UOB-KH's Q1 Net Profit Slips 29.5%

Source : The Business Times, May 14, 2008

BROKERAGE UOB-Kay Hian recorded slimmer takings for the first quarter ended March 31, 2008, as it failed to repeat the stellar performance it put up during the industry boom last year.

Its total income slipped 22 per cent to $134.1 million, from $172.1 million last year. Its profit after tax attributable to equity-holders dropped 29.5 per cent to $43.2 million, from $61.2 million. Its earnings per share fell to 5.96 cents this year, from 8.44 cents last year.

UOB-Kay Hian explained its poorer showing by saying: '2007 was an exceptional year with record turnover for the stock broking industry and the group. Market volume in Singapore and the region began to slow in (the) fourth quarter (of) 2007 and continued into (the) first quarter (of) 2008.'

The brokerage said its revenues and net profit slipped 'in tandem with the general decline in trading volume and lower commission income'. 'The first quarter of 2008 was challenging for the financial markets. Market and trading conditions were volatile during this period due mainly to concerns over the impact of the sub-prime mortgage on financial institutions, the effects of the credit crunch on consumer spending and longer-term economic growth prospects. Market turnover in Singapore was lower compared to the same period in 2007,' UOB-Kay Hian said.

Its commission income slipped to $105.1 million, from $142.8 million the year before. That was partially offset by a higher interest income of $22.2 million, compared with $18.6 million last year - due mainly to a larger margin portfolio. But, with the lower commission income, commission expenses also fell - decreasing 31 per cent, from $35.4 million in 2007 to $24.3 million this year. Its finance expenses also fell significantly - by 27 per cent - due to lower working capital requirements.

The group's balance sheet remained strong, with UOB-Kay Hian maintaining a net asset value of $996.0 million, as at March 31, 2008. The brokerage said its funding requirements were substantially reduced this year, due to lower loans advanced to support trading and initial public offer activities in Singapore and Hong Kong.

Looking ahead, UOB-Kay Hian said that it expects to remain profitable for the current year, barring any significant deterioration in market sentiment.

The investment house recently beat out seven other bidders for a 15-year-lease site at Scotts Road/Anthony Road. Its record $34 million tender works out to $242.5 per sq ft for the 93,461 sq ft plot - double the original estimates by property market insiders. Its bid was also some 11 per cent more than what had been paid for the first transition office site in Newton in August 2007.

UOB-Kay Hian said then that it would develop the site into its new office.