Sea Pearl Beach Resort and Spa Limited, a five-star hotel in Cox's Bazar, is facing an uncertain future due to its high debt-to-equity ratio, which measures the degree to which the company finances its operations through debt versus wholly-owned funds.
The uncertainties regarding the company's future have also resulted from its failure to pay the instalment of bond and decrease in capacity utilisation, said the independent auditor "Kazi Zahir Khan & Co" in the company's audit report for FY21.
In its qualified opinion, the auditor said Sea Pearl's total debt stood at Tk462.57 crore including bank loans and bonds, which represents 78.72% of its equity and liabilities. Moreover, it has failed to pay the regular instalment of bonds since April 2020.
Besides, the company's capacity utilisation is poor and it decreased by 9.21% compared to the previous year. The total utilisation of the company's attainable capacity is only 44.28% in the last fiscal year, which was 53.49% in the previous year. All these factors indicate uncertainty to be an ongoing concern, said the auditor.
Sea Pearl Beach Resort Managing Director Aminul Hoque could not be reached over the phone for comments regarding the matter.
Replying to the auditor's opinion in the report, the company said its capacity utilisation shortfall resulted from the lockdown over the Covid-19 and the increase in the company's attainable capacity. But the company did not make any comments on the other indicators.
Despite the auditor's concern over the company's future, in FY21 its revenue jumped 40% to Tk64.39 crore, which was the highest since its inception. Its net profit was Tk7.36 crore.
Meanwhile, the company has announced the start of a new business of cruise ship tour package on the Khulna-Sundarban-Khulna route. For this purpose, they will buy two cruise ships with an estimated cost of Tk8.50 crore.
The company carried out its business through a franchise agreement, signed on 1 June 2014, with Netherlands-based five-star hotel and resort operator GT Investments BV. They are running the hotel and resort business under the "Royal Tulip" brand. It started its commercial operation in September 2015.
The company started constructing the hotel in Cox's Bazar with a bank loan. Later, they issued a bond worth Tk325 crore with an interest rate of 10% for repaying the bank loan. They issued the bond for eight years including a two-year moratorium period.
The bond's yearly instalment payment started in 2017. The Investment Corporation of Bangladesh was the sole investor in the bond.
Besides, the company raised Tk15 crore through an initial public offering in 2019 for business expansion.
They paid only 5% stock dividend to their shareholders in the first year of its stock exchanges journey. In the next year, they paid 1% cash due to a business slump for Covid-19. For the last fiscal they recommended the same dividend for the shareholders.
At present, it is traded under the "B" category at the stock exchanges. Its share price closed at Tk45.20 at the Dhaka Stock Exchange on Sunday.