8, 2024 - January 14, 2024

HOSPITALITY group Impiana Hotels Bhd, now known as Magma Group Bhd, is on a mission to reestablish its standing in the market.

Newly appointed managing director Datuk Seri Thomas Liang Chee Fong shares the group’s ambitious one-year turnaround plan, which it hopes will rejuvenate its fortunes, with The Edge.

Instrumental in bringing about the change is Magma’s new shareholder, Datuk Seri Lee Hock Seng, the founder of HYM Group, which manages properties and hotels in Kuala Lumpur and Penang. The low-profile Lee, who is credited with operating the high-performing WOLO hotel, aims to inject his hotel management expertise and talent — including Liang himself — into Magma, kick-starting the amelioration process.

Liang: We are all working towards the same goal, to make Impiana [now Magma] profitable again (Photo by Shahrill Basri/The Edge)

Notably, Lee raised his direct and indirect stake in the company to 21.97%, after acquiring 25.03 million Impiana shares. He first emerged as a substantial shareholder of Impiana in August 2023, and subsequently bought another 5.03 million shares or a 3.1% stake at nine sen apiece or RM2.25 million. The additional shares have increased his shareholding to a 14.29% direct stake and a 7.68% indirect stake held by his wife Datin Seri Joanne Yew Hong Im.

Lee was appointed to the board as executive deputy chairman on Sept 6, 2023, while second-biggest shareholder Datuk Seri Farouk Abdullah, who owns about 11.575% in Magma, remains as chairman of the group.

All said, it will be a challenging task to turn around the group, which is still recovering from the impact of the Covid-19 pandemic as it has been making losses for the past five years. For the latest cumulative nine-month period ending Sept 30, 2023, the group posted a net loss of RM9.38 million or a RM1.89 loss per share, on the back of higher revenue of RM16.82 million.

Magma leases WOLO hotel

The first two key steps in the turnaround strategy involve rebranding the group from its former listed name, Impiana, to Magma and securing a three-year lease for the coveted WOLO hotel from HYM, as the hotel currently generates a monthly revenue of RM1.2 million.

The resultant cash flow injection would cover Magma’s financial needs during this early phase of turnaround, according to Liang, who also articulated the intention of an outright acquisition of WOLO post the three-year lease period. For now, establishing a steady cash flow and improving Magma’s financial health remain the focus.

As such, it is also talking to the group’s creditors for better terms. At a debt-to-equity ratio of 105% as at Dec 31, 2022, Magma’s total borrowings stood at some RM71.82 million, most of which are term loans repayable over five years.

Last December, via a private placement, Magma raised some RM16 million to pare down borrowings and for repayment to trade-related creditors and as settlement to authorities.

At the same time, Magma’s revival strategy considers maximising existing resources across the Impiana hotels.

Magma oversees three Impiana hotels domestically and some abroad, and although all are managed by Magma, not all are fully owned by the group. For instance, ­Impiana Hotel Ipoh is fully owned and managed by ­Magma, Impiana Hotel KLCC is majority-owned by KLCC (Holdings) Sdn Bhd with Magma holding a minor stake, and Impiana Hotel Senai is owned by the KCC Group and managed by Magma.

According to Liang, the objective is to raise  the average occupancy rates across the Impiana hotels from around 60% to 80% over the immediate 12-month timespan.

This effort will be complemented by the implementation of more cost-effective measures at the Impiana hotels. As such, it plans to refrain from raising funds in the near term after the private placement last December.

Liang categorically rules out any retrenchment plans, emphasising the relevance of retaining the hotel’s workforce in the turnaround process.

“It is us [at HYM] who would [need to] embrace the culture of Impiana Hotels. The last thing we want to do is demoralise anyone. We are all working towards the same goal, to make Impiana [now Magma] profitable again,” he stresses.

This perspective establishes the management’s commitment to preserving Impiana’s legacy and utilising its established goodwill as a valuable asset in the revitalisation mission.

One of the strategic jewels, the Impiana Hotel KLCC, offers growth potential, with room prices averaging RM350 to RM380 per night. Its most frequent visitors, interestingly, hail from Indonesia and China, apart from the business crowd from the convention centres nearby.

“At a 60% occupancy rate, there is a lot of room to grow,” observes Liang, emphasising  the plan of minimising overheads and keeping costs low.

The aggressive turnaround plan also envisions diversification for Magma Group beyond the hospitality industry, which proved risky during the pandemic.

Supplementary revenue streams, such as the food and beverage sector, are being actively explored, including franchises from overseas, which offer a strategic fit within Magma.

Over the last one year, shares in Magma have risen over 200% to 29 sen, for a market capitalisation of RM274.1 million.

The group’s expansion started in 2018 with the then-listed Bio Osmo Bhd, which acquired hotels under the Impiana brand in Kuala Lumpur, Ipoh and Cherating, and commercial land in Pangkor, as well as the hotel management company of Impiana, for a total purchase consideration of RM425.9 million.

The acquisition formed part of a mandatory general offer (MGO) by Bio Osmo’s largest shareholder Farouk, wherein he injected hotels parked under his private vehicles into the group. The acquisition entailed the issuance of shares, irredeemable convertible preference shares and cash.

Undoubtedly, WOLO hotel, recently honoured as The Best Design Hotel 2023 by the Asia Best of Best Awards, presents a stark contrast to Impiana hotels as it is a lifestyle boutique hotel. As such, the fusion of both WOLO and Impiana hotels under a single umbrella will be closely watched by the hospitality industry.

 

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