LHN Limited’s Strategic Insights: EV Growth, Myanmar Risk & RTS Impact
LHN Limited, a Singapore-based real estate management services group, has released key updates ahead of its Annual General Meeting (AGM) on January 24, 2025. The company has addressed shareholder questions, revealing details that could influence its future trajectory and, potentially, its share price. Below are the highlights:
1. Minimal Exposure to Myanmar Despite Political Instability
The company disclosed that it only operates one block of serviced residences in Myanmar under a management service arrangement without owning any property in the country. Myanmar operations contributed less than 1% to both the Group’s total revenue and assets in FY2024, reducing the overall risk from the region. This proactive management of country risk should reassure investors concerned about political instability in Myanmar.
2. Facilities Management: Revenue Growth Amid Profit Decline
The Facilities Management (FM) segment grew revenue by S\$4.2 million year-on-year to S\$35.5 million in FY2024. However, profit before tax fell by S\$7.5 million to S\$4.7 million, mainly due to the absence of a one-off gain from the disposal of Getgo Technologies and underperformance of new car park projects in Hong Kong. Finance costs also slightly increased to S\$0.6 million, with interest rates on lease liabilities ranging from 1.48% to 4.59% per annum. The company plans to expand this segment by securing more external contracts and investing in technology to improve operations.
3. Renewable Energy and EV Charging: A Growth Catalyst
LHN’s Energy Business, which includes solar energy and electricity solutions, is poised for growth. The company has incorporated clean energy into its real estate operations since 2018, with properties like 202 Kallang Bahru and 10 Raeburn Park already featuring solar panels and EV charging stations. LHN expects additional contracts in solar energy and EV charging projects to drive this segment forward, aligning with global trends toward renewable energy adoption.
4. Commercial Business and Rising Finance Costs
The commercial sector faced challenges due to higher finance and operating costs. LHN indicated plans to explore growth opportunities in Singapore, though no significant turnaround measures were detailed. Investors may need to monitor this segment closely for future developments.
5. Currency Hedging and Site Expenses
The Group acknowledged potential currency risks from operating in Myanmar, Indonesia, and Cambodia but will only implement hedging strategies if deemed necessary. Additionally, site maintenance and preparation expenses increased by S\$10 million year-on-year, driven by higher service volumes in FY2024.
6. Johor-Singapore RTS Impact: Minimal Effect Expected
The upcoming Johor-Singapore Rapid Transit System (RTS), expected to start operations in 2027, may reduce demand for lower to mid-tier rental properties in Singapore. However, LHN anticipates minimal impact on its Space Optimisation Business, as its residential portfolio does not focus on this segment.
Key Takeaways for Shareholders
- LHN’s diversification into renewable energy and EV infrastructure presents a promising growth avenue.
- The company’s limited exposure to Myanmar mitigates risks from political instability in the region.
- Higher finance costs and operational inefficiencies in the commercial and FM sectors warrant close monitoring.
- Minimal impact is expected from the Johor-Singapore RTS, reassuring investors in the residential segment.
These updates offer insights into LHN’s strategic direction and could influence investor sentiment. Shareholders may view the company’s renewable energy initiatives as a potential growth driver while keeping an eye on operating cost challenges in other segments.
Disclaimer
This article is for informational purposes only and does not constitute financial advice or an offer to buy or sell any securities. Readers should conduct their own research and consult with a financial advisor before making investment decisions.
