Lian Beng shareholders query subsidiary's purchase of Thye Hong Centre

SLB Development's proposed acquisition of Thye Hong Centre is part of its business expansion to replenish its land bank.
SLB Development's proposed acquisition of Thye Hong Centre is part of its business expansion to replenish its land bank.PHOTO: ST FILE

SINGAPORE (THE BUSINESS TIMES) - The acquisition of Thye Hong Centre by Lian Beng's subsidiary SLB Development has raised questions over whether the move was an indicator that the group will be able to resume distributing dividends going forward.

No final dividend was declared by Lian Beng for its FY20 ended May 31 "so as to retain funds for working capital requirements of the group in view of the uncertainty due to Covid-19 pandemic", said the group in its financial statements.

In response to shareholders' queries ahead of its annual general meeting, Lian Beng said the company and its subsidiary SLB development are "operated as separate companies".

SLB Development said earlier this month that it has entered into a sale and purchase agreement with Thye Hong Manufacturing for the acquisition of Thye Hong Centre at 2 Leng Kee Road, a freehold six-storey industrial building, for $112.5 million, exclusive of goods and services tax.

"SLB Development's proposed acquisition of Thye Hong Centre is part of its business expansion to replenish its land bank, which is in SLB Development's ordinary course of business," said Lian Beng in a statement on Sunday (Sept 27).

Meanwhile, Lian Beng's priority is to ensure it has sufficient resources to tide over the current challenges as a result of the pandemic.

These challenges include manpower shortage arising from the quarantine of foreign workers, as well as the additional time and costs incurred to implement the required safe-working practices.

"We will consider resuming dividend distribution when our operations generate a comfortable amount of cash and profit for us to do so," said Lian Beng.

Asked by shareholders about the latest update on occupancy and rental collection across the group's properties, Lian Beng said that some of its tenants at its retail properties have been impacted by the the pandemic and circuit breaker measures. In response, the group is working with the tenants to assist them according to guidance provided under the government regulations.

 

Occupancy remains relatively stable across its investment portfolio in Singapore, said Lian Beng. However, the company is also exposed the UK hospitality sector through its minority stakes in several hotels there.

"We understand that hotels in the country have experienced declines in room occupancies as a result of the pandemic," said the group.

On the completion date of the construction of high-rise, multi-user industrial complex Defu Industrial City, Lian Beng said that the estimated completion date is in first quarter of 2021 but it expects further delays due to controlled restart measures. It declined to disclose the profitability of the project due to "commercial sensitivities".

Lian Beng also said it is unable to provide guidance on profit margins or a forecast on the expected value of its properties in the next six months.

Shares of Lian Beng fell 1.3 per cent or half a cent to $0.37 on Friday.