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Bukit Sembawang Estates Revenue Drops 60% For Half-Year 2025/26 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  Okay, let's unpack this. We are jumping straight into the unaudited interim financial statements,
• 0:14
  for Bukit Semboong Estates Limited or BSEL.
• 0:19
  Yeah, for the first half of their 2025-2026 fiscal year.
• 0:23
  And these numbers at first glance, they can look a little startling.
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  They really can. And I think that's why our mission today is so important.
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  We need to move past that initial shock of the big drop in revenue. Right.
• 0:34
  And really focus on the strategic decisions. We want to understand why the performance
• 0:39
  shifted, how the company is deploying massive amounts of capital right now.
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  And what that signals for their future, especially in, I mean,
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  the super competitive Singapore property market. Exactly. It's about finding
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  the signal and the noise.
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  So let's start where everyone starts, the headline figures, because that revenue
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  number. Yeah. It's a big one. It is. Revenue fell 60 percent.
• 0:58
  60. From $324 million down to about $130 million.
• 1:03
  That's a huge drop. It's a massive percentage. Yeah. But here is the first really
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  critical piece of context. While revenue dropped by 60%, the bottom line profit
• 1:12
  after tax the drop there was way less severe.
• 1:15
  It only decreased by 25%. Wait, hang on.
• 1:18
  So a 60% top line hit, but only a 25% hit to the bottom line.
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  I mean, how does that math even work? That feels totally contradictory.
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  It does on the surface. But the answer, it lies in the cost of sales.
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  If you look at the gross profit, it only went down by 15%. And that's because
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  their cost of sales dropped even faster than revenue did.
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  It was down a staggering 73%. Wow.
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  Okay, so what does that tell us? It tells you that the sales mix,
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  they did have this period from projects like 8 at BT and Pollen Collection,
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  must have carried a much better margin.
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  So they recognized less revenue, but the revenue they did recognize was more profitable.
• 1:59
  Exactly. It acted as this buffer that really softened the blow to the overall profit.
• 2:03
  Got it. Which is the key insight there. They managed to control the damage,
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  even though, of course, earnings per share still went down.
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  Right. From about 24 cents to 18 cents.
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  But now we can get to the core reason for that revenue drop in the first place.
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  Which is all about project timing. It's all project timing.
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  The property development segment's revenue on its own dropped by 61%.
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  And that's because they just successfully finished a couple of massive projects?
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  Precisely. The revenue decline is because of the absence of contributions from
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  two big ones that just wrapped up.
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  That would be the Atelier and LV at MB.
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  They both caught their temporary occupation permit, the P-DOP.
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  Yes. And obtaining the T2P is the key moment.
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  That's when the bulk of the revenue and profit gets fully recognized.
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  It's kind of the end of the accounting journey for that project.
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  So once those finish lines are crossed, you just have this natural gap in revenue
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  until the next wave hits. You've got it.
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  So they went from four big projects contributing in the last period down to
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  really just two this time around.
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  That explains the entire headline drop. Okay. So here's where it gets,
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  for me, really interesting. Looking at the financial maneuvering behind the
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  scenes, the finance costs.
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  They spiked by a massive 1,065 percent from almost nothing, just felt 0.1 million dollars.
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  Up to a million dollars. That number just jumps off the page,
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  doesn't it? It really does.
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  And that spike is a direct consequence of a big decision they made.
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  They decided to borrow and borrow heavily.
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  Okay. They drew down a $121 million term loan from an existing credit facility.
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  And it was earmarked specifically for project-related purposes.
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  So they took on new debt, which immediately translated into higher interest expenses.
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  That's it. And at the same time, as a sort of double whammy,
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  their interest income fell 71%. So they're paying more to borrow and earning less on their cash.
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  Yeah, they had less cash sitting in fixed deposits because they were spending
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  it and the rates they were getting were lower.
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  It's a clear signal that BSEL has shifted from being a cash-rich saver to an
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  active borrower and a spender.
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  Which is a perfect lead-in to the balance sheet because despite the profit dip,
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  total assets actually went up by 8%. How are assets growing when cash is flying
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  out the door? This is the heart of the story.
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  This is BSEL turning cash into future inventory.
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  The single biggest driver was a huge increase in one line item,
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  development properties.
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  That figure basically doubled. It surged from about $518 million to almost $1.1 billion.
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  It doubled. That is not a small move. It's a massive strategic bet.
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  And it was almost entirely driven by upfront costs for future mega projects,
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  specifically land betterment charges or LBCs.
• 4:47
  Right. The LBC. Can you just quickly explain what that is and why it's so important here? Sure.
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  The LBC is basically a tax you pay to the government in Singapore to get approval
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  to develop land more intensively. to build more on it. Exactly.
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  So for BSEL, paying these LBCs for projects like NIM and Luxus means they're
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  paying hundreds of millions right now to secure the right to build really valuable
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  new properties, mostly in the landed segment, for years to come.
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  So they're turning cash on hand into secured, high-value, long-term inventory.
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  That's the perfect way to put it. And that explains the cash strain we see.
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  Cash and equivalents drop from over $580 million down to about $283 million.
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  The cash went to two main places, those huge LBC payments we just talked about
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  and significant dividend payouts, about $52 million.
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  So they're rewarding shareholders while investing heavily.
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  And on the other side of the ledger, total liabilities jumped 138 percent.
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  Which is almost entirely that $121 million term loan we identified earlier.
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  That's the funding for all this future development. So the cash flow statement
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  just confirms this, this massive investment phase. This net cash outflow of almost $300 million.
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  And the cash used in operating activities was even higher, around $367 million.
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  That number tells you this period wasn't about business as usual.
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  It was about heavy, deliberate capital deployment. Right. Pouring money into
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  the pipeline for the next decade. Precisely.
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  So how does all this spending line up with what's happening in the broader Singapore
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  property market? Is this a good time to be making such big bets?
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  Well, the industry context is actually quite favorable. Demand for private homes
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  in Singapore is still remarkably resilient.
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  And there's data to back that up. There is. The latest URA stats show transaction
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  volume actually increased by over 44% quarter on quarter.
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  The market is active. And what about the segment BSEL is focused on?
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  Landed properties. That's the crucial part. Landed properties are leading the price growth.
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  They are up 1.4% in the quarter, which outpaced the rest of the market.
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  So BSEL is betting hundreds of millions on new landed developments,
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  NIM and Luxus, at the exact moment that segment is showing the most string. That's the strategy.
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  They're positioning themselves right where the growth is. So with all that investment
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  in the ground, what's the plan for the next 12 months? How do they turn this
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  spending back into revenue?
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  Their plan is all about activating that pipeline. They're getting ready to launch
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  their new landed development, Pollen Collection 2. That's the immediate payoff.
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  And they'll keep selling the existing projects too, I see. Of course.
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  Selling units at 8, at BT, and the rest of the first pollen collection.
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  And critically, they're moving ahead with planning for Luxus Hills Phase 10.
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  And I saw they used the phrase prudent and measured approach for timing these launches.
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  It did. Which means they're watching the market very carefully.
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  They want to launch these high-value projects at the best possible moment to
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  maximize the return on that huge capital investment.
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  So if you synthesize all of this, the revenue drop, the debt cost spike,
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  doubling their future inventory.
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  It paints a completely different picture than just a business downturn. It absolutely does.
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  The core narrative is that this was a financially intense, high spending,
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  but low revenue phase. It's a bridging period.
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  A bridge between the projects that just finished, like Levy at MB,
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  and the massive new pipeline they're building. Exactly.
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  The financial statements are really just a document of that reinvestment,
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  funded by debt and driven by those huge LBC payments.
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  So what this all means for you, the listener, is that BSEL is positioning itself
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  very aggressively for the future.
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  They're preparing new launches like Pollen Collection 2 and Lexus Hills right
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  into the market segment-landed properties. That's showing the most strength right now.
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  They are getting set for some serious future revenue.
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  And this leaves us with a provocative thought for you to consider.
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  Given the huge LBC payments and that $121 million loan that defined this period,
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  how might the successful launches of Pollen Collection 2 and Lexus Hills impact
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  their cash position and their debt levels in the next year or two.
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  Especially if that strong price growth in landed properties continues.
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  The whole calculation hinges on that. That is the high stakes game they're playing.
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  A great question to chew on. That's been our Deep Dive. We'll catch you next time.