Thursday 26 November 2020

Eagle Hospitality Trust- Updates On Projected Salvageable Hotel Properties Value from Fire-sales (End 2020)

This is an update on the valuation of Eagle Hospitality Trust ("EHT") in the event of forced liquidation and also an estimation of the fair market value once it is removed from suspension.

Based on the Q3 financial results released, I have updated the various numbers on the statement of financial position.

Elaboration on Financial Projection
1. I have revised the valuation of the investment properties to S$734Mil from the original S$1.27Bil. This is a significant drop in fair valuation of S$533Mil amidst COVID-19.

2. Assuming no more hidden liabilities, then immediate liquidation if a buyer can be found will be around US$0.119 per unit. 

3. If the business can continue running and valuation recovers as denoted in the various columns on the right side, investors will be able to recover more money. Hence it is important for the new white knight to be appointed as REIT Manager to continue the business. The recent successfully tested COVID vaccines should lead to a gradual recover in the US hospitality industry.

MAS instruction to DBS Trustee to terminate REIT Manager and to appoint new one
EHT REIT Manager has responded to MAS on 13 November 2020. Since then, there have been no update on whether MAS decided to accept and retain the current REIT Manager or to carry on with the appointment of a new one that will be unveiled soon. Personally, if the current REIT Manager is retained, this means EHT will still be under the control of Howard Wu and Taylor Woods. I will rather EHT liquidate and end their current business under such scenario.  However, if the REIT Manager did indeed change to a new one, then it maybe worthwhile to carry on holding on to the units of EHT.
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  1. Hi, Any further comment on news that the reit manager will be changed?

    1. Hi GlobalPassiveIncome, an honour to have you dropping by. The recent announcement of SC Global coming into the picture as White Knight is good news. SC currently controls the managers of two listed real estate investment trusts in the region, Japan Hotel REIT Investment Corporation and Thailand Prime Property Freehold and Leasehold REIT. It is very strong financially and has the networking and experience to restructure EHT.

      The bad news now is how much will be the placement units issued to SC Global for them to re-capitalise EHT and at what price. Current unit holders will suffer from massive dilution in their original holdings if the new unit issuance is based on recent valuation report of the hotels. But no choice, given that SC Global need to have a significant stakes in order to water down the current units controlled by Howard Wu and Taylor Woods.