Guocoland's Q3 Profit Dives 93% To $2.6m

Source : The Business Times, April 19, 2008

Sharp drop due to lower contribution from projects in Singapore, China

GUOCOLAND Ltd yesterday reported a 93 per cent plunge in third-quarter net profit to $2.6 million for the quarter ended March 31, down from $34.4 million a year ago.

Guocoland said that this was mainly due to a drop in gross profit to $11 million from $45.9 million, due to lower profit contribution from property development projects in Singapore and China.

Revenue also fell, down 27 per cent to $104 million from $143.4 million a year ago.

In its filing with the stock exchange yesterday, Guocoland said that it incurred an income tax expense of $6.9 million for the quarter, mainly due to an underprovision of $4.6 million for a completed and fully sold project in China arising from non-deductibility of certain expenses.

Guocoland also explained that in November 2007, it completed its acquisition of a 100 per cent interest in Hainan Jing Hao Asset Limited, which in turn held a 90 per cent stake in Beijing Cheng Jian Dong Hua Real Estate Development Company Ltd, the company undertaking the Dongzhimen project in Beijing (DZM Project).

To date, an aggregate of 3.22 billion yuan (S$650 million) of the purchase price of 5.8 billion yuan has been paid to the vendors of the DZM Project, Beijing Beida Jade Bird Company Ltd and its related corporations.

The balance has been withheld pending resolution of disputes, said Guocoland, which has projects in Singapore, China, Malaysia and Vietnam.

The company said that contraction in global economies, especially in the US, volatility in the global financial markets and rising global inflation would slow down the economies of Singapore and other Asian countries.

'The group has built up a solid base which will enable it to realise good growth and earnings from its landbank. Barring unforeseen circumstances, the group's results for the fourth quarter (ended June 30, 2008) will be substantially better than the third quarter (ended March 31, 2008).

'In view of the current market situation, the results for the full year ending June 30, 2008 are expected to be lower than the results for the previous year ended June 30, 2007.'

Inventory has increased to $3.8 billion from $1.6 billion, mainly due to a jump in Guocoland's landbank arising from completion of the en bloc acquisitions of Sophia Court, Palm Beach Garden, Leedon Heights and Toho Garden condominiums in Singapore and the acquisition of the Dongzhimen site in Beijing.

Earnings per share for the quarter, fully diluted, came to 0.31 of a cent, compared with 5.55 cents a year ago.

At the close of the trading day, Guocoland shares ended unchanged at $3.55 apiece.