PROPERTY developer Bukit Sembawang Estates (BSEL) on Friday (Jul 19) defended its capital structure and growth plans, among other things, in response to a slew of questions from the Securities Investor Association (Singapore), or Sias.
This came ahead of the company’s annual general meeting on Jul 26.
Sias had questioned if BSEL was over-capitalised and whether its management has consistently delivered returns exceeding its cost of capital. It also asked about BSEL’s share price, which it noted has fallen below the levels observed during the pandemic lows of 2020. And in FY2023, the company’s net profit plunged 58.5 per cent to S$34.4 million.
The company replied that it adopts a “prudent approach to development”, and has a conservative capital structure with low gearing.
BSEL’s “strong cashflow position” allows it to conserve financial resources for more acquisitions of properties for development and investment, it said in a seven-page statement. “This also provides the group with the financial ability to weather uncertainties in the market, and enables the group to move and act swiftly when an opportunity or need arises.”
On management’s performance, BSEL said it adopts a hurdle rate that considers the cost of capital, cost of debt and project risks.
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“The board regularly reviews the performance of management in achieving the agreed goals and objectives… (and) continuously reviews and refines its business strategy to increase corporate value and improve capital efficiency,” it said.
The company also pointed out that it takes a “long-term portfolio view” of all its development properties, and will continue to closely monitor prevailing market conditions to determine the appropriate time to purchase additional land, if necessary, to supplement its existing land bank.
Currently, its land bank remains “healthy”, and there is a “steady sales pipeline” of landed housing and condominiums, on top of a long-term recurring income asset, it said. “Together, these drive the group’s revenue generation.”
Sias also questioned the “relatively high turnover rate” in BSEL’s senior management team in the past 18 months. Its chief operating officer left in February 2023, general manager of marketing and sales in November 2023, and head of project in July 2024. All three were at BSEL for two to four years.
BSEL highlighted that the three employees left for either individual career decisions or for an “expected and satisfactory retirement”, and their cessation did not materially affect its operation.
“The company has in place work systems to address the operational needs arising from key staff resignations including succession plans,” it said.
Sias also questioned the benefit of spreading out the sales of BSEL’s new projects.
The property developer explained that landed housing projects – such as its Pollen Collection in Seletar Hills Estate – are sold in batches since the quantum is much higher and demand is smaller.
In doing so, BSEL will be able to maintain a steady supply that co-relate to demand, as well as adjust prices in tandem with the market and “achieve (the) target average selling price for the development”, it said.
Shares of BSEL closed at S$3.59 on Friday, down 0.3 per cent or S$0.01.
