OUE posts 1H21 swung to net profit after year-earlier fair value loss

The OUE Bayfront building in Signapore’s central business district. Credit: Shenton WireThe OUE Bayfront building in Signapore’s central business district. Credit: Shenton Wire

OUE reported Tuesday it swung to a first half net profit of S$30.1 million from a year-earlier net loss of S$207.2 million, mainly on the absence of a year-ago fair value loss on U.S. Bank Tower.

Revenue for the January-to-June period fell 49.5 percent on-year to S$152 million on lower contributions across business divisions, the property developer said in a filing to SGX.

After divesting U.S. Bank Tower in September 2020 and partially divesting OUE Bayfront, OUE Tower and OUE Link in March 2021, revenue from investment properties fell to S$105.2 million in the first half of this year from S$139.1 million in the year-ago period, OUE said.

The hospitality division’s revenue fell by S$18 million on-year to S$25.8 million in the first half on the full-year impact on room occupancy and banquet sales by ongoing travel restrictions and Singapore’s government-imposed restrictions to stem the spread of the Covid-19 virus, OUE said.

Hospitality headwinds

“The group’s hospitality division is currently executing the phased asset enhancement works to transform and rebrand Mandarin Orchard Singapore to Hilton Singapore Orchard. Expected to be launched in early 2022, Hilton Singapore Orchard will be ready to tap on the growth of Singapore’s hospitality scene as recovery begins and travel resumes,” OUE said.

The designation of the Crowne Plaza Changi Airport (CPCA) as a stay-home notice dedicated facility and designated crew accommodation facility until February 2022 is expected to support the property’s returns, OUE said.

The development properties division posted first half revenue of S$200,000, compared with S$98.5 million a year earlier on the absence of OUE Twin Peaks units sold under deferred payment plans.

OUE proposed an interim dividend of 1 Singapore cent a share, compared with no dividend declared in the year-ago period; the dividend is set to be paid on 23 September.

Cautious outlook

OUE issued a cautious outlook.

OUE said the divestments of U.S. Bank Tower and the partial divestments of OUE Bayfront properties helped the group pare down existing debt and strengthen cash reserves amid a challenging operating environment.

“The group has sufficient liquidity to meet its near-term debt obligations and operational needs. The group will also continue to exercise prudence in managing its non-essential capital and operating expenditure as the prolonged pandemic is still impacting businesses and economies worldwide,” OUE said.

The property developer noted the Singapore government is aiming to ease travel restrictions from September as vaccination rates are increasing in the city-state.

“However, the hospitality sector continues to face significant challenges in the near term as global tourism is expected to recover to pre-pandemic levels only by 2024,” it added.

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