H.I.S. considering asset sales due to business downturn – sources

15 July 2020 - 09:42 am UTC


H.I.S., the Tokyo-headquartered travel and tour agency, is considering asset sales to regain financial health following the downturn of its core travel business due to the novel coronavirus pandemic, sources familiar with the matter said.

 

The company, which has a market capitalization of about JPY 111.69bn (USD 1bn), may be mulling the potential sale of Nagasaki-based theme park subsidiary Huis Ten Bosch, the sources noted. Others include Kyushu-based transportation and accommodation business Kyushu Sangyo Kotsu Holdings, among others, one of them added.

 

An H.I.S. IR spokesperson said that while it is not considering any asset sales immediately, it may be an option if its business performance does not improve after a certain period – possibly in the next two years. It is currently implementing measures so that H.I.S. can remain operational for another two years. H.I.S. is basing its recovery on hopes that sales from its overseas travel business will recover to 2019-end levels by the end of 2021, she noted. 

 

That said, H.I.S. is receptive to approaches from interested buyers for any of its assets now regardless of the timeline, the spokesperson said. This can include Huis Ten Bosch, she noted, as long as the offer is high enough. It could also consider selling hotel assets, she said, pointing out that they sold Watermark Hotels in Sapporo, Gold Coast, and Brisbane, as they received an excellent offer from the buyer a few years ago.  

 

H.I.S. is seeking to secure cash by: 1) cutting operational costs by JPY 20bn; 2) reviewing facility investments to save JPY 9bn; and 3) draw on its JPY 33bn commitment line from banks, according to an earlier disclosure.

 

In February 2019, H.I.S. announced it was making preparations to list Huis Ten Bosch as well as HTB Technical Center, the property management, infrastructure, energy and building services company for the Huis Ten Bosch park, on the Tokyo Stock Exchange.

 

Earlier that month in February 2019, H.I.S. had announced that Huis Ten Bosch was no longer considering an investment from a Chinese investor. A previous report had noted that Fosun Group [HKG:0656] made an offer for a 25% stake in the theme park. 

 

In 2019, it was announced that the regional Nagasaki prefectural government would designate part of the Huis Ten Bosch theme park as a candidate site for a casino resort and that it has reserved part of the land to buy for redevelopment if Nagasaki prefecture succeeds in the integrated resort bid, according to a draft proposal disclosed by Nagasaki prefecture.

 

The majority of Huis Ten Bosh shares are held by H.I.S (66.6%) and the remaining shares are held by Japanese companies including Kyushu Electric Power [TYO:9508] (13.3%); Saibu Gas [TYO:9536] (10%); and Kyudenko [TYO:1959] (5%), according to a credit report from Tokyo Shoko Research.  

 

H.I.S. operates various businesses, including H.I.S. Hotel Holdings (Henn na Hotel; Guam Reef Hotel; Green World Hotel); communication equipment and services provider H.I.S. Mobile; direct sales support service for accommodation SYS; and renewable energy supplier H.I.S. SUPER Power, among others.

 

H.I.S. booked a gain of JPY 4.23bn in the year ended October 2018 from the sale of the Watermark Hotel Sapporo and the Watermark Hotel Australia properties, according to the company's financial statement.  

 

For the six-month period from November 2019 to the end of April 2020, H.I.S. posted overall sales of JPY 344.3bn, down 8.9% from the same period in a year ago. It also posted operating losses of JPY 1.4bn compared with operating income of JPY 8.9bn a year ago, according to the company's financial statement released June 2020. 

 

The company noted, citing statistics from the Japan Tourism Board, that during this period the number of Japanese travelers departing from Japan declined by 36% year-over-year to 6.32m and the number of foreign visitors to Japan declined by 44.5% to 8.91m due to the impact of COVID-19.