Advance Synergy Bhd (ASB) says its indirect Indonesian subsidiary, PT Diwangkara Holiday Villa Bali (DHVB), has entered into a settlement agreement with two parties it is suing with regards to a hotel in Bali, Indonesia.
DHVB was given the right by PT Diwangkara Jaya Makmur to operate and manage Diwangkara Holiday Villa Beach Resort in Bali until 1 May 2025.
However, PT Makmur took over the property, office building and management of the hotel before the expiry of the lease.
In a filing with Bursa Malaysia, ASB said the court held that the action by PT Makmur in taking over the property, office building and management of the hotel before the expiry of the lease was unlawful and ordered the company to return the operations of the hotel to DHVB and to pay the latter material and immaterial losses.
ASB said that DHVB was offered a six billion rupiah (RM1.66 million) cash settlement by PT Diwangkara and CV Telabah Nasional Trading Company, whose shareholders are the hotel owners.
It is understood, ASB has decided it will no longer operate Diwangkara Holiday Villa Beach Resort following the settlement.
"It is all water under the bridge for ASB. The group will focus on developing the market and the branding of its existing hotel, Wina Holiday Villa Kuta Bali, set on the Kuta beachfront area, among the other hotels and resorts it operates worldwide," a source told NST Property.
The settlement is expected to result in a gain of about RM520,000 to the group.
For the financial year ended 31 December 2019 (FY2019), ASB posted a higher gross profit of RM86.3 million compared to RM83.9 million in FY2018.
However, revenue was lower at RM275.5 million compared to RM283.6 million which it posted for FY2018.
In a filing with Bursa Malaysia, ASB said its hotels & resorts division registered higher revenue of RM55.8 million for FY2019 compared to RM54.3 million for FY2018. Its hotels in Cherating (Kuantan) and London achieved higher revenue while there was a better contribution from the newly opened Holiday Villa Hotel & Residence Shanghai Jiading, China.
With the higher revenue in FY2019 and higher operating income, the division recorded a pre-tax profit of RM5.8 million for FY2019 compared to RM3.4 million for FY2018.
The group's property development division also recorded a higher revenue of RM700,000 in FY2019 contributed by the Taman Sri Matang project in Kuching, Sarawak, which was launched in November 2018. Revenue for FY2018 was RM38,000.
ASB said because of higher revenue, the property division posted a lower loss for the current year under review of RM900,000 compared to a loss of RM2.2 million in the previous year.
Moving forward, the board expects the global economy to be uncertain for FY2020 given the outbreak of the Coronavirus (Covid-19) which may affect the global growth and the group's major divisions - hotels & resorts and Travel and Tours.
The hotels & resorts division expects the first half of 2020 financial results to be adversely impacted.
ASB said the business outlook for 2020 will be challenging as coupled with the Covid-19 outbreak, it is expected that the local meetings, incentives, conferences and exhibitions (MICE) market will be weak for 2020 and the political blockade in Qatar will continue to hurt the group's hotel performance in Doha, Qatar.
It said, despite the current market challenges, the hotels & resorts division will be increasing its sales and marketing budget by opening new sales offices in the ASEAN region, Japan and China, as it has a portfolio of rooms spread over several countries to take care of.
To take advantage of the expected low period in 2020 pending the recovery from the Covid-19 outbreak, the division will also focus on upgrading the facilities of its hotels in Cherating and Langkawi, it said.
"The introduction of the LaVilla Boutique Hotel concept is expected to have positive impact on the division’s operational results in 2020 although the results may be deferred due to the delay in the opening of new hotels under this concept," it said.
ASB said the division will approach the second half of 2020 with caution due to the uncertainty in the materialisation of forward bookings in the MICE market segment, more so if the Covid-19 outbreak is prolonged.
It will also place greater emphasis and be more aggressive and creative in marketing its packages to the respective local market of each country coupled with the anticipated increased sales from direct online bookings.
"In line with the division’s business plan, it will continue to target all major market segments and at the same time to focus on developing business from Asia region, working with tour operators, local corporate business and securing more residential meetings with an emphasis on local tourism," it said.
ASB said the property development division is expected to face continued challenges in 2020 due to the softening of the property market in Kuching and the delay in the launching of Phase 2 of the Federal Park project.
However, ASB remains optimistic about its prospects once this project and the project at Jalan Sejijak, Kuching are launched.