Hong Leong Asia issues profit alert, expects net loss for 1H

TheEdge Wed, May 06, 2020 01:02pm - 3 years View Original


KUALA LUMPUR (May 6): Singapore-listed Hong Leong Asia Ltd's (HLA) operating unit Hong Leong Global Enterprises Ltd (HLG) issued a profit warning expecting to report a net loss for the six months ending June 30, 2020 (1H20), compared to a net profit for 1H19.

HLG said in a filing with Singapore’s stock exchange that the anticipation of a net loss is in view of the Covid-19 pandemic disruption to the operations at its main hospitality business in Cameron Highlands, Copthorne Hotel Cameron Highlands (CHCH). 

“Depending on further measures, if any, which may be implemented by the Malaysian government to flatten the infection curve, the company is unable at this point to provide any accurate estimate of the loss but does not expect the impact on cash and shareholders’ equity to be material,” HLG said.

The group stated that the operations at CHCH had halted since March 18, when the movement control order (MCO) was first enforced by the government. Currently, the MCO period is scheduled to end on May 12.

Although restrictions imposed under the MCO have just been relaxed, HLA does not expect the operations at CHCH to return to normalcy anytime soon as travel restrictions and border controls remain in place and precautionary measures still have to be observed.

Apart from subsidies provided by the Malaysian government, CHCH has also taken steps to reduce operating cost, especially in areas of energy consumption and the suspension of guest broadband and satellite television services during the MCO period. 

As announced in February 2020, HLA said it will continue with its plans to renovate CHCH to make it more comfortable for guests, and to proceed with the development of a 40-unit high-rise apartment building and undertake major refurbishment of the old commercial complex into additional hotel and function rooms in Cameron Highlands. 

Nonetheless, the group advised shareholders and investors to exercise caution when dealing in the shares in the company and should consult their stockholders, bank managers, solicitors, accountants or other professional advisers if in doubt.

Besides the hospitality business, HLA is also involved in the building material business in Malaysia via its cement maker subsidiary, Tasek Corp Bhd. 

The main business units of HLA are the diesel engine unit and the building material unit. It also has other business units, such as the industrial packaging unit and the air-conditioning system unit.

For 1H19, the profit attributable to owners of the company was S$20.5 million, compared to a loss of S$38.4 million for 1H18, mainly due to the absence of the net loss incurred from Henan Xinfei Household Appliance Co Ltd, Henan Xinfei Refrigeration Appliances Co Ltd and Henan Xinfei Electric Co Ltd (collectively known as Xinfei companies).  Xinfei companies ceased to be subsidiaries of the group with effect from May 21, 2018.

Revenue for the group was S$2.055 billion for 1H19, an increase of S$38.8 million, or 1.9%, from S$2.016 billion for 1H18. The increase in revenue was mainly due to higher revenue recorded by its diesel engine and building material units.

For the full financial year ended Dec 31, 2019 (FY19), HLA reported a higher profit attributable to owners of the company (profit after tax and minority interests), up by S$40.4 million to S$34.4 million, in contrast to a loss of S$6 million for FY18.

Meanwhile, revenue came at S$4.104 billion for FY19, an increase of S$318.5 million, or 8.4%, from S$3.786 billion for FY18. 

As at 11.40am today, HLA's share price had risen one Singapore cent or 1.98% to 52 Singapore cents (RM1.58), bringing it a market capitalisation of S$377.65 million. Meanwhile, Tasek Corp's share price was up five sen or 0.88% to RM5.75, with a market capitalisation of RM696.57 million. 

Meanwhile, HLG's share price was up 8.33% to 26 Singapore cents, bringing it a market capitalisation of S$25.05 million.

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