Fragrance Group

Kim Eng on 8 Mar 2012


Fragrance Group recently provided more updates on the proposed spin-off and listing of its hotel business. Under the restructuring exercise, the group’s hotel assets will be held by its new investment holding company, Global Premium Hotels. According to an independent valuation on 22 November 2011, the net tangible assets spun off would amount to $635.2m. Fragrance stands to receive a total consideration of $558.0m, after netting off a discount of $67.2m and a dividend of $10.0m. We understand that the net proceeds of about $420.5m will be mainly used to repay debts and expand its property business. In addition, a special dividend may be paid out to shareholders, after taking into account the group’s overall cash position and future growth strategies.

We expect the proposed listing of Global Premium Hotels to help unlock value for shareholders and increase Fragrance Group’s overall financial capacity and flexibility to strengthen the growth of its property business. Moreover, by creating a separate listed entity, the hotel business will have additional financial capacity and direct access to capital markets. In our view, the new listing may kindle interest in other smaller hotel plays listed here.