OSK’s Q1 profit drops 26% on lower property and construction contributions

KUALA LUMPUR (May 30): Diversified group OSK Holdings Bhd’s net profit for the first quarter ended March 31, 2022 (1QFY22) fell 25.89% to RM86.27 million from RM116.41 million in same quarter last year, due to lower contributions from its real estate and construction businesses.

Revenue fell 5.69% to RM306.46 million from RM324.96 million, according to the group’s stock exchange filing.

Earnings per share fell to 4.18 sen from 5.65 sen. No dividend has been declared.

Its real estate segment saw a 55% drop in pre-tax profit to RM26.5 million, while revenue fell 21% to RM175.1 million, mainly because projects launched in 2021 are at their early stages of construction and have not reached the revenue and earnings recognition threshold.

“In addition, 1Q22 showed a significant decline in profit contribution from our joint venture project in Melbourne, Australia, from RM15.9 million in 1Q21 to a loss of RM0.5 million in 1Q22. 1Q21 saw the acknowledgment of settlement benefits from the last group of buyers upon completion of construction of Melbourne Square (MSQ) Phase 1. Despite sales picking up as Australian borders reopened, the sale of units completed in 1Q22 was not sufficient to cover expenses, resulting in a slight loss,” OSK said.

Its construction segment, meanwhile, posted a pre-tax loss of RM1.1 million compared to a pre-tax profit of RM0.4 million a year earlier. “The segment’s performance is dependent on the number of projects that have been rolled out by the property development division. The construction progress of the new projects undertaken did not generate sufficient revenue to cover its overhead, resulting in a loss in 1Q22,” he said.

Regarding the outlook, the group expressed confidence that it would operate satisfactorily for the remaining quarters of the fiscal year ending December 31, 2022 (FY22).

In a separate statement, Group Executive Chairman Tan Sri Ong Leong Huat said OSK expects revenue recognition from new property development projects launched in 2021, namely MIRA @ Shorea Park, over the next quarters as construction progresses, as well as the progress billing of ongoing projects. (i.e. YouCity III, Bandar Puteri Jaya and Iringan Bayu).

“In Melbourne, Australia, the group will continue to focus on selling the remaining completed residential units in Phase 1 of Melbourne Square (MSQ), aided by the reopening of Australia’s international borders, which will have a positive impact on attracting potential foreign buyers. Nevertheless, the recent rise in interest rates could pose a challenge to MSQ’s sales growth and its impact will be closely watched.

“Additionally, the easing of social and travel restrictions since 4Q21, leading to its complete removal in April and May 2022, has brought much respite in terms of foot traffic, rentals and room occupancy for our division. real estate investment and our hotel segment, respectively. The occupancy rates of Plaza OSK, Atria Shopping Gallery and Faber Towers remained high as of March 31, 2022 at 93%, 87% and 73%, respectively,” it said. he declares.

The group also noted that the financial services and investment holding segment is expected to continue to perform well in FY22, with RHB Group expected to continue to generate stable returns for the group with its 10-year stake. .18%.

“In addition to conventional money lending, the capital finance division will focus on expanding its range of financing products to government officials and Islamic finance businesses in Malaysia. In Australia, the capital finance division will focus on expanding its loan portfolio by tapping into the growing demand for commercial real estate finance,” Ong said.

In addition, the resumption of shipments of OSK cables and Industrialized Building System (IBS) wall panels in Malaysia and Singapore to meet construction and development projects also bodes well for the industries segment.

“Profit margins for both products also showed significant improvement in 1Q22 due to improved production efficiency and the ability to increase product selling prices to cushion the impact of higher prices. raw materials,” Ong added.

As of this writing on Monday, OSK shares were unchanged at 90 sen, valuing the group at RM1.89 billion.

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