Ho Bee's profits climbed 230.5% to S$52.1m

Thanks to disposal gain from Chongbang Holdings.

According to Phillip Securities Research, Ho Bee reported 1Q13 PATMI of S$52.1mn. This represents a 230.5% y-y increase, mainly attributed to the S$32.7 million disposal gain in its China investment, Chongbang Holdings. Higher revenue recognition coming from development projects, Trilight (residential) and One Pemimpin (industrial), resulted in S$60.8mn revenue, a 68.4% y-y increment.

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How do we view this?
Overall, results were largely in-line with our expectations. Although 3M13 revenue formed 41% of FY13 estimates, we do not foresee strong luxury residential sales amidst a challenging year ahead.

While 3M13 PATMI accounts for a mere 9% of FY13 estimates, the strong pre-commitment level of The Metropolis prompts greater optimism. We expect strong reval gain upon its completion in 2H13 to bridge the gap. Additionally, the revaluation would boost its NAV and provide stronger recurring income.

Challenging outlook for local residential sales
In 1Q13, revenue from property development rose 75% y-y to S$58.1mn, owing to the revenue recognition for prior quarter unit sales of Trilight and One Pemimpin.

Presently, Ho Bee have majority of their unsold inventory concentrated in Sentosa. With the cooling measures instilled, demand for new units at Sentosa has tapered off. With its strong balance sheet, Ho Bee should hold out and wait for opportune sales timing for its unsold residential units. Hence, we expect weaker local residential sales for FY2013.