MCL posts 2008 loss of US$107.3m
http://www.businesstimes.com.sg/sub/...46340,00.html?
Published February 21, 2009
MCL posts 2008 loss of US$107.3m
Group hit by US$180.2m writedown of development properties for sale
By EMILYN YAP
HIT by property writedowns, real estate developer MCL Land swung into the red for the financial year ended Dec 31, 2008. The firm yesterday posted a net loss of US$107.3 million, in contrast to a net profit of US$61.9 million a year earlier.
Loss per share came to 29 US cents, against earnings per share of 16.73 US cents previously.
While MCL Land recognised development profits from The Grange, Mera Springs and The Esta projects for the year, a US$180.2 million writedown of development properties for sale eroded those takings.
'Property prices have fallen significantly and the outlook for the residential property market in Singapore has become increasingly uncertain,' the developer said. This led the company to revise the carrying value of these properties downwards.
MCL said the US$107.3 million loss attributable to shareholders included a US$0.9 million fair value adjustment to the group's investment properties.
For FY08, group revenue fell 12 per cent year-on-year to US$343.1 million. MCL Land's board is recommending a first and final dividend of 10 Singapore cents per share payable on May 26, 2009.
'Confidence in the residential property markets in Singapore and Malaysia is extremely weak as a consequence of the current economic downturn with few buyers willing to commit to property purchases,' said MCL Land chairman Y K Pang. '2009 is expected to be a challenging year.'
But he expects the completion of three developments here this year - The Fernhill, Tierra Vue and Hillcrest Villa - to provide some lift to the group's results for the year. 'With strong cash flow generated from the sale of development properties and a healthy balance sheet, the group is well-placed to weather the difficult economic and market conditions.'
MCL Land also has the Waterfall Gardens and D'Pavilion scheduled for completion in 2010 and The Peak@Balmeg in 2011. The company has another seven projects at various stages of planning approval and it plans to launch them progressively in the next few years.
Shares of MCL Land fell half a cent yesterday to close at 66 cents.
After writedowns, MCL will have freer hand
http://www.businesstimes.com.sg/sub/...20513,00.html?
Published February 24, 2009
COMMENTARY
After writedowns, MCL will have freer hand
By KALPANA RASHIWALA
WHEN MCL Land, a subsidiary of Hongkong Land, released its full-year 2008 results on Friday, it was the first Singapore-listed developer to book provisions for its residential land bank this market downcycle.
The developer said it wrote down the value of development properties for sale by US$180.2 million, and this pushed MCL into the red, with a US$107.3 million net loss, in contrast to a net profit of US$61.9 million a year earlier.
In doing so, the group has faced up to the market reality - property prices have begun to slide, and are expected to fall further. By writing down the values of some of its sites, the group now has flexibility to launch new projects on them at an opportune time in future, generate cash flow and begin a new cycle of profit-booking - something other developers who have so far resisted writing down values of their residential sites may not be able to look forward to.
Part of the reason for MCL Land's swift decision to make the provisions may have to do with its parentage in the Jardine group, which is known to be conservative.
In its results statement, MCL Land said that 'International Financial Reporting Standards require development properties for sale to be carried at the lower of cost or estimated net realisable value. With the advice of professional valuers, the board has reviewed the carrying value of development properties for sale in Singapore that have yet to be launched or sold and has decided to write down the carrying value by US$180.2 million'.
MCL did not state this, but given the profile of the group's land bank, the writedowns are likely to have been entirely for its Singapore residential land bank.
The company did not identify specifically which sites it wrote down or how much it wrote them down to.
A good guess may be that the sites bought in the past couple of years were targeted for the writedowns. These would include a 99-year-leasehold plot in Yishun fronting Lower Seletar Reservoir that MCL Land bought in March 2008 for $350 per square foot per plot ratio (psf ppr), the freehold Nim Park in Seletar Hills area purchased for about $440 psf ppr, Dynasty Garden Court 1 in Sixth Avenue purchased for $830 psf ppr, Nob Hill Condominium and adjoining sites in the Ewe Boon Road area costing $1,100 psf ppr and Casa Nassau in Upper East Coast Road picked up at about $580 psf ppr.
In writing down the values of these sites, in all probability MCL looked not just at sale prices that could be achieved for new projects on these plots if they were to be launched today, but also took into account potential price declines over, say, the next year or two.
Despite the writedowns, MCL Land's net gearing dipped marginally to 46 per cent as at end-2008 from 47 per cent as at end-2007. Going by normal banking practice, MCL is expected to have to top up equity for bank loans relating to some of these sites to avoid breaching loan covenants.
Cash and cash equivalents
The group had US$131.8 million in cash and cash equivalents as at end-2008. It should generate significant cash flow during the current financial year from completing three projects - The Fernhill, Tierra Vue and Hillcrest Villa - notwithstanding the possibility that some buyers who bought on the deferred payment scheme (DPS) may plead for more time to pay up when DPS expires.
This additional cash flow should provide the group some buffer for topping up equity on bank loans arising from the provisions.
On the stock market yesterday, MCL ended seven cents higher at 73 cents.
By announcing the provisions and chalking up a loss for the year ended 2008, MCL probably won't dent sentiment towards the counter. After all, we are in a recession and most people expect companies in general to post lower earnings or even losses. What the writedowns have done for MCL is to clear the deck so the group may look forward to a new round of action.
