This article first appeared in The Edge Malaysia Weekly on May 12, 2025 - May 18, 2025

HAVING assumed the listing status of Pan Malaysia Holdings Bhd last year, Exsim Hospitality Bhd (KL:EXSIMHB) (EHB) is looking to build a sizeable asset portfolio, with the goal of ultimately setting up a real estate investment trust (REIT).

“When it comes to asset acquisitions, we do have an exit plan in mind down the road, which potentially includes a REIT for several advantages such as the tax-free nature of its distributed income, a more efficient use of capital and the deleveraging of balance sheets when the assets are transferred to the REIT,” EHB executive director Paramjit Singh Gill tells The Edge in an interview.

The asset referred to is the RM240.25 million purchase of a 294-room hotel in Empire City, Petaling Jaya, Selangor — whose acquisition was a related-party transaction announced early this year. EHB had entered into a conditional sale and purchase agreement with Arcadia Hospitality Sdn Bhd, which is partially owned by brothers Lim Aik Hoe and Lim Aik Kiat, major shareholders of EHB. Another shareholder of Arcadia Hospitality is Datuk Jackson Tan Kak Seng, managing director of construction outfit Binastra Corp Bhd (KL:BNASTRA).

The purchase of the five-star hotel will be funded partly by EHB’s proposed rights issue with warrants that seeks to raise up to RM250.79 million. EHB has procured irrevocable and unconditional undertaking letters from its major shareholders — including Exsim Hospitality Holdings Sdn Bhd with a 70.52% stake — to subscribe in full for their respective entitlements to the warrant-sweetened rights issue, as well as to take up rights shares not subscribed by minority shareholders.

Stressing that the deal is being done at arm’s length, Paramjit says, “The completion risk will not be undertaken by any shareholder of EHB … The payment terms have been staggered, where [the] bulk of it will be released upon completion.”

On plans to acquire more hospitality assets, he says the immediate targets are a serviced residence building in Ipoh, Perak, which is being developed by Exsim Development Sdn Bhd, as well as another hotel in Empire City, owned by Mammoth Empire Group.

In January, Exsim Development entered into a joint-venture agreement with Liew Yin Yin Land Sdn Bhd for the development of a 1.291-acre land in Ipoh. It will feature a hospitality building comprising 420 serviced apartments and four retail units.

“It is in a prime location right beside Weil Hotel, [which is next to Ipoh Parade]. Eventually, that will be one of the assets we will acquire … Ipoh has a shortage of good-quality hotel assets. Other good locations are Kota Kinabalu and certain parts of Johor,” says EHB managing director Justin Tan Hai Liang.

He does not rule out the possibility of EHB’s acquisition of another hotel in Empire City, but it has to be at the right price. “We also want to look at the gestation period, including how the new mall there [Hextar World in Empire City] will perform. Whatever assets we look to acquire have to be operable.”

Last December, Binasat Communications Bhd (KL:BINACOM) — in which businessman Datuk Eddie Ong Choo Meng has a 22.53% stake via Hextar Capital Bhd (KL:HEXCAP) — proposed to acquire a 241-room hotel in Empire City for RM73.54 million. In March this year, Ong, who is also CEO of Hextar Group Bhd, announced that Hextar World — spanning 1.8 million sq ft of net lettable area — was slated to open in the last quarter of the year.

At EHB, tycoon Tan Sri Khoo Kay Peng sold his 65.9% controlling stake in Pan Malaysia to brothers Aik Hoe, Aik Fu and Aik Kiat for RM36.73 million, or six sen a share, last year. The siblings are founders of Exsim Development, a boutique property player involved in the development of high-rise buildings.

Prior to the deal, Pan Malaysia had already sold its financial services assets and was left with its hospitality asset Corus Paradise Resort in Port Dickson, Negeri Sembilan.

Corus Paradise Resort, which commenced operations three decades ago, has been closed for a major refurbishment since mid-January this year and is expected to reopen by early next year. Some RM113.6 million from EHB’s rights issue exercise has been earmarked for the hotel refurbishment, which is estimated to cost RM120.7 million.

“We are currently in negotiations with the international brands for franchise arrangements for the hotel. The conversion has to comply with certain requirements. We do need to leverage their brand, concept, strategy and loyalty programmes, where we will be able to unlock stronger long-term returns for the assets. That said, we are also open to operating the hotel under our own brand in the future — provided it meets international standards. To be frank, there is a lack of international operators in Port Dickson today,” says Tan.

Since taking over Pan Malaysia, EHB has diversified into the interior design and fit-out business, and has so far secured RM270 million worth of jobs.

“At the end of the day, it is a game of volume and economies of scale. The beautiful thing about the fit-out work is that it is short term in nature. We can complete a job within nine to 12 months; so, the revenue and profit recognition can be fast, depending on the complexity of the work,” Paramjit explains.

Asked if the business segment is too reliant on jobs from Exsim Development, he replies, “Right now, we’re focused on delivering our internal projects, which are keeping us at full capacity. That said, we are already seeing external job flow picking up. Over time, we’re targeting a balanced mix, with about 40% of our fit-out contracts coming from external clients.” 

Paramjit reiterates that Exsim Group’s property development business will not be injected into EHB, whose core businesses continue to be hotels, a hospitality business operator and providing interior design and fit-out services.

For the hospitality business, Tan observes that besides managing its own properties, there has been an increase in interest from third-party owners — referring to projects neither owned nor developed by Exsim Development — for EHB’s property management services.

“We believe this segment has a great potential, hence we have built a specific core team to cater for the needs of our guests, whereby it will be more similar to hotel management services, as opposed to an Airbnb operation. We are constantly negotiating with asset owners for new opportunities.

“We have seen a fair bit of changes in the market, and we are blending short-term and long-term rentals. This will give us a higher occupancy rate and more certainty over a longer period of time,” he says.

According to Tan, this segment will help strengthen the group’s fee income base without requiring any capital expenditure outlay.

EHB has expanded its portfolio of managed properties to 496 units in the Klang Valley, Penang, Ipoh, Kuantan and Terengganu. Tan believes the number of properties managed by the group will grow significantly in view of the robust delivery of property projects over the next few years.

He says annual rental returns are 5% to 6%, in line with market rates.

For the first half ended Dec 31, 2024 (1HFY2025), EHB reported a net profit of RM1.95 million against a net loss of RM1.58 million in the previous corresponding period, thanks to the hospitality as well as interior design and fit-out business segments. Revenue jumped to RM21.71 million from RM3.02 million previously.

“With a lot of changes in our business model underway, we expect FY2025 to deliver favourable results, and the loss-­making days of Pan Malaysia to be history,” says Tan, adding that the group had an order book of RM230.3 million as at February this year.

During the period in review, the interior design and fit-out segment generated RM1.4 million in revenue for the group from more than 100 fully serviced units. Under the managed property portfolio, 437 contracts were secured in 6MFY2025 from various locations, including Terengganu, Pahang and Penang.

Given the ongoing expansion plans, Tan says EHB will consider paying dividends only from 2027.

As at end-December 2024, the group had RM3.89 million cash and bank balances as well as total borrowings of RM16.19 million, implying a net debt position of RM12.3 million.

EHB’s shares have gained just 1.45%, or half a sen, year to date, closing at 35 sen on May 7 for a market value of RM325.1 million. About a year ago, on May 23, 2024, the stock closed at 43 sen for a market capitalisation of RM399.4 million. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.