28 May 2014

Some Keynotes from LKH Annual Report FY14

Operation Highlight. Source: Company Annual Report

Corporate Development & Prospects

  • S$114.3m construction project awarded in June 2013 for hotel development by Genting Singapore
  • 1,145 units at the Minton TOP in November 2013. 
  • Parkland Residences @ Upper Serangoon Road (DBSS Project) only 4 units remains unsold - profit to be recognized when TOP end 2014
  • Paya Lebar Square - sold 96% office units and to retain the retail units (about 82% leased as of April 2014) for cash flow generation - profit to be recognized when TOP end 2014
  • Completed purchase of the freehold Kismis Lodge for $84.2 million (70% stake) to be redeveloped into a 3-storey with a basement mixed landed residential development
  • Completed purchase of 15 commercial units and 1 penthouse residential unit at Balestier Tower for $77.4 million for development purpose
  • November 2013 - Accepted a conditional offer to sell our land (20% stake) at Jalan Conlay, Seksyen 63, Kuala Lumpur, Malaysia to an unrelated third party for a total cash consideration of RM568 million (S$221 million). The transaction is targeted to complete by Q2 FY2015 and would generate pre-tax gain of approximately RM247 million (S$96 million) (Jack: could be around S$15m net profit)
  • January 2014 - to purchase 295 strata-titled office units on levels 6 to 25 of Westgate Tower at 1 Gateway Drive, on lot 8360V Mukim 5, Singapore (40% stake). The purchase price is $579.4 million and it is purchased for long term investment purpose (Jack: could be around S$10m - S$20 m recurring income for 40% stake)
  • to purchase 616,461 square feet of land at Banda Seri Alam, Johor for RM74.0 million (S$29.0 million) via associated company for development purpose. The purchase is expected to be completed in financial year ending 31 January 2015
  • Duxton Hotel Perth and Duxton Hotel Saigon did not performed as well during current year when compared to last year due to the slow down in both Perth and Vietnam economies. During the year, the F&B business faced major operational challenges and management is currently working on streamlining its activities with a view to improving profitability
  • Our outlook is cautiously positive in view of the expected slower growth in the global economy and also as Singapore undergoes economic restructuring in order to create sustained growth. The latest round of cooling measures introduced by the government in January 2013 and the release of more land for development to cool the residential market have reduced buying volume while stabilizing prices. We will continue to be selective in our project tendering. We will also continue to invest in business that will generate consistent revenue and profitability streams

Income Statement. Source: Company Annual Report

  • Most of the profits are actually from "Share of results of Joint Ventures & Associated Companies" so you would see that the group mostly relies on JV / Associated companies to grow the earnings. 
  • As property market is in the down trend cycle, the group is now focus on boosting recurring income by increasing investment in properties such as West Gate Tower etc. 
  • As the two projects to be recognized under Completion of Contract method by end of financial year 2015, so we would expect the share price could be "encouraged" towards end of the financial year. 
  • LKH's shareholding is highly concentrated under Low's family and we believe that it could encourage the BOD would strive harder and award the minor shareholders with good dividend yield (more than 50% dividend payout last financial year)
  • Recent news on Singapore property market is that the government encourages "normalization" of property price in Singapore so that most Singaporean could afford and even upgrade their houses through softening property price. Nonetheless, I believe the current situation would remain weaker until next general election as housing issue is always one of the good debate topics from opposition parties. Nonetheless, as long as interest rate remains below 2.5%, real estate is always a good alternative investment choice for rich folks to park their excess money in to battle for long term inflation rate (estimated in between 2% - 3% CPI in long run)

1 comment:

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