Financial Statements

2018 First Quarter Financial Statement Announcement

Financials Archive

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Profit & Loss

Profit & Loss 1Q2018

N/M : Not meaningful

Statement of Comprehensive Income

Statement of Comprehensive Income 1Q2018

Balance Sheet

Balance Sheet 1Q2018

Group Performance Review

(a)(i) First quarter review - 1Q 2018 vs 1Q 2017

The Group’s revenue for the quarter ended 31 March 2018 (“1Q 2018”) was lower year-on-year by 17%, or S$6.0 million, to S$30.1 million from S$36.1 million in the quarter ended 31 March 2017 (“1Q 2017”).

The lower revenue was mainly attributable to the expected expiry of the lease on Westlite Tuas in Singapore which ceased operations in December 2017. The Group’s gross profit reduced by 10%, from S$24.0 million to S$21.6 million year-on-year, in view of the lower revenue. However, the Group posted a higher gross profit margin of 72% as compared to 67% year-on year, due to the absence of the amortisation cost relating to the intangible assets on favourable lease (“Intangible Asset”) in Westlite Tuas by S$1.2 million.

Administrative expenses were lower by S$1.0 million, which was mainly due to the absence of the non-recurring cost of professional fees of S$1.7 million incurred during 1Q 2017 in preparation for the dual primary listing of the Group’s ordinary shares on the Main Board of the Stock Exchange of Hong Kong Limited (“SEHK”) which took place in 4Q 2017. No such cost was incurred in 1Q 2018. Excluding this non-recurring cost, administrative expenses increased S$0.7 million, in line with the Group’s expanded business operations.

Finance expenses increased by S$0.8 million, largely due to the issuance of the Multicurrency Medium Term Notes (“MTN”) Series 3 of S$85 million in April 2017.

Share of profit of associated companies increased S$0.3 million largely due to the share of the profits from the Centurion US Student Housing Fund (“the US Fund”) launched in November 2017 of which the Group holds approximately 28.74% of the total units in issue.

The income tax expense reduced by S$1.0 million mainly due to lower profit and reduced prior period deferred tax provision. The prior period deferred tax provision of $0.5 million was provided in 1Q 2017, arising from the cumulative fair valuation gains recognised for the Group’s investment properties in Australia.

The net profit after tax derived from the Group’s operations for 1Q 2018 was S$10.5 million, or a reduction of S$1.2 million.

Excluding one-off items in the form of dual listing expense, the Group’s profit from core business operations reduced from S$13.5 million in 1Q 2017 to S$10.5 million in 1Q 2018.

(b)(i) Review of Group Balance Sheet

Assets

Cash and bank balances increased by S$4.4 million to S$80.1m, of which S$7.2 million and S$4.4 million were used for investing and financing activities respectively. The increase in cash and bank balances was largely due to net cash provided by operating activities of S$15.9 million.. Please refer to b(iii) review of the Group’s cash flow statements.

Trade and other receivables as well as other assets reduced S$4.5 million and S$1.5 million respectively mainly due to collections during the 1Q2018.

Investment properties increased by S$10.5 million, largely due to the asset enhancement works that is currently being carried out for the Group’s workers and student accommodation assets in Malaysia, Australia and the United Kingdom.

Trade and other payables reduced S$6.8 million, largely due to settlement of the payables relating to construction cost and professionals fees on HK dual listing exercise.

Borrowings & Gearing

The Group was in a net current liabilities position of S$46.5 million due to the reclassification of the MTN of S$65.0 million, which will mature in July 2018, from long term borrowings to short term borrowings. The Group currently has sufficient cash resources and banking facilities (both in aggregate of approximately S$235.1 million) available to meet the financing needs of the maturing MTN and its current liabilities.

As at 31 March 2018, the Group’s net gearing ratio was lower at 50%, as compared to 51% as at 31 December 2017.

The Group continued to generate stable and strong operating cash flow of S$15.9 million in 1Q 2018. The Group’s interest cover of 3.4 times (or 5.5 times interest cover, excluding interest from the MTN) continues to be adequate and is within the Group’s interest cover threshold. The Group’s developmental and acquired operating assets are primarily funded through bank debt with a loan maturity profile averaging 10 years.

The Group’s balance sheet remains healthy with S$80.1 million cash and bank balances.

(b)(ii) Review of Company Balance Sheet

Trade and other payables reduced by S$1.8 million largely due to settlement of payables during the quarter.

(b)(iii) Review of Cash Flow Statement

In 1Q 2018, the Group generated a positive cash flow of S$15.9 million from operating activities.

During 1Q 2018, cash of S$7.2 million in investing activities was mainly used for the development of the Group’s accommodation assets, in particular for Westlite Bukit Minyak, RMIT Village, Australia and Dwell Cathedral, United Kingdom.

Net cash of S$4.4 million was used in financing activities mainly due to financing obtained offset by the repayment of borrowings and interest paid during the period.

As a result of the above activities, the Group recorded an increase in cash and cash equivalents of S$4.3 million in 1Q 2018.

Commentary On Current Year Prospects

Accommodation Business

As at 31 March 2018, the Group operated a diversified portfolio of 26 workers and student accommodation assets comprising c.55,147 beds across five countries.

(a) Workers Accommodation

Market demand for the Group’s purpose-built workers accommodation (“PBWA”) in Singapore is expected to remain stable while demand for the Group’s PBWA beds in Malaysia is expected to increase.

As at 31 March 2018, the Group had a total of c.26,100 beds across four operating workers accommodation assets in Singapore. The foreign worker population in Singapore is expected to remain steady. During 1Q 2018 the Singapore economy grew overall by 4.3%, supported by strong manufacturing growth, however construction activities continued to perform sluggishly^1. Nonetheless, government-backed infrastructure projects and anticipated improvements in the property market continue to support an uptick in the construction sector.

The current demand for PBWA continues to outstrip overall supply of PBWA beds in Singapore. Supply of PBWA is expected to reduce when more temporary PBWA leases expire. This should naturally cushion any reduction of foreign worker population resulted from the Marine sector, which is currently facing challenges.

In Malaysia, as at 31 March 2018, the Group operated c.23,700 beds across six workers accommodation assets. The assets in Malaysia continued to benefit from the Group’s increased marketing efforts and from the Malaysian government permitting the hiring of more foreign workers in the manufacturing sector.

The Malaysian government is beginning to address and improve the health and safety requirements for foreign workers which bodes well for the PBWA sector in Malaysia. With its existing portfolio and Bukit Minyak under development in Penang adding further c.6,600 beds, the Group remains well-placed to cater for growing demand in Malaysia.

(b) Student Accommodation

As at 31 March 2018, the Group had a portfolio of 5,347 student accommodation beds across 16 purpose-built student accommodation (“PBSA”) assets in the United States (“US”), United Kingdom (“UK”), Australia and Singapore.

The Group remains confident in its 2018 outlook, given that its PBSA assets are situated in the world’s top three tertiary educational markets with close proximity to major universities and university towns, resulting in a healthy demand and undersupply of PBSA beds.

In the UK, the Group’s eight student accommodation assets continued to perform well. Despite the Brexit vote, the Group expects sustained performance, underpinned by the continued undersupply of PBSA beds and year-on-year increase in rents per bed space. The Group continues to monitor the Brexit situation in relation to education, economic and migrant policies.

In 4Q 2017, the Group announced the successful closing of its inaugural private fund, the Centurion US Student Housing Fund. The fund acquired a portfolio of six PBSA assets across five states primarily catering to first-tier universities. The Group’s six student accommodation assets have performed well throughout 1Q 2018. The Group is optimistic that the demand for student accommodation in the US will remain strong in 2018.

In Australia, RMIT Village continued to achieve healthy occupancy rates following a successful booking campaign for the 2018 academic year and the overall sustained demand for PBSA in Melbourne. Given Australia’s popularity among international students seeking tertiary education, the Group is confident that RMIT Village will continue to perform well when the new 160 beds, currently undergoing its asset enhancement programme, are added in 4Q 2018.

The development of dwell Adelaide with 280-beds remains on-track and is expected be completed in 4Q 2018, in time for the student intake in the 2019 academic year. Given the demand for inner-city student accommodation from both overseas and domestic students, the Group remains confident that its occupancy rates will be healthy in 2019 academic year.

Moving forward, the Group will continue to identify opportunities to strengthen its student accommodation portfolio and its operational capabilities in new and existing territories. The Group will also continue to focus on its asset light strategy and continue to pursue alternative growth prospects and new asset types.

Remarks:
^1. Straits Times, 13 April 2018, “Singapore economy grows 4.3% in Q1 of 2018, boosted by strong manufacturing growth”
^2. ASEAN Briefing, 12 January 2018, “Malaysia’sInvestment Outlook for 2018”

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