Revaluation gains lift United Engineers' full year net profit; dividend reduced

REVALUATION gains lifted United Engineers' full-year net profit from continuing operations to S$89.6 million, up 227 per cent from 2016.

This was due mainly to a net revaluation gain of S$44.4 million from its investment properties in Singapore, as well as a S$16.8 million reduction in the provision for rental support for UE Bizhub East which was no longer required.

A first and final dividend of 4 cents per share was declared, lower than the 5 cents per share dividend UE had maintained for years.

UE said that this was in order to grow the business. It does not have a formal dividend policy.

In 2016, UE declared a 5 cent dividend and special dividend of 7 cents per share after divesting MultiFineline Electronix and the environmental engineering business that year. However, there were no major divestments for UE last year, apart from the disposal of the WLPG business.

UE did not break down its reporting by quarter.

Revenue in the 12 months to Dec 31 last year was S$539.4 million, up 12 per cent from 2016 on the back of higher revenue recognition from phase 4 of Chengdu Orchard Villa in China and The Manhattan in Malaysia following the completion of the projects.

Overall, property development revenue rose 106 per cent to S$146 million.

But property rental and hospitality revenue fell 3 per cent to S$131.6 million on lower contribution from UE BizHub West. The average occupancy rate for UE's investment properties was between 85 to 95 per cent.

Revenue from engineering and distribution, as well as the manufacturing division also fell.

In its filing on Thursday, UE also provided an update on WBL, the subsidiary it intends to fully acquire from UE shareholder Yanlord Perennial Investment and the OCBC group.

UE shareholders will vote on the interested party transaction on Friday.

WBL's loss from continuing operations in 2017 came to S$497,000, narrowing from a loss of S$5 million in 2016. Revenue rose to S$359.6 million, from S$297.5 million in 2016.

For the first time in years, UE also provided an update on one of its largest projects, Shenyang Orchard Summer Palace.

About 40 per cent of the office block had been sold or leased as at Dec 31 last year, it said.

Serviced apartments and retail space have also been built in Shenyang, but UE did not share more details about the activity there.

Over at Chengdu Orchard Villa , the construction of 231 townhouses in phase 5 is ongoing, UE said. Phase 4, which comprised 164 townhouses, has been completed and fully sold except for two show units.

WBL had a net asset value per share of S$2.64 as at Dec 31.

UE has a net debt to equity ratio of 0.23 times, below its target of 1.1 times, which gives it room to gear up.

"Leveraging on the new shareholders' wealth of experience in property development and asset management, the group will enhance its existing commercial properties such as UE Square and UE BizHub WEST, embark on new property development projects, as well as seize opportunities in other businesses and geographical presence for the next phase of growth," said UE executive chairman Zhong Sheng Jian, who is also the founder of Yanlord Land.

Earnings per share from continuing operations was 14 cents, up from 4.3 cents in the same period a year earlier.

Net asset value per share was S$3.09 as at Dec 31 last year, up from S$3.06 as at Dec 31, 2016.

UE shares closed unchanged at S$2.56 on Thursday before the results were released.