Ho Bee Land Q2 net profit nearly doubles to S$71.5m

HO Bee Land has posted net profit of S$71.5 million for the second quarter ended June 30, up 98.1 per cent from the S$36.1 million net profit in the year-ago period.

In a filing with the Singapore Exchange on Friday evening, the property group said that the stronger bottomline was on the back of recognition of a S$28.3 million fair value gain on investment property. This arose from the group completing the sale during the second quarter of 2018, of a 30-year leasehold interest carved out from a 999-year leasehold petrol station site in Bukit Timah Road. Ho Bee continues to hold the residual lease for the site. The sale price was higher than the previous valuation for the site as at Dec 31, 2017.

Another major reason for the increase in Q2 net profit was the group's share of profit of associates, contributed by the joint-venture projects in Shanghai and Zhuhai, which doubled to S$25.7 million in Q2 FY2018 from S$12.2 million in Q2 FY2017.

For Q2 FY2018, group revenue rose 16.1 per cent to S$43.4 million from the year-ago period. The increase was due mainly to higher rental revenue from 67 Lombard Street, acquired in June 2017, and Ropemaker Place, acquired on June 15 this year. 

Ho Bee posted a foreign exchange loss of S$4.1 million in Q2 FY2018 - against a forex gain of S$1.5 million in the year-ago period. This was chiefly due to the group's net asset exposure in the pound sterling and Australian dollar, which weakened against the Singapore dollar in Q2 FY2018.

Net finance costs surged 43.9 per cent to S$8.6 million in Q2 FY2018 largely due to the additional bank borrowings to fund the acquisitions of 67 Lombard Street and Ropemaker Place.

Earnings per share climbed to 10.74 Singapore cents in Q2 FY2018 from 5.42 Singapore cents in Q2 FY2017.Net asset value per share stood at S$4.78 as at June 30, 2018, up from S$4.70 as at Dec 31, 2017. No dividend was proposed. Ho Bee Land shares ended unchanged at S$2.54 on Friday. The group announced its results after the stock market closed.

For the first half, Ho Bee posted net profit of S$120.9 million, up 30.8 per cent from a year ago. Group revenue expanded 15.4 per cent to S$92.1 million.

Net gearing rose to 0.77 time as at end-Q2 2018 from 0.42 time as at end-Q1 2018 - due to additional borrowings to fund the £650 million (about S$1.16 billion) acquisition of Ropemaker Place. The 21-storey freehold Grade A office building has about 602,000 sq ft of commercial space.

Ho Bee noted that the acquisition was in line with the group's strategy to diversify overseas and grow its recurring income base.

Ropemaker Place will generate an annual rental income of £30.57 million, yielding a return of around 4.7 per cent for the group.

With this acquisition, the group now has a portfolio of seven commercial properties in London with a total lettable area of more than 1.5 million sq ft. Together with The Metropolis in the Buona Vista locale in Singapore, recurring income will continue to be a strong contributor to the group's earnings, the group said.

Ho Bee's chairman and chief executive, Chua Thian Poh, said: "The Singapore government recently announced a slew of tough cooling measures targeted at the residential market.

"These measures will have minimal impact on the group's performance. Our strategic decision to diversify into other markets and grow our recurrent income base has placed us in a good position for sustainable growth."