Chip Eng Seng's Q2 profit down on reduced margins, higher expenses

PROPERTY group Chip Eng Seng on Friday posted a weaker second-quarter net profit for the three months ended June 30, dragged by reduced margins, higher marketing and distribution expenses, as well as a provision of S$5 million for a construction project.

Net profit for the quarter plunged 94.3 per cent year on year to S$819,000, the company said in a filing to the bourse operator.

This represents earnings per share of 0.13 Singapore cent, down from 2.3 cents a year ago.

The group said that higher marketing and distribution expenses in Q2 was due to sales commission incurred for Grandeur Park Residences, which was launched in March this year, as well as marketing expenses incurred for the newly opened Grand Park Kodhipparu, an island resort in Maldives.

Revenue in Q2 came in 9.3 per cent lower at S$212.6 million, weighed down by lower contributions from the property development and construction divisions.

Cost of sales dipped 2.6 per cent year on year to S$176.5 million.

Net asset value per share at end June was 120.25 Singapore cents, compared with 123.33 cents at end December 2016.

Under the construction division, the group said that it won a tender in May 2017 for the building works at Bidadari for a contract sum of S$110.8 million, which lifted its construction order book to S$538.4 million at the end of Q2 2017, up from S$457.2 million in the preceding quarter.

It added that Singapore's rental market will remain challenging throughout 2017 as vacancies are expected to stay high.

That said, the company added that outside of Singapore, the group and Roxy-Pacific jointly acquired (pending completion of the transaction) a Grade A office building in Auckland, New Zealand, which will improve its recurring income.