
My fellow shareholders,
2008 was a busy year for our company. We began with
strong first half year results. Our Utilities and Industrial
Parks divisions recorded steady results, our ferries in
our Resort Operations showed a 19% increase year on
year in the number of passengers arriving in Bintan, and
our Property Development division showed a strong and
growing order book. However the global financial and
economic crisis has had an adverse impact on all our
businesses during the third and fourth quarters of the
year.
Utilities Our Utilities business began 2008 with cost pressures
from rapidly escalating fuel prices, and demands from our
clients to moderate the resulting electricity tariff increases.
We undertook a number of efficiency initiatives, including
completion of the conversion of our 19 power generators
at the Batamindo Industrial Park to dual fuel capability of
natural gas or heavy fuel depending on supply costs. A
similar conversion has been made in our Bintan Resorts
power plant in northern Bintan, now allowing it to use either
light or heavy fuel oil. We also carried out the initial feasibility
and design works on our new coal fired power plant to be
located in our Bintan Industrial Estate in southern Bintan.
The declining fuel prices in the second half of the year on
the back of the worsening financial and economic crisis
eased cost pressures on the business. However this was
more than offset by declining demand for utility services as
manufacturers in our industrial parks reduced production
and therefore purchases of electricity and water services
with sharply falling demand in global trade. Utility demand
is expected to shrink as long as global trade remains at
these low levels. Therefore we have been continuing with
our efficiency efforts coupled with close monitoring of our
customer demands to reduce the impact on our business,
and we have postponed development of our coal fired
power plant until the financing market improves.
Industrial Parks
Our Industrial Parks business has also had a mixed
year. Early in the year we saw an increase in occupancy
as manufacturers found us increasingly competitive in
comparison to the rapidly increasing operational costs
in China. Our core tenant base remains focused on the
electrical, electronics and medical related industries.
Unfortunately as global manufacturing contracts,
demand for factory space is likely to fall. To date,
our tenants have adjusted by reducing production
schedules from three shifts to two, so we have not lost
any rentals in our core tenant base. However, several
garment-related tenants in our Bintan Industrial Estate have shifted out, as part of the macro trend of the
garment industry moving out of Indonesia to countries
with lower operating costs.
Our Industrial Parks marketing agent has been working
hard on bringing new industrial clusters into our parks,
and we hope they can be successful in 2009, despite a
difficult business environment.
Resort Operations
Our Resort Operations Division had an exciting year
with orders placed for two new high speed ferries
scheduled for delivery in May 2009. The new ferries can
cruise at 38 knots (approximately 70 km/h) compared
to the current ferries speed of about 28 knots. The
new ferries have the latest wave interceptor hardware
which should significantly improve ride comfort
especially during the choppy monsoon period and
will also provide a dedicated separate business class
section to cater to the increasingly affluent visitors
Bintan is attracting.
During the year, Bintan also played host to a number
of visiting celebrities and dignitaries as our reputation in
the destination market increased. Overall visitor arrivals
to Bintan also increased significantly during the year to
398,000 from 333,000 in 2007.
Property Development
In May we had the official Groundbreaking Ceremony
of our Lagoi Bay Development project, attended by
numerous dignitaries who enjoyed a wonderful dinner and
party on the beach in Lagoi Bay. At the launch, we also
announced S$45 million of additional land sales bringing
our total order book to over S$67 million including a new
shopping mall and two new hotel projects.
As the financial crisis worsened during the third and
fourth quarters, some of our purchasers of land
requested for delays for commencement and completion
of construction. Accordingly, we had permitted all
purchasers to delay commencement of construction
by 12 months, and we have also shifted our timeline for
delivery of completed infrastructure.
Several projects were completed during the course
of the year. These include a new 65,000 square foot
shophouse style development in our Town Center, a
new 20,000 square foot shopping mall also in the Town
Center, a new 3 hectare children’s adventure zone and
water sports center at our Reservoir, a new 100,000
square foot Resort Centre Complex (comprising bowling
alleys, shopping mall, restaurants, health club, etc) at
the Nirwana Resorts, and a S$3.5 million upgrade in
the utility infrastructure in the Bintan Lagoon Resort. In
addition the new Sahid Tourism and Hospitality School
opened with its first class of 55 students.
Financial Results
Although our final results for the year were not as
strong as in the preceding year, we remain in a good
financial position, with strong cash flow as evidenced
by our S$72 million in EBITDA and our conservative
balance sheet with gross borrowings of S$86 million
as at end 2008.
We should also highlight that in compliance with
accounting standards, we do not recognize cash
deposits on land sales in the Property Development
Division until the final transfer of property title to the new
owner, even though such receipts are not refundable.
Since early 2008, we inform shareholders of our land
sales order book, which represents sales contracts which
have been entered into, pending completion of the sales
transactions. Based on past experience, it takes about
18 to 24 months for completion after the initial contract.
Hence, 2009 should result in the completion of some
sales contracts entered into in 2008.
We thank you for your continued support, and we will
work tirelessly to improve our company.
Sincerely,
Mr Lim Hock San
Non-Executive Chairman
Independent Director |
Mr Eugene Park
Chief Executive Officer
Executive Director |
|