Hospitality player, Magma Group Bhd has been on an impressive run since the emergence of a new substantial shareholder in August.

The counter rose some 350% in the past 6 months, touching a 52-week high of 29 sen in recent weeks versus a year low of 4 sen.

Magma, formerly known as Impiana Hotels Bhd, has been languishing for a long time but saw an injection of life when Datuk Seri Lee Hock Seng and his spouse emerge as the its largest shareholders following their acquisition of a 19.9% stake in the company. The duo raised their stakes to 22.6% in October.

Lee is seen as a white knight for the loss-making Impiana Hotels Bhd as he struck a deal with Tan Choon Wee, via Advance Opportunities Fund (AOF), which in turn ceased to be a substantial shareholder.

Lee is the group chairman of HYM Group, which owns and operates WOLO Kuala Lumpur and Gold3 Boutique Hotel on Jalan Bukit Bintang in Kuala Lumpur. Surely Lee’s hospitality presence is not significant and it makes ssnse to enter into Impiana for its presence as well as listing status.

Impiana Hotel’s revenue was derived from the hospitality and property development businesses. It is managing hotels under its brand, including Impiana KLCC Hotel, Impiana Hotel Ipoh and Impiana Hotel Senai in Johor.

In terms of overseas presence, there are 3 Impiana Hotels each in Thailand and Indonesia but it does not own the hotel properties in these countries. Being in the hospitality business is not easy as it requires huge capex to maintain and upgrade.

Prior to Lee’s entry, Impiana raised some RM150 million from redeemable convertible notes (RCN) programme mainly to renovate its hotels in KL and Perak. It was reported that the upgrades for Impiana Hotel KLCC and Impiana Hotel Ipoh are expected to cost around RM10 million-RM12 million.

It does not need to bear any refurbishment and upgrading expenses for its overseas hotels as these are not owned by the listed company. But it will be challenging to put in money to renovate its hotels, which have been a drag on the company.

In the third quarter period ended September 30, 2023 (3QFY23), it managed to trim its net loss to RM2.75 million from RM3.47 million a year ago due to better occupancy rate as the hospitality industry continue its recovery from the pandemic

However, its revenue fell to RM4.54 million in 3QFY23 from RM5.61 million a year ago. The company received some reprieve when Public Bank Bhd has withdrawn its lawsuit against Magma and its executive chairman Datuk Seri Ismail Farouk Abdullah.

This was a relief for Magma as it leaves behind the challenges in the legal arena and focus on growing its business. Public Bank in June last year filed a civil suit against Magma’s wholly owned unit Astaka Mekar Sdn Bhd, as well as Data Sepadu Sdn Bhd, Impiana Sdn Bhd and Ismail Farouk.

Ismail Farouk, a major shareholder of Data Sepadu and Impiana, owns an 11.6% stake in Magma. It remains to be seen if the new shareholder can in fact turn around the hospitality business although the sentiments could be quite positive given the recovery in tourism numbers, which will benefit the hotel industry.