EXSIMHB: Hospitality Group Sees Strong Growth Prospects, Receives ‘Buy’ Rating

A prominent player in Malaysia’s hospitality and interior design segments has garnered a “Buy” recommendation from TA Securities, with an initial target price of RM0.54 per share. The investment bank’s optimistic outlook stems from the company’s strategic transformation, robust growth pipeline, and innovative business model following a significant acquisition.

Strategic Transformation Drives Performance

The group, an investment holding company with operations spanning own-and-operate hospitality, hospitality management, and interior design and fit-out works, underwent a pivotal strategic shift in 2024. This involved an acquisition that diversified its business into property management, hospitality operations, and a high-margin interior fit-out construction segment. This move aligns the company as a strategic proxy to a major property developer, providing a visible pipeline of projects and synergistic execution advantages.

The interior fit-out division has rapidly emerged as a key profit driver, characterized by short project cycles (typically 9-12 months) that allow for fast revenue recognition. As of end-June 2025, the company boasted a robust outstanding orderbook of RM204 million, with new job wins year-to-date reaching RM344.9 million. This segment’s immediate contributions have been instrumental in reversing the group’s financial performance from a net loss to profitability, with quarterly core profits steadily improving.

Ambitious Growth Trajectory

TA Securities projects strong core earnings growth of 49.9%, 38.4%, and 38.0% for the financial years 2026, 2027, and 2028, respectively. This anticipated growth is underpinned by key assumptions including new orderbook replenishment of RM250 million to RM300 million annually and the gradual materialization of 3,560 units of hospitality inventory over the next five years.

The company’s growth strategy is multifaceted, leveraging its position as a dedicated hospitality and interior fit-out arm for a major development group. This offers access to an estimated RM30 billion gross development value pipeline over the next decade, with management targeting an aggressive expansion to 10,000 hospitality keys within five years and an annual intake of RM300 million in new fit-out jobs.

Its hybrid hospitality strategy combines asset ownership with an asset-light management model. Flagship initiatives include the comprehensive RM120.7 million refurbishment of Corus Paradise Hotel, slated for reopening in the second half of 2026, and the acquisition of Tower E hotel for RM240.3 million, expected to complete by end-2026. These assets, along with the “Mana Mana” asset-light short-term rental brand (managing 1,002 keys as of end-June 2025), are poised to significantly boost recurring income from FY27 onwards.

Future Value Creation and ESG

A significant long-term strategic move involves the intention to spin off the hospitality portfolio into a Real Estate Investment Trust (REIT). This initiative is expected to unlock embedded asset value, create a steady dividend stream, enhance transparency, and provide a scalable structure for continuous portfolio growth, potentially positioning the group as a leading hospitality-focused listed vehicle in Malaysia. The buoyant Malaysian tourism sector, which saw 16.9 million international tourist arrivals in the first five months of the year, is expected to further support the group’s hospitality segment.

The group currently holds an ESG rating of 3-stars from TA Securities, reflecting adequate integration of environmental, social, and governance factors. This includes initiatives like green building designs for its properties, an “Employee First” approach to worker welfare, and a commitment to strong board independence.

Financial Nuances and Valuation

While the group recorded a net gearing ratio of 1.3x as of end-June 2025, largely due to a low equity base, a proposed RM250.8 million rights issue with free warrants is expected to significantly de-gear the balance sheet to 0.6x once completed. TA Securities notes that if this rights issue is factored into their forecast, the estimated FY26 EPS would be diluted, leading to an adjusted target price of RM0.31 per share from the initial RM0.54. However, the investment bank believes the group presents an attractive investment proposition, citing its healthy net margins, robust and resilient order book growth, and strong earnings momentum.