SINGAPORE (Oct 14): SLB Development, the property development subsidiary of construction firm Lian Beng Group, has diversified into the fund management industry. The company hopes to generate recurring income that can smoothen out its otherwise lumpy earnings from property development.
SLB announced that it has made its first investment of £2.0 million ($3.5 million) into a UK residential fund, called PinnacleResidential Fund, which is managed by Pinnacle Investment Management Limited, a fund management subsidiary of UK-based Pinnacle Group Limited.
“While we continue to seek growth for our core property development business – which has been executing ongoing projects that have been selling well – we recognise the need to diversify our income streams,” says CEO Matthew Ong.
“The fund management business is expected to facilitate our business development goals by enhancing our network of contacts and providing access to new groups of prospective clients and potential partners,” he adds.
The diversification into fund management was approved by SLB’s shareholders at an EGM on Sept 26.
For the 1Q20 ended Aug 31, SLB reported revenue of $7.7 million, down 68.1% y-o-y. The company attributes the lower revenue to the absence of revenue contribution from an earlier project, T-Space @ Tampines.
However, SLB reported earnings of $1.9million, reversing from a loss of $4.1 million in the year earlier quarter. Back then, the company was hit by losses from associates and joint ventures, specifically, marketing costs incurred from residential projects such as Affinity @ Serangoon and Riverfront.
SLB says it "will continue to monitor the property market closely and take appropriate action when necessary" with regards to these projects.
The company on Sept 25 sold for $13.5 million its wholly-owned subsidiary, Wellprime, which is used to hold a development site at 50 Lorong 21 Geylang. SLB expects to book gains from this sale in 2QFY2020.
While it will be "prudently seek suitable" new opportunities for future growth, SLB is "cautious" when it comes to replenishing its land bank.
SLB’s balance sheet remains healthy with cash and cash equivalents of $51.8 million, and a low net gearing of 0.2 times.
Year to date, SLB shares have declined 35.3% to close at 11.1 cents on Oct 14. It was listed in April 2018 at 23 cents.