SINGAPORE - Far East Orchard saw its first quarter net profit fell by about two-thirds to S$5.6 million from S$16.9 million in the same period last year.
This was mainly due to lower profits from its hospitality joint ventures and the hospitality assets in Perth, Australia, and higher interest expense from bank borrowings.
Revenue for the three months to March 31 shrank by 22.9 per cent to S$39.4 million, mainly due to the end of certain lease agreements in Australia and New Zealand in late 2016 and weaker performance from its two hospitality assets in Perth, Australia.
This was partially offset by revenue contribution from the opening of Oasia Suites Kuala Lumpur in April 2016.
Other income was $1.2 million, or 44.7 per cent lower at S$1.2 million, mainly due to lower interest income from advances to joint venture companies.
Its share of results of joint ventures sank by 94 per cent to S$1.3 million, mainly due to lower contributions from the hospitality joint ventures as a result of the share of a one-off gain on sale of Vibe Hotel Sydney in the previous corresponding period.
Earnings per share slumped to 1.33 cents from 4.11 cents previously while net asset value per share firmed to S$2.94 compared to S$2.91 as at Dec 31.
Looking ahead at the hospitality sector, Far East noted that the outlook in Singapore is likely to remain weak with a challenging operating environment.
Revenue per available room (RevPar) is expected to be impacted by further increase in hotel room supply this year, strength of the Singapore dollar and weak corporate demand.
In Australia, the outlook for the hospitality industry remains positive.
"Over the next three years, while international visitor trips and domestic visitor nights are forecast to grow at 6.2 per cent and 3.2 per cent per annum respectively, the pace of growth is expected to vary amongst the different states that the group operates in. Capital cities such as Sydney and Melbourne may experience faster growth vis-à-vis Perth and Brisbane," Far East noted.
Following the sale of Vibe Sydney and increase in supply in Melbourne and Perth, the outlook for the group remains challenging.
As for property development, the group's joint venture property development projects - RiverTrees Residences and Woods Square in Singapore are on track.
RiverTrees Residences has been fully sold and is expected to obtain its temporary occupation permit this year.
However, muted economic growth and supply overhang is anticipated to continue to weigh on the growth of the Singapore residential and commercial property market in the near-term.
In Sydney, its joint venture with Toga Group for a mixed-use residential and retail/commercial development, Harbourfront Balmain, is on track with its development schedule and sales target.
It is expected to be completed this year.
Meanwhile, the group's first residential project in Britain is progressing as planned.
It plans to refurbish the heritage property located in the prime central borough of the City of Westminster, London, into a mixed-use development comprising residential accommodation and a restaurant. A new residential building will also be developed on the site.
"The group remains confident about the long-term fundamentals of the UK property market and continues to closely monitor developments in the UK as it prepares to leave the European Union," Far East said.