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Corporate Information
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CHAIRMAN'S MESSAGE
On behalf of the Board of Directors, I am pleased to present to you the
Annual Report of IPC Corporation Limited ("IPC" or "The Group") for the
financial year ended 31 December 2011 ("FY2011").
Year 2011 was a year troubled with economic and financial turbulence, mainly from the Europe zone and USA. It was also a year inflicted with natural disasters, which caused a further dent in the economic and social health of the global economy.
Japan, one of the Group's core markets, was hit by the 11 March 2011 Tsunami, which immediately triggered the Group to take precautionary measures to hold back it's property investment and development plans until the later part of 2011 where the Group purchased a 190 guest room business hotel in Matsuyama. It is the 4th business hotel the Group has purchased since it started investing in Japan in mid 2009. The Group's other property investment in Japan in 2011 was a condominium development in Tsukimino on 22 February 2011.
The U.S. economy was not in any favourable position either. Property prices were depressed and did not provide interesting opportunities from foreclosure of Single Family Residential ("SFR") units for 2011.
Amid the difficulties and challenges resulted from the global financial woes and natural disasters, the Group still managed to record a revenue of S$43.813 million and a profit after tax of S$5.34 million for FY2011, an increase of 89.3% and 3% as compared to the previous year's revenue and profit respectively.
FINANCIAL OVERVIEW
Group sales increased by 89.3% to S$43.813 million for year ended 31
December 2011 when compared to S$23.143 million recorded in the previous
year. The increase was attributed essentially to the sales of condominium
projects in Uraga and Tsukimino, Japan and rental income of the three business
hotels in Japan (Asagaya, Asakusa and Okayama). Correspondingly, gross profit
increased by 81.3% to approximately S$9.752 million as compared to S$5.379
million of the previous year.
The Group's other gains of approximately S$6.383 million was mainly attributed
to gains of S$8.049 million from the revaluation of investment properties in
Japan whilst weighed down by unrealised foreign translation loss, net of about
S$1.419 million. The unrealised foreign translation loss was mainly due to the
strengthening of exchange rate of Japanese Yen against Singapore Dollars.
Resulting from the improvement on gross profit, coupled with other gains and
other income, the Group registered a profit before tax of S$8.864 million and an
after-tax profit of S$5.340 million for FY2011.
As at 31 December 2011, the Group's cash and cash equivalents remain at a
healthy position of about S$58.411 million.
IPC shall continue to proactively implement its defined strategies in markets
which can give better returns, both in the short and long term, so as to enhance
shareholders' value.
DEVELOPMENTS IN FY2011
JAPAN
The Group since investing in Japan in mid 2009 has identified the type of asset class to invest to meet its corporate objectives, both in the short and long term. The implementation of its twin strategies - focusing on residential apartments by buying land to develop as well as buying distressed completed/ uncompleted apartment units, and investing in business hotels, has served the Group well and it shall be continued. The Group has the plan and intention to invest and expand its business hotels portfolio to reach economies of scale that will generate a sustainable income stream and profitability.
The Group started 2011 with the purchase of a piece of land, of approximately 1,336 sq. meter to develop a 6-storey condominium project comprising 38 apartment units in Tsukimino ("Tsukimino Project"). The purchase was made on 22 February and is the 4th condominium project in Japan for the Group. The total cost of the project is estimated at JPY 920 million (approximately S$14.08 million).
The 11 March 2011 Japan Tsunami led to massive devastation and the economy was derailed. Fortunately, there was no physical damage to the Group's properties. Further investment was stalled as a result of the earthquake. However, in Q4 2011 investment activity resumes and a business hotel was acquired in December 2011, the 4th hotel in the Group's collection in Japan.
The Group's 4th business hotel is in Matsuyama, Ehime Prefecture. The hotel is currently being operated under the name of Matsuyama Washington Hotel Plaza ("Matsuyama Hotel"). The Matsuyama Hotel has 190 guest rooms and the total acquisition cost is around JPY 910 million (approximately S$15.3 million). It shall commence to contribute to the Group's revenue in FY2012.
The Uraga condominium development project comprising 77 apartments at Uraga, which was acquired in 2010, was successfully developed and completely sold in 2011.
The Group shall continue to evaluate residential land for development in the greater Tokyo region and other Prefectures where there is a strong constant demand.
CHINA
The constant worry of the over-heating economy has given rise to many cooling measures undertaken by the Chinese government. In order not to be caught by a sudden downturn, the Group has instead focused on its property consulting and investment (PCI) activity in China, in particular the 2nd tier cities. This strategy allows the Group to stay engaged in the Chinese property market yet limiting its risk.
In Q3 2011, the Group undertook a property consultancy in Zhuhai of about RMB 1 million. In the same quarter, the Group sold the office/commercial space for about RMB 12 million, as part of its asset divestment programme.
In the final quarter of 2011, the Group made an investment by taking a 10% interest in a new development project, an office cum commercial building called Aeron Plaza in Foshan. The total investment amounted to RMB 25 million. Project completion is expected to be in 2013.
Until the global situation has improved and the general property climate in China has stablised, the Group shall continue to focus on its PCI activity in China.
USA
The buy-sell activity of SFR units in USA in 2011 was subdued primarily due to the depressed property market. Therefore, no significant transactions were recorded for the year under review.
The Group shall be focusing its efforts to sell and clear its current inventory
DEVELOPMENTS IN 2012
On 31 January 2012, the Group purchased a distressed uncompleted development condominium project designed for 85 apartment units in Oppama ("Oppama Project"), which is located about 50km to the south from the center of Tokyo, Japan.
The Oppama Project is a new 6-storey development and building completion is scheduled to be by Q2 2013. The Group has at the same time entered into a Sales and Purchase Agreement with two Japanese real estate companies to pre-sell the entire project to them. Full payment from these two companies will be made upon the project completion and delivery of the 85 apartment units. The total project cost is estimated at JPY1.9 billion (approximately S$30.8 million), which shall be funded by internal resources.
FUTURE PLANS AND PROSPECTS
Japan shall continue to be one of the key markets for the Group. More resources shall be allocated to this market since there are opportunities with our defined strategies.
In addition, the Group shall continue to execute its strategies in China and clear its property inventory in the USA.
DIVIDEND
In appreciation of the support demonstrated by our shareholders in FY2011, the Board of Directors is recommending a final dividend of S$0.0025 per ordinary share.
WORD OF APPRECIATION
On behalf of the Board of Directors, I would like to take this opportunity to thank our shareholders, management team, business associates and our valued customers for their dedication, support and contributions made to the Group for the past year. We look forward to your continual support as we strive to create greater shareholder value for all in 2012.
NGIAM MIA JE PATRICK
Chairman & Chief Executive Officer
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