http://www.businesstimes.com.sg/arch...-gain-20140228

Published February 28, 2014

Ho Bee earnings soar on $489.6m revaluation gain

By Kalpana Rashiwala [email protected]


A REVALUATION gain of $489.6 million for The Metropolis office project in Buona Vista provided a big boost to Ho Bee Land's fourth-quarter and full-year net earnings.

The property group announced net profit of $506.1 million for the fourth quarter ended Dec 31, 2013, up from $66.9 million for Q4 2012. For FY 2013, the group's net profit rose to $591.8 million from $187.1 million in FY 2012. Also contributing to the stronger bottom line was the $47.2 million gain from disposal of shares in Chongbang Holdings (International) in early 2013.

As at end-December 2013, The Metropolis, comprising two office towers with Grade A specifications plus a small retail component, was valued at $1.242 billion by Colliers International. This translates to around $1,150 per square foot (psf) based on the project's 1.08 million sq ft total net lettable area. Market watchers reckon this may be on the conservative side. Ho Bee developed the project on a 99-year-leasehold site it acquired at a state tender in 2010.

Tower One received Temporary Occupation Permit in July 2013 and Tower Two, in November.

Beyond contributing to a "paper gain" arising from its revaluation, The Metropolis is starting to show a real and more enduring impact on Ho Bee's financial results as it has begun generating rental income.

The group's revenue from property investment jumped to $12.5 million in Q4 2013 from $2.7 million in Q4 2012. Full year, the figure more than doubled to $25.7 million from $11 million. Besides The Metropolis, rental income from Rose Court, an office building in London that Ho Bee bought in mid-2013, was the principal contributor to the sharp increase, the group said.

Based on a back-of-the-envelope calculation, The Metropolis could generate about $80 million gross revenue, translating to possibly around $60 million pretax profit, on an annual basis - assuming the asset is fully leased. The average monthly rent Ho Bee is achieving would be north of $6 psf, reckon market watchers.

While the group's revenue from property investment rose, revenue from property development shrank. For Q4 2013, the figure was $43.7 million, down 80 per cent over the same year-ago period. Full year, the figure contracted 75 per cent to $113.6 million from $450.7 million previously. The drop was due mainly to the higher revenue recognition on the completion of the Trilight residential project and One Pemimpin industrial project in 2012.

Group revenue shrank 75 per cent year on year to $56.2 million in Q4 2013. For FY 2013, the figure slipped 69.8 per cent to $139.3 million.

Ho Bee posted earnings per share of 87.4 cents in FY 2013, up from 26.7 cents in FY 2012. Net asset value per share rose to $3.48 at end-2013 from $2.58 at end-2012. On the stock market, the counter closed three cents higher at $2.15 yesterday. Ho Bee released its results after the market close. The company is proposing a three cent per share special dividend in addition to a five cent per share first and final dividend. Combined, this is a higher payout than for FY 2012, when only a first and final dividend of five cents was paid.

Net gearing decreased to 0.15 time at end-2013 from 0.17 time at end-2012.

The group commented that with the QE tapering in the United States which will result in tighter liquidity and expected rise in global interest rates, the real estate sector is expected to face more headwinds this year as the cooling measures implemented for the residential property market by the government are "not likely to be loosened anytime soon".

Ho Bee's chairman and CEO Chua Thian Poh said: "With the challenging residential property market in Singapore, the earnings for 2014 will be underpinned by the contributions from The Metropolis and the Rose Court office building in London.

"Apart from launching its residential projects in Melbourne and Gold Coast this year, the group is also continuing to look for investment and development opportunities both locally and overseas."