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Hiap Hoe Limited: First Half 2025 Financial Results · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  Welcome to the Deep Dive. Today,
• 0:10
  we're looking into Hypo Limited's results for the first half of 2025.
• 0:14
  We've got their inner report here. Our goal really is to untack their financial
• 0:18
  performance, figure out what's
• 0:20
  driving things, and maybe get a sense of what's coming next for them.
• 0:23
  Yeah, and what's quite interesting here is how the top line numbers look okay,
• 0:27
  But when you actually dive deeper, the picture gets, well, a lot more nuanced,
• 0:31
  especially that journey from profit before tax down to the final net profit
• 0:35
  figure. There's a real story there. Okay, let's get into it then.
• 0:38
  Because, you know, revenue showed a decent increase, right? Up 5.6% to $62 million.
• 0:43
  And it looks like that was mostly hotels, about a $4.6 million lift from higher occupancies.
• 0:48
  That seems positive, yeah. A good sign for their core business.
• 0:51
  That hotel performance is definitely a plus. Good operational result there.
• 0:55
  But you're right to focus on the profit figures, because that's where things
• 0:58
  get, let's say, complicated.
• 0:59
  Profit before tax actually dropped quite sharply down 54.2% to $5.3 million.
• 1:05
  But then, paradoxically, the net profit for the period, the bottom line,
• 1:10
  it just surged up an incredible 439.2% to $5.4 million. Wow.
• 1:16
  Okay. See, that's the bit that really stands out.
• 1:18
  How do you get such a massive swing between those two numbers?
• 1:21
  Is it just some kind of accounting quirk or something else going on?
• 1:25
  Well, the dip in profit before tax, that mostly comes down to other income.
• 1:28
  It plummeted from about $24.4 million this time last year to only $3.1 million in the first half 2025.
• 1:35
  And the reason is pretty clear. Last year's number included that big $20.78
• 1:39
  million gain from selling the Four Points Hotel in Melbourne.
• 1:42
  That was a one-off. Take that away. And other income is much smaller.
• 1:46
  Ah, okay. So the comparison was skewed by that big sale last year.
• 1:49
  Makes sense. But then what explains the huge increase in the net profit if the
• 1:52
  pre-tax profit was down?
• 1:54
  Right. So the net profit jump, that was almost entirely due to a substantial
• 1:58
  income tax credit, about $2.7 million.
• 2:01
  Turns out it was from an over-provision in a previous year. And guess what?
• 2:05
  It was also linked back to that same Melbourne hotel disposal.
• 2:08
  So basically, they got a tax refund related to that pass sale.
• 2:11
  This one item completely flipped the net profit result.
• 2:14
  A tax credit. So not really from current operations then. It's more like an
• 2:17
  adjustment from the past boosting the present number.
• 2:20
  Okay, so if we try to look past that Melbourne sale effect, both the gain last
• 2:24
  year and the tax credit this year, what else shaped the results?
• 2:27
  What else was happening operationally?
• 2:29
  Well, looking beyond that, their financial insurance did well.
• 2:32
  Fair value gains were up strongly, but 86%, adding $12 million.
• 2:36
  So their investments performed.
• 2:38
  And on the cost side, finance costs were down almost $5 million.
• 2:43
  Lower borrowing costs helped there. That's a definite positive.
• 2:46
  However, foreign exchange losses more than doubled at $4 million.
• 2:50
  Mostly, it seems, from the Aussie dollar, euro, and U.S. dollar moving against the Singapore dollar.
• 2:55
  So global currency swings biting bit. Right. The usual currency volatility.
• 3:00
  Okay. Let's shift gears slightly. What about the balance sheet,
• 3:03
  the overall financial position?
• 3:05
  I saw the net asset value per share nudged up at tiny bit to 152.20 cents.
• 3:12
  And cash from operations looked pretty stable, around $12.7 million.
• 3:16
  That's right. Operations generated a similar amount of cash.
• 3:18
  But if you look at cash flow from investing activities, there's a really noticeable shift.
• 3:23
  In the first half of 2024, investing activities actually generated $26.5 million,
• 3:28
  mainly from that hotel sale, of course.
• 3:30
  This year, in 2025, investing activities used $1.1 million.
• 3:34
  Small outflow. It just underlines again, that absence of a major asset sale this period.
• 3:40
  Last year's sale-funded acquisitions, this year is more. Well,
• 3:43
  business as usual on the investing front.
• 3:44
  Okay, so putting all this together, the operational improvements in hotels,
• 3:48
  the one-off tax boost, the investment gains, but also FX headwinds,
• 3:51
  what does this signal for their future outlet? What are they saying?
• 3:54
  Yeah, their commentary seems quite focused. They're talking about strengthening
• 3:58
  recurring income, so improving rental yields from their properties and pushing
• 4:02
  hotel occupancy rates higher. That seems to be the core strategy now.
• 4:06
  The question is, though, can they do that effectively enough?
• 4:09
  Because they also flag rising operating costs, especially in hospitality.
• 4:14
  Labor, utilities. It's a challenge everywhere.
• 4:16
  So trying to grow the reliable income streams while managing those rising costs.
• 4:20
  That's the balancing act.
• 4:21
  Do they mention the wider economy, inflation, uncertainty? They do acknowledge
• 4:25
  the global economic uncertainties and inflationary pressures.
• 4:28
  They know it could impact their investment portfolio performance.
• 4:32
  But importantly, they also state they have sufficient banking facilities and
• 4:36
  liquidity, so they feel prepared to meet their obligations in the near term.
• 4:40
  Suggests a cautious approach, I think.
• 4:43
  Aware of the risks, but confident in their financial footing for now,
• 4:47
  optimizing what they've got. Interesting.
• 4:48
  So it's a story where, yes, a big past transaction is still echoing through
• 4:52
  the results with that tax credit.
• 4:54
  But underneath, there's this clear operational focus on squeezing more value
• 4:59
  out of their existing assets, especially hotels and rentals. Exactly.
• 5:02
  It really shows where you can't just look at that huge net profit jump and celebrate, you know.
• 5:07
  Yeah. You have to understand the why. The context is everything.
• 5:11
  It's not just about the final number. Absolutely.
• 5:13
  So for anyone looking at HIPO, the question seems to be how much weight do you
• 5:17
  give that underlying operational effort versus the noise from these larger, less frequent events?
• 5:22
  And can that focus on recurring income truly offset the economic pressures they
• 5:26
  and everyone else seem to be facing? Something to watch.
• 5:30
  Music.