Published February 26, 2009

Ho Bee Q4 profit down 71%

Company warns of tough year ahead but expects to ride through difficult period

By KALPANA RASHIWALA

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HO Bee Investment, which posted a 70.9 per cent plunge in fourth-quarter net earnings to $11.3 million, has warned of 'a very challenging year amidst the weak market sentiment and adverse economic environment'.

Nevertheless, with strong earnings contribution expected from five completely or substantially sold residential projects receiving Temporary Occupation Permit this year, 'the group is in a good position to ride through this difficult period', Ho Bee said. The five projects are Vertis, Quinterra, The Coast, Paradise Island and Orange Grove Residences. Vertis received TOP in January this year with the rest expected to follow suit soon.

Ho Bee's lower net earnings for Q4 ended Dec 31, 2008, was due partly to a 36.6 per cent slide in revenue to $38.5 million (due to lower recognition of revenue from property development projects in the latest quarter).

Also contributing to the weaker bottom line was a $2.3 million loss arising from the net change in fair value of investment properties and writedown of properties held for sale and a $4.6 million share of loss of joint venture entities - against a combined gain of $16.7 million of similar nature for Q4 2007.

For the full-year, Ho Bee's net profit dived 65.8 per cent to $93.1 million, again on the back of a 49.3 per cent drop in revenue to $302.1 million. Besides this, the weaker earnings were due to the absence in 2008 of an $87.7 million gain arising from the net change in fair value of investment properties and the reversal of writedown of properties held for sale for the preceding year.

The group's $5.1 million share of loss of joint venture entities also eroded the bottom line.

Ho Bee did not make any residential landbank provision, except for a $3 million-plus writedown in Q4 for its 35 per cent stake in the Pinnacle Collection site in Sentosa Cove. It bought the 99-year leasehold site jointly with IOI Properties for $1.1 billion or $1,822 per square foot per plot ratio last year.

Ho Bee stated that it was the group's policy to defer recognition of income at various stages of completion for residential units sold under the deferred payment scheme (save for the initial 20 per cent payment upon signing of the sale and purchase agreement) until TOP for the development is obtained.

Slightly more than 50 per cent of the total units in the five residential projects receiving TOP this year were sold on deferred payment scheme.

Ho Bee's operating profit from property development dropped to $117.7 million from $247.6 million a year earlier while operating profit from property investment slid to $11 million from $86.4 million. However, profit from hotel business rose to $4.6 million from $2.4 million.

Shareholders will receive a one cent per share final dividend, down from two cents previously.

Earnings per share slumped to 12.63 cents from 36.92 cents a year earlier. Net asset value per share rose to $1.20 from $1.10 previously.