1Q17 PATMI decreased 18.9% YoY to S$85.5m due to a range of factors, including the absence of contributions from two JV projects (Bartley Ridge and Echelon) which achieved TOP in 2016, exchange losses, softer contributions from M&C and lower investment income from the realization of an investment in Real Estate Capital Asia Partners (a private real estate fund).

We understand that the M&C’s numbers were affected by losses in its New York hotels, increased room supply, declining corporate demand in Singapore and an unfavorable FX impact from the decline of the pound Sterling.

In terms of the topline, 1Q17 revenues grew 8.4% YoY to S$783.8m mainly due to healthier performances from the property development division given the progressive handover of units in Phase 1 of Suzhou Hong Leong Center (HLCC) and strong sales at Gramercy Park, partially offset by the absence of contributions from HAUS@SERANGOON GARDEN and Jewel @ Buangkok, which attained TOP last year.

We deem this set of results to be somewhat below our expectations and 1Q17 numbers now form only 13.6% of our full year forecast. We put our BUY rating and fair value estimate of S$10.50 under review.

Source: OCBC Research - 12 May 2017