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Published November 12, 2010

Ho Bee's Q3 profit falls 60.9% to $38.8m

Revenue slides 52.7% to $98.9m; earnings per share down to 5.3 cents

By KALPANA RASHIWALA


HO Bee Investment has posted a 60.9 per cent year-on-year drop in group net profit to $38.8 million for the third quarter ended Sept 30, on the back of a 52.7 per cent fall in revenue to $98.9 million.

For the first nine months of this year, net profit eased 34.4 per cent to $192.7 million while revenue slid 59.7 per cent to $426.9 million.

The lower top and bottom lines for both periods are against a backdrop of much higher revenue recognition on Singapore residential development properties in the respective year-ago periods.

The group has been making opportunistic divestments of smallish investment properties in Singapore in recent months.

Instead, it is eyeing a bigger pool of recurring income from a sizeable office project that it will develop in Buona Vista at a total cost of about $1 billion. The cost includes the $411 million or $342 per square foot (psf) per plot ratio paid for the 99-year-leasehold site at a state tender in July.

The site is next to the existing Buona Vista MRT Station on the East West Line and sits above part of the new Circle Line Station that will open next year. The development will have two office towers - a 23-storey block with floor plates averaging about 28,000 square feet and a 21-storey tower with about 25,000 sq ft floor plates on average.

The total net lettable area of the development will be about one million sq ft - all offices except for about 20,000 sq ft of retail space on the ground floor. Work is slated to begin in Q1 2011 and complete by end-2013.

Among other things, the group has sold four office floors at Samsung Hub on Church Street for $111.42 million or $2,125 psf and TG Building, a warehouse on Tagore Lane, for $33 million. It is also said to have divested Frontech Centre in the Bukit Merah area for $34.5 million and two shop units on the ground floor of Samsung Hub for slightly over $14 million or about $2,680 psf.

The group has made two investments in China this year jointly with Yanlord Land group. It has a 50 per cent stake in a residential site in Tangshan and a 40 per cent stake in a site in Shanghai's Qingpu district. Payment for these stakes as well as the Buona Vista plot (which is a 100 per cent Ho Bee venture) whittled the group's cash and cash equivalents from $171.7 million at end-December 2009 to $37.8 million at end-September 2010. Over the same period, the gearing ratio rose from about 0.2 time to 0.37 time and is expected to rise further to about 0.5 by year-end as the group completes the final instalment payment to the government for the Buona Vista site

The group will fund the construction of the Buona Vista project from further borrowings as well as cash proceeds from sales of Singapore residential projects.

Two developments will receive Temporary Occupation Permit soon - The Orange Grove in early December 2010 and Seascape in Sentosa Cove in early 2011. The group has sold 29 units at The Orange Grove and 35 units at Seascape.

Ho Bee also has one more undeveloped Singapore residential site - The Pinnacle Collection at Sentosa Cove. The plot, in which it has a 35 per cent stake, can be developed into a condo up to 20 storeys high and comprising 302 units. This project is slated for launch in H2 2011.

Ho Bee's earnings per share fell from 13.5 cents in Q3 2009 to 5.3 cents in Q3 2010. Net asset value per share rose from $1.63 at end-December 2009 to $1.86 at end-September 2010. The counter closed three cents lower at $1.68 yesterday.