Assessing a Diversified Property Developer

Article Highlights

• SLB Development turns profitable for FY2020

• Positive and Increasing free cash flow for FY2019 and FY2020

• Net Debt to Equity ratio declined in FY2020

• Lian Beng Group Limited is the single largest shareholder

SLB Development Limited (“SLB Development”) is a diversified property developer with extensive experience across the residential, mixed-use as well as industrial and commercial sectors, and property development projects.

In 2019, SLB Development established a fund management business in partnership with experienced industry veterans, which aims to actively pursue investment opportunities in real estate funds and various segments of the real estate value chain.

SLB Development has built a network of business relationships with other property developers and contractors and has expanded its presence beyond Singapore to the PRC, UK and Australia.

Evaluating SLB Development Limited using 4 Financial Metrics

Revenue & Net Profit

For FY2020, SLB Development’s revenue declined by 3.1% year-on-year to S$46.16 million. The decrease was mainly due to the absence of revenue recognised from T-Space at Tampines in FY2020 as the project was substantially completed in June 2018 with revenue on sold units fully recognised in FY2019. However, the decline was offset by an increase in revenue recognised from Mactaggart Foodlink and INSPACE.

SLB Development’s profit after tax came in at S$9.92 million for FY2020, as compared to a loss of S$3.6 million a year earlier. This was due to a higher gross profit and a lower loss from its joint venture and associates.

For the trailing 12-month financial performance, its revenue declined by 1.7% to S$45.36 million. This was attributed to the implementation of safe management measures at work sites which caused a slowdown in the construction progress of the Group’s development projects. Despite that, profit after tax rose by 5.3% to S$10.46 million due to lower taxation and finance costs.

Free Cash Flow

For the past 2 financial years, SLB Development has generated positive and increasing free cash flow. For FY2020, free cash flow stands at S$33.56 million, which is a growth rate of 2.38%.

For its trailing 12-month financials, the Group registered negative free cash flow, which was primarily due to lower cash flow from its operating activities and a negative change in working capital.

Leverage Ratio

SLB Development has been in a net debt position since FY2019. For FY2020, its net debt to equity stood at 0.15 times, which is a significant improvement from FY2019’s figure of 0.34 times. This can be attributed to the decline in debt level and a slight increase in cash level for the Group.

However, the ratio has crept up to 0.25 times in the recent trailing 12-month period. This was due to the increase in debt level and lower cash level for the period.

Ownership

The single largest shareholder belongs to Lian Beng Group Limited, which has a 77.55% stake in SLB Development.

Lian Beng Group Limited is Singapore’s homegrown construction group that provide one-stop business solutions with integrated civil engineering, in-house construction-related business, resource and transportation, production of ready-mixed concrete and asphalt premix.

Other notable shareholders in SLB Development includes:

• Mr. Teo Kee Bock, who was previously Executive Chairman and Managing Director of Super Group Limited.

• Mr. Lin Yu Cheng, Chief Executive Officer and Executive Chairman of Leader Environmental Technologies.

• Mr. Ching Chiat Kwong, Executive Chairman and Chief Executive Officer of Oxley Holdings Limited.

Conclusion and Prospects

Despite the stagnant revenue in the past 2+ years, SLB Development has turned around in terms of profits. However, investors will have to keep a lookout for the high net debt to equity ratio and potential decline in free cash flow.

In terms of prospects, the Group will continue to actively monitor the progress to ensure smooth development and completion of the projects and focus on taking the necessary initiatives to moderate any financial impact arising thereon.

In the long run, the Group is cautious when seeking opportunities to replenish its land bank and will continue to explore business opportunities in the region through acquisition, joint ventures and/or strategic alliances that will complement its property development business. It will also prudently seek suitable opportunities to diversify its income streams further for sustainable future growth.

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