Bukit Sembawang Estates books $53.8m impairment loss

This consists of losses from Fraser Residence Orchard due to the pandemic.

Bukit Sembawang Estates Limited booked a total of $53.8m impairment loss for the serviced apartment units in its latest financial year, according to a filing.

This is based on the developer’s response to SGX’s queries on the disclosure of valuation methodology and material assumptions used in determining the value of the property.

This comprises Fraser Residence Orchard, Singapore’s (FROS) $44.1m loss recognised in FY2020 and $9.7m recognised in FY2019 due to the impact of the pandemic in the serviced apartments market. The group has commissioned an independent valuer, Edmund Tie and Company (SEA) to value the said property.

The valuation methodology for the impaired serviced apartment units was based on the discounted cash flow (DCF) method, which allows an investor to make an assessment of the long-term return that is likely to be derived from a property.

Bukit Sembawang Estates also addressed the question regarding the 17% decrease in cost of sales for Q4 FY2019 from $34m to $28.4m when revenue had increased by 29% for the same period.

Its board responded that included in development properties for Q4 FY2018 is the cost of development properties of $1m relating to units sold under projects which did not recur in Q4 FY2019.

These adjustments are said to have included $6.7m relating to the sales commissions on units sold under deferred payment schemes and $2.1m relating to enhancement works for unsold units. Excluding the impact of said adjustments, the cost of sales was $37.2 in Q4 FY2019 compared to $34m incurred in Q4 FY2018, resulting in an increase of 9% YoY along with the revenue which grew 29% YoY.

Bukit Sembawang Estates added that the corresponding gross margin was also 49% compared to 40%. The higher gross margin on sales for Q4 FY2019 was attributed to the higher contribution from high gross margin projects, namely, Luxus Hills Phase 8 and 9, which had no such revenue and gross margin in Q4 FY2018.