S.A.I. Leisure, whose name stands for sea, air, and island, will make its debut on May 16 on the main board, aiming to raise up to HK$403 million.
Founded in April 1997 by its chairman Tan Siu-lin, (above, right) and his eldest son Henry Tan, the chief executive, the company has since grown from a single hotel property in Saipan to a diverse business in Saipan, Guam and Hawaii.
Tan Siu-lin is also the founder of local apparel manufacturer Luen Thai (0311), the supplier to renowned brands such as Adidas, Coach, Dillard's, Esprit and Uniqlo.
The flotation has attracted Sunrise Height as a cornerstone investor, owned by chairman of Sa Sa International (0178), Simon Kwok Siu-ming, and his wife Eleanor Kwok Law Kwai-chun.
S.A.I. Leisure's major business is in the tropical islands of Saipan and Guam. On average, 61.1 percent of revenue comes from Saipan and 36.8 percent from Guam.
The group held a 33.7 percent market share in terms of revenue in 2017 in Saipan's leisure tourism industry and was the largest player in Saipan's hotels and resorts industry in 2017 by revenue, number of properties and number of rooms sold, according to Frost & Sullivan.
S.A.I. Leisure's revenue increased by 10.08 percent from 2016 to US$89.43 million (HK$697.55 million) in 2017, and further grew by 12.02 percent year-on-year to US$100.18 million in 2018. About 66.5 percent of 2018 revenue was from hotels and resorts, including Fiesta Resort Saipan (32.5 percent), Kanoa Resort in Saipan (13.5 percent), Century Hotel in Saipan (1.1 percent) and Fiesta Resort Guam (19.4 percent).
The luxury travel retail sector generated 28.9 percent of total revenue in 2018, compared with 17.1 percent in 2016 and 19.6 percent in 2017. The remaining 5.4 percent of total revenue in 2018 was from the destination services sector.
Profit for 2016 was US$12.47 million, rising by 5.32 percent to US$13.13 million in 2017. Profit for 2018 fell by 10.38 percent year-on-year to US$11.77 million, due to the one-off non-recurring fees for consolidated financial statements, and gradual expansion of luxury travel retail sector with six new boutiques, which improved revenue, but margin was lower.
S.A.I. Leisure says that the current land lease of the Fiesta Resort Saipan is due to expire on June 30, 2021, and that for Kanoa Resort will end on June 30, 2024. The company is cautiously optimistic that the land leases will be renewed at a similar rental.
The company warns that the financial results for 2019 will be negatively impacted by a one-off non-recurring expense of around US$3.6 million in relation to the write-off of the existing leasehold improvements at Fiesta Resort Guam as a result of a plan to refurbish assets.
There will also be fees for consolidated financial statements, and capital expenditure of US$1.7 million for two new travel retail boutiques this year.
Meanwhile, Saipan and Guam are also prone to typhoons. On October 29, 2018, super typhoon Yutu tore through Saipan and caused the temporary closure of the Saipan International Airport and suspension of inbound commercial flights for around 15 days, resulting in a decline of occupancy at Kanoa Resort and Century Hotel.
The company intends to invest 75 percent of the funds from the flotation in its US$56.7 million asset rejuvenation plan, in a bid to upgrade its hotels from middle-end market to high-end market, and add 140 rooms.
Jennifer Su Tan Sze-tink, executive director, said that the revenue per available night of its hotels is about US$140, and it could rise to US$180 following the upgrade. She forecasts a payback period of six to eight years.
She says there is huge demand from Chinese customers, and expects occupancy rate to remain above 70 percent during the rejuvenation.
A part of the net proceeds raised will be used to launch new travel retail boutiques.
Some of the capital will be used for IT system upgrade, and improving digital sales and marketing to strengthen online presence.
The remaining funds will be used as general working capital.