Chip Eng Seng

Chip Eng Seng 3Q15 net profit plunged 81% y/y to $13.6m amid a sharp drop in revenue to $158.5m (-62%), mainly due to completion of the Belvia project in 3Q14.

Apart from the falling property development revenue (-74.9% to $78.6m), the group also saw lower recognition from construction projects (-28.9% to $71.2m). This was marginally cushioned by maiden contribution from Park Hotel Alexandra ($6.2m), which commenced operations in May ’15.

Gross margin widened by 3.1ppt to 25.5% but bottom line was depressed a huge spike in marketing expenses to $16.8m, largely for High Park Residences which was launched in Jul ’15. In addition, finance cost ballooned 4x to $3.7m and associates dived into a $0.5m loss (3Q14: $7.9m) due to absence of contribution from its Belysa JV project.

Despite its weak performance, net gearing improved to 0.68x as compared to 0.89x in FY14.

As at the end of 3Q15, take-up rate was more than 90% for its High Park Residences in Singapore, and 97% for townhouses in Williamsons Estate, Australia.

Moving forward, management guided that apartments within the Williamsons Estate will be launched in 4Q15, and the Singapore residential block, Fulcrum’s TOP is expected in Jan ’16. However, demolition works for the construction of Tower Melbourne is expected to be further delayed by an on-going legal dispute.

As for other segments, the property company is seeking to tender for more public housing projects to bolster its existing construction order book of $641.8m, and expects its hospitality business to break even in 2016.

Chip Eng Seng is currently trading at 2.1x trailing P/E and 0.6x P/B.