Far East Orchard, on March 4, announced that it has entered into a joint venture agreement (JVA) with Real Hospitality Group Asia Co in relation to a hospitality management business in China.
The JVA was entered into by the group’s subsidiary, Far East Hospitality Management Asia (FEHMA).
Under the JVA, FEHMA and Real Hospitality Group will set up a joint venture company (JVCo) in Hong Kong with a joint committed capital of RMB3 million ($645,000). The JVCo will then establish a wholly-owned subsidiary in China.
According to the agreement, FEHMA will hold a 40% stake in the JVCo, while Real Hospitality Group will hold the remaining 60%.
According to the JVA, FEHMA will grant a licence of selected hotel brands to the subsidiary of the JVCo, where it will operate and manage hotels under the licensed brands in China.
Real Hospitality Group, which was founded in 2010 in the US, will support the newly established company with personnel in various functions under a shared services agreement.
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According to Far East Orchard, the JVA will provide access to the tourism industry in China, which has one of the largest domestic markets in the world before Covid-19. The Chinese travel market is also starting to show signs of recovery amidst the pandemic, adds the company in its statement on March 4.
“The board is of the view that this is a good time to enter the Chinese market and grow the group’s global presence,” says Far East Orchard in its statement.
“The group has been looking for an opportunity to grow its brand presence globally, and Real Hospitality Group’s vast experience in managing third-party branded hotels allows the group to enter the Chinese market with an experienced joint venture partner. As a result of the JVA, the group will also be able to leverage on Real Hospitality Group Asia Co’s existing setup in China,” it adds.
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The JVA is not expected to have any material impact on Far East Orchard’s consolidated net earnings per share (EPS) and consolidated net tangible assets (NTA) per share of the group for the current financial year ending Dec 31.
Shares in Far East Orchard closed 1 cent lower or 0.9% down at $1.10 on March 4.
Photo: Far East Orchard
