This article first appeared in The Edge Financial Daily on February 21, 2018

KUALA LUMPUR: A 65% drop in revenue caused Bina Darulaman Bhd (BDB) to deliver a net loss of RM10.42 million in the fourth quarter ended Dec 31, 2017 (4QFY17), which dragged its full-year results into the red for the first time since 1998.

The developer incurred a 3.43 sen loss per share in the recent quarter, from earnings per share of 7.65 sen in 4QFY16, when it booked a net profit of RM23.27 million.

Quarterly revenue shrank to RM54.68 million from RM153.92 million a year ago, mainly due to lower contributions from the group’s property, and road building and quarry divisions.

The losses incurred in the latest quarter caused BDB’s FY17 — already suffering from low profits over the earlier nine months — to book a net loss of RM7.81 million, from RM34 million in net profit a year ago. Full-year revenue declined 29.41% to RM251.71 million from RM356.59 million previously.

The Kedah-centric property and construction player blamed the much weaker performance in FY17 on fewer billings and delayed launches.

In a statement, group managing director Datuk Izham Yusoff (pic) said BDB’s property development segment suffered a 62% decline in revenue to RM81.4 million in FY17 from RM213 million in FY16, no thanks to lower progress billings.

“The drop in revenue was also a result of continued stringent housing loan application rulings which limited customers’ access to desired funding. This resulted in many customers having to cancel their bookings,” said Izham.

“Many of those who went on to purchase had to make compromises by switching from earlier preferred products priced at more than RM400,000 to more affordably priced products to facilitate successful funding application,” he added.

BDB’s ongoing medium- to high-end residential projects in Bandar Darulaman and Darulaman Perdana townships were also at advanced stages of development, which added to the lower recognition in the segment. In comparison, the segment’s revenue and profit in the previous year were significantly contributed by land disposal, said BDB.

Meanwhile, its leisure segment — which introduced a water theme park in its Darulaman Putra township last year — also continued the loss-making trend from FY16.

Going forward, Izham expects BDB to have a better balance in the supply of affordable housing units, with more property projects to be rolled out.

“Approximately 75% of products that we plan to roll out in 2018 are priced up to RM400,000, making it easier for customers to have access to their expected loan margins.

“With this better balance, we are confident we will be able to address the issue of high loan application rejection rates and failure to obtain desired loan margins that resulted in customers having to cancel their intended purchase for higher priced products last year,” he said.

Izham is also confident that BDB’s position — with a land bank worth RM344.4 million, healthy cash reserves of just under RM120 million, and a low gearing of 0.27 times — can support a pickup in earnings in FY18.