Q4 profit falls 88% due to slower sales, inclusion in Q407 of restructuring surplus
By UMA SHANKARI
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KEPPEL Land, Singapore's third-largest property group by market capitalisation, said it will conduct a review to see if it can delay building some of its projects as it reported an 88 per cent fall in fourth- quarter earnings yesterday.
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| 'This cost review exercise could include developing projects in phases and even suspending projects for now.' - Kevin Wong, Keppel Land's group CEO |
'We are reviewing our operation costs as well as the project costs of all our development projects to trim fat and conserve cash, so that we can invest in any attractive opportunities that come along,' said group chief executive Kevin Wong. 'This cost review exercise could include developing projects in phases to meet demand and even temporarily suspending the entire project if it does not add value to the company under current market conditions.'
Projects that are yet to be launched for sale are those that are most likely to be delayed both in Singapore and abroad, he added.
The developer reported that net profit for the three months ended Dec 31, 2008 fell to $68.5 million, from $572.3 million in 2007. KepLand's Q4 2007 earnings were boosted by the divestment of its one-third stake in the One Raffles Quay office building to property trust K-Reit Asia for about $940 million. Q4 2007 recorded a $235.2 million surplus from the restructuring of the interest in One Raffles Quay Pte Ltd.
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Revenue for Q4 2008 fell 46.8 per cent to $197.4 million, from $371.4 million, as KepLand saw slower sales across many key markets. Several projects in Singapore and overseas were also completed in previous quarters, which means that these projects did not contribute to KepLand's balance sheet in Q4. Lower revenues also came from the group's fund management business and property services.
On the back of this, earnings for the full 2008 financial year slumped 70.8 per cent to $227.7 million, from $779.7 million the previous year. Revenue fell 40.2 per cent to $842.2 million, from $1.4 billion in 2007. Analysts said that full-year earnings and turnover were in line with estimates.
Full-year earnings per share fell to 31.6 cents, from $1.08 in 2007. KepLand proposed a final dividend of 8 cents a share.
The developer also said it made no provisions or writedowns in its Q4 financials. 'We had been disciplined and cautious in land acquisition, especially over the last two years, in Singapore and overseas. As a result, there are no provisions needed for our land bank,' said Mr Wong. The carrying values of KepLand's investment buildings are also within the current market range, he said.
In the previous downturn of 2001, KepLand wrote down its land bank by $455.1 million, resulting in a net loss of $366.5 million for that financial year.
The developer had net debt of $1.5 billion as at end-2008, up from $1.09 billion at the end of 2007. Gearing at end-2008 was 0.52 times, up from 0.41 times in 2007.
KepLand said that 2009 will be a challenging year as the group continues to face strong headwinds from the global economic crisis.
'In Singapore, KepLand's exposure is mainly in the mid-to-high-end segments, where demand is really weak. The regional markets China and Vietnam are also experiencing slow sales,' wrote Kim Eng analyst Wilson Liew in a note earlier this month.
Credit Suisse yesterday cut its price estimates for several property stocks on fears that property demand may slump further as Singapore sinks deeper into recession. The research firm cut KepLand's target price to $1.55, from $2.48 previously.
KepLand shares lost one cent to close at $1.50 yesterday amid a broad market pullback.
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