Published August 15, 2009

Ho Bee Q2 gain surges, thanks to Sentosa Cove

Net profit jumps to $157.3m for period ended June, up from just under $37m a year ago


HO Bee Group has posted a big jump in group net profit to $157.3 million for the second quarter ended June 2009, up from $36.96 million a year earlier, thanks mainly to profit booked for two projects at Sentosa Cove that were completed in Q2 - The Coast condo and Paradise Island comprising 29 villas.

Shareholders will be rewarded with a doubling of interim dividend to two cents a share.

The group's Q2 bottom line improvement was despite write-downs totalling $109.8 million. These comprised $30.4 million of fair-value losses on revaluation of investment properties (mostly Ho Bee's stake in Samsung Hub), a $25.4 million write-down on development properties (believed to be chiefly for the Elmira Heights site in Newton Road) and a $53.93 million write-down for development properties held by jointly controlled entities.

The last figure is believed to be for Ho Bee's 35 per cent share of The Pinnacle Collection site at Sentosa Cove. Ho Bee teamed up with IOI Properties of Malaysia to clinch the plum site for $1.097 billion or $1,822 per square foot per plot ratio (psf ppr) in early 2008. Including an earlier smaller write-down in Q4 last year, The Pinnacle Collection site has been written down 15 per cent to $933 million or $1,550 psf ppr.

Strong cash collections in Q2 from buyers of The Coast and Paradise Island allowed Ho Bee to repay borrowings. Net borrowings fell to $575.8 million at June 30, from $1.15 billion at Dec 31, 2008. Net gearing ratio decreased to 0.51 from 1.26 over the same period. More cash collections can be expected this quarter with Orange Grove Residences receiving Temporary Occupation Permit last month.

Group revenue rose to $740.8 million in Q2, from $116.8 million a year earlier.

First-half net profit trebled to $194.6 million from $63.1 million, as revenue vaulted to $850.8 million, from $211 million. 'The group is expected to remain profitable for the next two quarters this year,' Ho Bee said in its results announcement.

In October, it is likely to launch two freehold condos - the 205-unit Trilight on the former Elmira Heights site, and Parvis, a 248-unit condo on the former Holland Hill Mansions site. The latter is a joint venture with MCL Land.

Ho Bee's net asset value per share increased to $1.44 at June 30, from $1.20 at Dec 31, 2008.

On the stock market, the counter has risen from a low of 27.5 cents on March 12 this year to $1.11 at yesterday's close. It ended a cent lower yesterday.

CIMB-GK Research analyst Donald Chua has an 'outperform' call on Ho Bee with a target price of $1.40. 'Prospects for Ho Bee are good as it will be able to ride the Sentosa story, which is being revived with the impending completion of Resorts World,' he said. Ho Bee has exposure to Sentosa Cove through three condos - Turquoise, which is half sold, and two projects that have yet to be launched. They are Seascape on the Seaview Collection site, which could be launched in Q1 2010, and the condo on The Pinnacle Collection plot. Ho Bee will develop the two projects jointly with IOI.