Far East Orchard H2 net profit up four times on gains from student accommodation investments

REAL estate group Far East Orchard : O10 0% posted on Wednesday (Feb 28) a net profit of S$57.7 million for the six months ended Dec 31, 2023, more than four times the S$13.9 million reported in the corresponding year-ago period.

Revenue for the half year improved 20 per cent to S$92.8 million from S$77.3 million in H2 2022.

The group attributed the jump in net profit to a fair-value gain on investment properties of S$58.3 million over the financial year, up from the S$2.6 million in FY2022.

The group said in a bourse filing: “The fair-value gains were mainly from the group’s purpose-built student accommodation (PBSA) portfolio in the UK, driven by a strong demand for beds from domestic and international students and a supply shortage across key UK university cities.”

Earnings per share stood at 11.84 Singapore cents for H2 2023, up from the 2.92 Singapore cents in H2 2022.

For the financial year, revenue rose 30.3 per cent year on year to S$183.6 million from S$141 million, boosted by the strong performance from the group’s hospitality segment.

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The group noted that revenue from the hospitality business increased 40.5 per cent to S$126.9 million in FY2023, with the continued strong recovery in global corporate and leisure travel following the pandemic.

Nevertheless, the group is facing challenges from the higher finance expenses due to elevated interest rates, persistent inflation and higher staff costs.

Total expenses for FY2023 increased 22.1 per cent to S$84.7 million from S$69.2 million the year before.

Far East Orchard’s chief executive Alan Tang said: “Our twin engines of the hospitality and PBSA businesses are now running at full steam, and we are optimistic as international travel recovers and student demand for higher education in the UK remains robust. However, we remain cognisant of numerous macroeconomic headwinds.”

The board of directors will recommend a first and final dividend of S$0.04 per share at the group’s upcoming annual general meeting. Subject to shareholders’ approval, the payout date will be announced later.

Shares of Far East Orchard closed flat at S$1.03 on Wednesday, before the announcement.