Chip Eng Seng

[money]

In Q3 financial report, CES clocked S$194m of property development primarily due to 33M recognition. What I fail to understand is the the gross profit hardly move......why? In actual fact its gross margin in Q3 2012 is a lot worse than in Q3 2011. Could someone pls enlighten me? Thanks

Because margins from 33M, Prive and Belysa was not very fantastic. Its in the low double digit margins compared to the standard 20% because.....the CEO misread the market and thought the property market will soften.

But the good news is, they will soft launch the strata retail units at Park Hotel Alexander from 7000SGD psf to rev up their margins again

do you think they will keep the strata units for capital appreciation and rental?

[propertyinvestor]

Q3 2012 GM at 21% (55,898/262,692) But Q3 2011 GM at 61%!! (44,027 / 72,304).....what a big difference? Could mispricing cause such a big differnce

33M has 388units. Assume property development is exclusively 33M, S$194,094,000/388 = S$500k per unit....looks right?
Assume most of the gross profit comes from 33M, that would work out to be 55,898,000 / 388 = $144k per unit. How does that sound?
If that sounds right, then what on earth are they selling in Q3 2011 that can make gross profit of $44m with $72m revenue?

33M recognition is one shot because its a foreign development. In Q3 2011, the profit came mainly from the disposal of Grange Infinite and the last unit few units in CityVista Residences.

[revelationofpyramids]

In the results report CES says: "With the completion of the (33M) development, the Group had started to deliver the completed residential units to the purchasers in 3Q2012. The Group has also commenced recognising the revenue and related expenses for residential units which has been delivered to the purchasers in the current quarter."

Also: "The Group’s Melbourne 388-units residential development project, 33M achieved its stage one completion in 3Q2012 and stage two completion in October 2012."

The words "commenced recognising", "started to deliver the completed units" and "stage two completion in Oct 2012" all seem to suggest that there is a high chance only part of the total revenue and profits of 33M are recognised in Q3. If this is right, then more will be booked in Q4. Its difficult to estimate how much profit per unit is 33M then, although a quick guess could be about S$100k per unit. Does that mean Tower Melbourne will fetch $50m+ profit since it has more than 500 units?

Also, not a single cent in Prive and Belysa profit is recognized yet, as profit is recognized only on TOP next year for these 2 EC projects.

[propertyinvestor]

In the results report CES says: "With the completion of the (33M) development, the Group had started to deliver the completed residential units to the purchasers in 3Q2012. The Group has also commenced recognising the revenue and related expenses for residential units which has been delivered to the purchasers in the current quarter."

Also: "The Group’s Melbourne 388-units residential development project, 33M achieved its stage one completion in 3Q2012 and stage two completion in October 2012."

The words "commenced recognising", "started to deliver the completed units" and "stage two completion in Oct 2012" all seem to suggest that there is a high chance only part of the total revenue and profits of 33M are recognised in Q3. If this is right, then more will be booked in Q4. Its difficult to estimate how much profit per unit is 33M then, although a quick guess could be about S$100k per unit. Does that mean Tower Melbourne will fetch $50m+ profit since it has more than 500 units?

Also, not a single cent in Prive and Belysa profit is recognized yet, as profit is recognized only on TOP next year for these 2 EC projects.

HUh? profits for Local development are recognised on a POC basis. Belysa and Prive are progressive for sure. Where did you get the info that Prive and Belysa is recognised only upon TOP?

[money]

In the results report CES says: "With the completion of the (33M) development, the Group had started to deliver the completed residential units to the purchasers in 3Q2012. The Group has also commenced recognising the revenue and related expenses for residential units which has been delivered to the purchasers in the current quarter."

Also: "The Group’s Melbourne 388-units residential development project, 33M achieved its stage one completion in 3Q2012 and stage two completion in October 2012."

The words "commenced recognising", "started to deliver the completed units" and "stage two completion in Oct 2012" all seem to suggest that there is a high chance only part of the total revenue and profits of 33M are recognised in Q3. If this is right, then more will be booked in Q4. Its difficult to estimate how much profit per unit is 33M then, although a quick guess could be about S$100k per unit. Does that mean Tower Melbourne will fetch $50m+ profit since it has more than 500 units?

Also, not a single cent in Prive and Belysa profit is recognized yet, as profit is recognized only on TOP next year for these 2 EC projects.

HUh? profits for Local development are recognised on a POC basis. Belysa and Prive are progressive for sure. Where did you get the info that Prive and Belysa is recognised only upon TOP?

They are non progressive cos they are ECs

[BeDisciplined]

Yup. Both Prive and Belysa are EC and under new accounting rules, revenue, profit and cost can only be recognized upon TOP and both are going to TOP in 2014.

At current price, does CES have any meat left? Has seen it stayed at that price for quite some time.

[propertyinvestor]

Yup. Both Prive and Belysa are EC and under new accounting rules, revenue, profit and cost can only be recognized upon TOP and both are going to TOP in 2014.

At current price, does CES have any meat left? Has seen it stayed at that price for quite some time.

No they are not. Im very sure of that because at the AGM, somebody brought this question up and the CEO mention that the rules has been clarified that for local development, Progressive method will still apply while for overseas development, lump sum recognition will be applied upon delivery of vacant possession.

CES still has plenty of meat. Look out for the pasir panjang development and Park Hotel Alexander!

[ngcheeki]

Yup. Both Prive and Belysa are EC and under new accounting rules, revenue, profit and cost can only be recognized upon TOP and both are going to TOP in 2014.

At current price, does CES have any meat left? Has seen it stayed at that price for quite some time.

No they are not. Im very sure of that because at the AGM, somebody brought this question up and the CEO mention that the rules has been clarified that for local development, Progressive method will still apply while for overseas development, lump sum recognition will be applied upon delivery of vacant possession.

Based on the what was stated in the AR 2011 of CES, what BeDisciplined said is corrected.

"With the adoption of the new accounting standard INT FRS 115,
the Group’s financial performance for future financial years is expected to be more volatile. Revenue and related expenses from overseas sales of development units and Singapore residential units sold under the DBSS(“Design, Build and Sell Scheme”), EC (“Executive Condominium”) and Deferred Payment Scheme (“DPS”) will only be recognised when the development units are delivered to the purchasers."

http://info.sgx.com/listprosp.nsf/07aed3...b0026de9b/$FILE/Chip%20Eng%20Seng%20AR%20LOW%20Res.pdf

[revelationofpyramids]

In CES 2012 1H results media release first page:

“CES’ performance in 2Q 2012 was affected by the lack of profit recognition on projects sold previously. These include our Melbourne project and our DBSS and EC projects in Singapore which had enjoyed a healthy level of sales. 33M, our Melbourne project and Privé and Belysa, our joint venture EC projects are fully sold while our DBSS project Belvia is already 79% sold.”
- Executive Chairman, Mr Lim Tiam Seng

One can also look at NRA's report on CES which lists out the estimated completion dates of all its projects, with a remark: "Percentage of completion method is used to recognise
revenue and expenses of My Manhattan and Fulcrum." Notice that Prive, Belysa and Belvia are not named, altough they are in the list of projects.

[money]

Yup. Both Prive and Belysa are EC and under new accounting rules, revenue, profit and cost can only be recognized upon TOP and both are going to TOP in 2014.

At current price, does CES have any meat left? Has seen it stayed at that price for quite some time.

No they are not. Im very sure of that because at the AGM, somebody brought this question up and the CEO mention that the rules has been clarified that for local development, Progressive method will still apply while for overseas development, lump sum recognition will be applied upon delivery of vacant possession.

CES still has plenty of meat. Look out for the pasir panjang development and Park Hotel Alexander!

perhaps what the CEO meant was for the normal condos like MyManhattan, these would still be accounted for progressively