SINGAPORE (Dec 30): PhillipCapital has downgraded Regal International Group from “buy” to “neutral” and lowered its target price to 24 cents from 43 cents as the company needs longer time to recognise earnings from its various projects now in the pipeline.

The Kuching-based developer has almost sold out certain projects like Tropics I but it “remains to be seen” if the subsequent launches can do equally well. “The benefits of potential buoyant sales, even if realised, will only be realised towards 2017 as the projects’ construction complete,” states the brokerage in a Dec 29 note.

The company recognises revenue from properties sold using what is called the complete contract method, where the bulk of revenue from a sold unit can only be recognised upon completion of construction and when the ownership of the unit transfers to the new owner.
This accounting standard can help present a fairer representation of the profitability of the developers and earnings can be less lumpy.

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