Metro’s S$36.3m impairment losses due to China property sector headwinds

THE ongoing credit situation in China’s property sector contributed to the S$36.3 million impairment losses taken in Metro Holdings : M01 0%’ financial year ended March 31, 2022, the property group said on Sunday (Jul 17).

The impairment losses were on the amounts due from associates; namely, Jovial Paradise and Global Charms, both of which had invested in real estate debt instruments in China. Metro’s commitment for Jovial Paradise was S$48.7 million and S$67.7 million for Global Charm.

Responding to questions from shareholders ahead of its annual general meeting on July 22, Metro said: “The impairment assessment was performed based on the associates’ exposure on underlying debt instruments which were tied to the associated development projects of the borrowers.”

The group had considered the current market and situation of China’s property sector. It took the impairment after considering the loan-to-value and net asset value coverage of the underlying debt instruments.

“The impairment had been considered by the auditor as part of their audit in arriving at an unqualified audit opinion on the financial statements for the financial year ended Mar 31, 2022,” Metro said.

Asked if its investment in DocMed Technology Pte Ltd signalled a shift in its core strategy, Metro said property investment and development as well as retail remain its core business.

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“That said, the group is on the constant lookout for new business opportunities with good partners to further diversify for resilience,” Metro said.

The group has identified growth opportunities in the health tech sector during the Covid-19 pandemic. It chose to collaborate with Singapore-listed Hyphens Pharma International - DocMed’s parent company - due to its proven track record in the healthcare industry., and distribution network covering 10 other markets including Bangladesh, Brunei, Cambodia, China, Oman and South Korea. 

“Given the geographical overlap, there are potential synergies for both parties to capture opportunities in the region where there is presence,” Metro said. DocMed is planning to expand its integrated healthcare platform offerings in Singapore and Asia-Pacific.

Metro shared that its investment in DocMed underwent a “thorough investment evaluation process whereby a professional, reputable, independent third party” was engaged to conduct the valuation , before a valuation of S$60 million was arrived at.

Shares of Metro last closed S$0.005 or 0.7 per cent lower at S$0.75 on Friday before the announcement.