http://www.businesstimes.com.sg/arch...er-q2-20130813

Published August 13, 2013

Ho Bee's profit lower in Q2

Firm cites higher revenue recognition from development properties last year

By Kalpana Rashiwala


HO BEE, which posted weaker second-quarter net earnings, said that rental income from its Metropolis office development in Singapore, along with a completed London office development it bought earlier this year, will underpin its bottom line for the next few years, with the expected slowdown in the Singapore residential market.

"A combination of cooling measures and impending supply has resulted in an uncertain and challenging environment in the Singapore residential market. However, the group has diversified into China, Australia and the United Kingdom. We have also strategically expanded our investment portfolio, which includes Rose Court in London and The Metropolis in One North," said Chua Thian Poh, chairman & CEO of Ho Bee Group.

The Metropolis, comprising 1.08 million sq ft of lettable commercial space, will be fully completed in October this year. It is more than 82 per cent pre-committed. BT understands that recent tenants clinched at The Metropolis include fast food chain McDonald's regional office, AXA, Asia Pacific Breweries, and Mitsui Ocean Development and Engineering Co.

Ho Bee has acquired four development sites in Australia - one in Melbourne and three in Gold Coast. It also has significant exposure to China through joint ventures with Yanlord in Tangshan, Zhuhai and Shanghai.

The group yesterday posted net earnings of $26.2 million for the second quarter ended June 30, 2013, down 64 per cent from the same period last year. Revenue fell from $144.3 million to just over $6 million. The drop was due to higher revenue recognition from development properties in the same quarter of last year, when it completed One Pemimpin, a strata industrial development, and finished booking the remaining profit for its Orange Grove condo project, which was completed a few years ago.

Ho Bee had not booked profit on One Pemimpin prior to completion as it is not a residential project.

The sale of Hotel Windsor was completed in May this year and a $25.9 million net gain was recognised in the Q2 income statement and $94.7 million revaluation reserve was transferred to unappropriated profit upon completion. Total gain on the hotel's sale was $120.6 million.

For the first half, the property group's net profit fell to $78.4 million, which was 11.6 per cent lower than the $88.7 million in H1 2012. Revenue slipped 62.9 per cent to $66.9 million, on the back of lower revenue recognition from development properties.

Ho Bee will not be paying an interim dividend.

Net gearing was 0.17 time, same as end-2012.

The group's earnings per share fell from 10.4 cents in Q2 2012 to 3.9 cents in Q2 2013. Net asset value per share rose from $2.58 at end-Dec 2012 to $2.70 at end-June 2013.

The counter closed one cent higher at $2.19 yesterday.