This article first appeared in The Edge Malaysia Weekly on July 22, 2024 - July 28, 2024

TOURISM-related property developer Yong Tai Bhd (KL:YONGTAI) is close to selling its newly built Courtyard by Marriott in Melaka, say sources. The price tag eyed for the hospitality asset is RM160 million to RM170 million.

“Negotiations are in the final stages. The buyer is likely to be an owner of a logistics company,” a source tells The Edge without naming the buyer. “The sale is part of the group’s target to pare down some of its debts,” says another source.

Courtyard by Marriott Melaka is a 248-room four-star hotel, which started operating in April last year. According to Yong Tai’s 2023 annual report, the hotel has a net book value of RM113.84 million.

In its first year of operation, Courtyard by Marriott Melaka achieved an average occupancy rate of 65%, according to its financial results for the third quarter of financial year 2024 (3QFY2024) ended March 31.

Yong Tai CEO Datuk Boo Kuang Loon declined to comment when asked about the matter, only mentioning that the company would make an announcement to Bursa Malaysia should there be any material development.

Boo says Yong Tai is an asset-rich company that had to weather challenges when the Covid-19 pandemic hit. “The company’s main focus this year is to complete its maiden property development in Kuala Lumpur, dubbed Impression U-Thant,” he adds.

Yong Tai has been suffering annual losses since FY2019 ended June 30. Its worst year was FY2022, when it incurred a net loss of RM346.63 million. Its net loss narrowed to RM21.67 million in FY2023.

For the first nine months of FY2024, its net loss narrowed further to RM6.09 million. The company attributed this to the loss incurred by its hospitality segment, due to interest on its term loans and the fact that its theatre — an auditorium with a geometric façade called Encore Melaka — had yet to resume its daily shows during the period in review.

As at March 31, Yong Tai had total borrowings of RM169.65 million and accounts payable of RM197.97 million. Its cash position stood at RM7.5 million.

If the sale of Courtyard by Marriott Melaka goes through, the company would have more breathing space from a reduced debt pile while having greater capacity to work on other projects. The development of the hotel was announced in 2015, but it only started operation in April last year following the Covid-19 pandemic.

Meanwhile, its Encore Melaka project may have found a lifeline after the pandemic disrupted its operation. Last month, the group announced that it had signed a collaboration agreement with a China state-owned enterprise from Sichuan province to revitalise the project.

According to information on Yong Tai’s website, the Encore Melaka auditorium was designed by Wang Ge, chief architect of China’s Beijing Institute of Architectural Design, and constructed by Joins, “the team renowned for engineering spectacular stage platforms through the harmonious integration of technology and art”.

When launched in July 2018, the theatre was considered the crown jewel of Yong Tai’s signature project in Melaka, Impression City — a 138-acre mixed-use development with an estimated gross development value of RM6 billion that was launched in 2017.

The group holds a 30-year concession to stage the Impression Series, a show highlighting the city’s rich history and cultural heritage. However, the project — envisioned to be the “future cultural icon” of Melaka when launched — never had a chance to take flight as the Covid-19 pandemic struck not long after its debut, keeping tourists away.

Even prior to the pandemic, the group already faced challenges. In 2019, it went through a kitchen-sinking exercise that involved a one-off impairment of RM59.93 million. In 2022, it made another round of impairments, amounting to RM311.6 million, due to the uncertain outlook for the property development and tourism industries.

Yong Tai, whose business is mainly in tourism and property development, had planned to invest in new business ventures, including the distribution of Covid-19 vaccines and gold mining. However, both plans have been shelved.

Yong Tai’s share price had gained almost 12% year to date to close at 34 sen last Friday, giving the company a market capitalisation of RM142.3 million.

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