Lian Beng boosts land bank on strong financial position

[reporter2]

Lian Beng boosts land bank on strong financial position

Oct 13, 2017

But firm hit by lower turnover from building segment in the first quarter

Rachael Boon


Construction firm Lian Beng Group was hit by lower turnover from the building segment and higher finance costs for investments in the first quarter.

However, the firm has rebuilt its land bank with recent en bloc purchases by associate companies, it said yesterday.

In July, an Oxley Holdings-led consortium, which includes Lian Beng Group and others as partners, bought privatised HUDC estate Serangoon Ville in Serangoon North Avenue 1 for $499 million.

In May, Rio Casa, a former HUDC estate in Hougang Avenue 7, was sold for $575 million to a joint venture comprising KSH Development, Oxley Holdings, Lian Beng Group and Apricot Capital.

Lian Beng said its "strong financial position has enabled it to seize the opportunity to acquire properties to increase its land bank for future redevelopment".

First-quarter net profit fell 29.4 per cent to $8.9 million, while revenue slumped 47.5 per cent to $37.2 million for the three months to Aug 31.

Executive chairman Ong Pang Aik said in a statement: "Our investments in property investment have helped us mitigate the cyclical nature of project-based segments such as construction and property development.

"The returns from property investment have enabled us to sustain our profit level despite the lower contribution from construction and property development segments."

Mr Ong said: "While our property acquisitions for property investment are mostly for long-term yield, we may sometimes dispose of properties if substantial capital gain presents a good opportunity to take profit of the investment."

The group maintained a strong balance sheet with a cash level of $146 million as at Aug 31, and that has allowed it to continue to explore local and overseas opportunities to further expand its business.

The firm said it "is cautiously optimistic of the outlook for the construction industry and will continue to tender for projects leveraging on its strong track record and proven expertise".

Quarterly earnings per share was 1.79 cents, compared with 2.53 cents a year earlier, while net asset value per share was 120.76 cents as of Aug 31, compared with 117.72 cents as of May 31.

Separately, Lian Beng said it is exploring a possible spin-off of its property development business on Catalist and has appointed SAC Capital as the financial adviser. The company is in the process of finalising the terms of the proposed spin-off.

Lian Beng shares closed 1.5 cents up at 69.5 cents yesterday.

[reporter2]

Lian Beng exploring spin-off of property development business

Fri, Oct 13, 2017

Lynette Khoo


LIAN Beng Group said it is exploring a possible spin-off of its property development business to be listed on the Catalist Board of the Singapore Exchange.

It has appointed SAC Capital Private Limited as the financial advisor on the proposed spin-off, and the sponsor and issue manager for the proposed listing.

The construction contractor-cum-developer said it believes the proposed spin-off and listing will provide a transparent valuation to benchmark the property development business as well as allow the business to be financially independent and raise the funds required without relying on the group's financing.

This will also allow the senior management personnel of each group to focus their attention on their assigned business segments and deliver the best possible value to the respective shareholders, it added.

Such plans mirror the earlier spin-off of property developer World Class Global by jeweller Aspial Corp on the Catalist in June this year through an initial public offering. Mainboard-listed Tee Land is also a spin-off of the property development business of TEE International in 2013.

Based on a submission made by SAC Capital on behalf of Lian Beng to SGX on Thursday, the group has been informed that the proposed spin-off is not considered a chain listing under Rule 210(6) of the listing manual.

Under this rule, a subsidiary or parent of an existing listed issuer "will not normally be considered suitable for listing if the assets and operations of the applicant are substantially the same as those of the existing issuer".

"The company is in the process of finalising the terms of the proposed spin-off and proposed listing, and a detailed announcement will be made in this regard at the appropriate time," Lian Beng said.

On Thursday, Lian Beng also reported a 29.4 per cent drop in net profit to S$8.94 million for the fiscal first quarter ended Aug 31, on the back of a 47.5 per cent slump in revenue to S$37.18 million. The decline was due mainly to a decrease in revenue from the construction business segment.

Other operating income jumped to S$10.5 million in the three months to Aug 31 from S$3.4 million in the same period last year mainly due to gain on disposal of the group's investment property at 247 and 249 Collins Street in Melbourne.

"Our investments in property investment have helped us mitigate the cyclical nature of project-based segments such as construction and property development," said Lian Beng's executive chairman Ong Pang Aik. "The returns from property investment have enabled us to sustain our profit level despite the lower contribution from construction and property development segments."

Lian Beng has teamed up with three other consortium partners to secure two privatised HUDC estates in collective sales this year - Rio Casa at Hougang Avenue 7 for S$575 million and Serangoon Ville at Serangoon North Avenue 1 for S$499 million. It has a 20 per cent stake in each of the consortium led by Oxley Holdings.

"The group's strong financial position has enabled it to seize the opportunity to acquire properties to increase its land bank for future redevelopment," Lian Beng said.

Its net construction order book stood at S$661 million as of Aug 31, which will provide a steady work pipeline through fiscal 2020. The group said it is cautiously optimistic about the construction industry and will continue to tender for projects.