Chairman's Message

Chairman's Message (Chinese)

Dear Shareholders,

On behalf of the Board of Metro Holdings Limited (“Metro” or the “Group”), it is my pleasure to present our Annual Report for the financial year ended 31 March 2020 (“FY2020”).

FY2020 was a volatile year for the global economy due to challenges brought about mainly by the ongoing trade war between China and the United States. This was further exacerbated by the COVID-19 pandemic, which has led to an unprecedented global economic crisis.

Against these headwinds, I am heartened to report that our recurring income base, which we strategically built up over the years, has allowed us to sustain our profitability amid these challenging times.

In FY2020, the Group registered a 22.3% year-on-year (“YoY”) growth in revenue to S$210.3 million, an improvement of S$38.3 million over last year (“FY2019”) mainly driven by revenue recognition from the sale of property rights of the residential development properties in Bekasi and Bintaro, Jakarta. Metro’s FY2020 profit before tax (“PBT”) was S$39.7 million, as compared to S$108.0 million in FY2019, mainly due to fair value loss of the Group’s investment properties held by our subsidiary, associates and joint ventures of S$8.5 million, as compared to a fair value gain of S$49.1 million in FY2019. As a result of the COVID-19 pandemic, the Group also recorded a fair value loss of S$7.9 million on our short term and long term investments in FY2020, as compared to a fair value gain of S$9.3 million in FY2019. Recognising the challenges faced by our tenants, the Group also extended rental rebates and waivers to tenants of properties held by our subsidiary, associates and joint ventures, amounting to S$13.1 million. These were mitigated by the divestment gain of S$10.6 million from the disposal of the Group’s 50% equity interest in its retail associate in Indonesia, PT Metropolitan Retailmart (“PT MRM”), as well as gains on disposal of short term investments of S$0.9 million and foreign exchange differences of S$2.7 million.

As at 31 March 2020, the Group maintained a healthy balance sheet, with net assets of S$1.5 billion. The Group’s strong financial position coupled with the S$1 billion Multicurrency Debt Issuance Programme established in October 2018 provides headroom for us to seize growth opportunities in our key markets of Singapore, China, Indonesia, the UK, and more recently, Australia.

Strategic Acquisitions and Expansion of Regional Presence
In line with Metro’s strategy to drive the diversification of its investment portfolio across the region and generate a stable and recurring income stream, the Group continued to grow its presence in Singapore and China, and expanded its footprint into Australia during the year under review.

During the year under review, we identified opportunities in a Singapore commercial property namely 7 & 9 Tampines Grande, a prime commercial mall (“The Atrium Mall”), being part of the landmark mixed-use development The Atrium (“晶融汇”) in Chengdu, China, and a portfolio of defensive Australian office and retail assets. Through these investments, we continued to strengthen our recurring income and portfolio diversification to achieve resilient growth.

The average occupancy of the Group’s five investment properties in Guangzhou, Shanghai, London and Singapore as at 31 March 2020 was 94.3%.

In view of the increasing demand within the decentralised office market, in April 2019, we acquired two blocks of premium Grade-A office towers, namely 7 & 9 Tampines Grande, through a 50% interest in a joint venture at Tampines Regional Centre which is well connected by both private and public transport, with easy access to major expressways.

The property enjoys a high average occupancy of 88.6% as at 31 March 2020 with a well-diversified tenant profile across various industries including conglomerate, technology, financial services and insurance industry. The buildings were conferred the Green Mark Platinum Award by the Building and Construction Authority and the LEED Gold Certification by the US Green Building Council.


In May 2019, we successfully entered into the most prime location in the high growth city of Chengdu with the acquisition of a 25% equity stake in The Atrium Mall, a LEED Gold certified property, for an investment amount of RMB200 million (S$39.8 million). This ties in well with our strategy of investing in quality properties with the potential to improve returns through multiple active asset management strategies, including asset enhancement and tenant mix restructuring.

The Atrium Mall is strategically located in the heart of the Chun Xi Road Business District and surrounded by international hotels, upscale office buildings and modern shopping malls such as Chengdu International Finance Square and Taikoo Li Chengdu. The Atrium Mall also features excellent connectivity to the public transportation network being connected by two train stations and over 20 bus lines.

In Jakarta, Indonesia, the construction milestones of the two residential projects namely Trans Park Juanda, Bekasi and Trans Park Bintaro are progressing well and are on track. Trans Park Juanda, Bekasi comprises five 32-storey residential towers, where four towers have topped off and Trans Park Bintaro comprises two residential towers where one of the towers has topped off. Sales for both projects are underway.

Due to the COVID-19 pandemic restrictions all retail outlets in the Bekasi and Bintaro malls were closed from April to June 2020 except for Transmart, resulting in a slowdown in sales and construction. Despite this, sales continued online through Facebook, Instagram, Zoom and YouTube.

United Kingdom
For the Middlewood Locks development project in Manchester, we completed Phase 1 construction work for 571 units and the sold units are being handed over in stages. Over 800 apartments – 277 units in Phase 1 and all 546 units in Phase 2 – were sold to Get Living, a UK private rented sector venture backed by Delancey Oxford Residential, APG and Qatari Diar.

We remain on track towards another major milestone for this development project in Manchester with the submission of planning approval of Phase 3 development in May 2020. Phase 3 comprises two residential blocks to provide approximately 190 new homes, circa 5,000 sqft of retail, leisure and amenity accommodation together with 5,000 sqft of office net lettable area. Phase 3 is expected to commence construction in early 2021 with completion expected in 2023.

The entire mixed-use development will eventually provide 2,215 new homes and about 750,000 sqft of commercial space including offices, hotel, shops, restaurants, a convenience store and gym.

To drive the diversification of the Group’s investment portfolio across the region and generate a stable and recurring income stream, we expanded our regional presence into Australia in November 2019. Through our first collaboration and partnership with the Sim Lian Group, Metro acquired a 20% equity stake in a portfolio of 14 quality freehold properties comprising four office buildings and 10 retail centres that span across four key states in Australia, namely New South Wales, Victoria, Queensland and Western Australia. As at 31 March 2020, the portfolio average occupancy stood at 96.7% and with a long overall weighted average lease expiry of approximately 7.5 years.

To align the interest with our strategic partner and to grow the Group’s asset management arm, we have also invested a 20% equity stake in a newly incorporated asset and investment management company, namely Sim Lian – Metro Capital Pte. Ltd., to manage the portfolio in Australia.

As part of the Group’s strategy in rationalising our retail business, the Metro Centrepoint store was closed upon its lease expiry in October 2019. In December 2019, Metro also divested our Indonesian retail associate PT MRM which operated 11 Metro stores across Jakarta, Bandung, Surabaya, Makassar, Solo and Manado, to our existing partner for a profit whilst retaining a trademark licensing fee.

We registered lower revenue of S$108.9 million in FY2020 as compared to S$130.6 million in FY2019 mainly due to the absence of the Metro Centrepoint’s sales as well as the shortening of operating hours in February and March 2020 arising from the outbreak of COVID-19 pandemic.

Despite the lower revenue, the Group recorded an operating profit of S$10.4 million, mainly due to the divestment gain of S$10.6 million from the sale of the Group’s 50% equity interest in PT MRM. Excluding this divestment gain, Metro retail’s Singapore operation recorded a lower operating loss of S$0.2 million in FY2020 as compared to an operating loss of S$7.1 million in FY2019, mainly due to higher profit, an absence of provision for stock obsolescence and impairment of fixed assets that were recorded in FY2019.

As the COVID-19 pandemic continues to inflict high human costs worldwide, the global economy is facing an unprecedented crisis and an uncertain recovery. Protecting lives and allowing health care systems to cope have required isolation, lockdowns, and the widespread closure of businesses to slow the spread of the virus. While many countries have found success in containment measures and gradually eased lockdown restrictions, there remains a significant degree of uncertainty as the situation is fluid and subject to change on an ongoing basis. As a result of the COVID-19 pandemic triggered financial crisis, the global economy is projected to contract sharply by -4.9% in 20201.

Property investment and development
Due to extreme measures, including the total lockdown of entire cities in Hubei to contain the COVID-19 pandemic, China’s economy contracted for the first time in nearly three decades. The country’s gross domestic product (“GDP”) contracted by 6.8% in 1Q 2020, a reversal from the 6.0% growth in 4Q 2019. In response to the crisis brought about by the pandemic, China has loosened its monetary policy to cushion the impact on the economy2.

Recognising the challenging business environment caused by the COVID-19 pandemic, rental rebates and waivers as well as extension of payment terms were granted to some tenants at Metro City, Metro Tower and GIE Tower who faced cashflow difficulties due to the closure of business operations. Our three properties continue to maintain a high average occupancy rate and contribute stable recurring income. After the lockdown was lifted and businesses resumed in our properties, Metro City witnessed the increase in customer spending levels and leasing activities for the three office buildings in Bay Valley are also improving. Asset management works for Shanghai Plaza and The Atrium Mall in Chengdu have resumed and leasing activities are in progress. Nonetheless, the shadow of a potential second COVID-19 wave in Beijing and Xinjiang, China and the ongoing trade tensions between China and the United States may likely weigh down the economy. For the near-term, our associate namely Top Spring continues to be subject to the China market headwinds.

In Singapore, the country’s GDP contracted 12.6% on a YoY basis in the second quarter of 2020 due to the Circuit Breaker (“CB”) measures that were implemented from 7 April to 1 June to slow the spread of COVID-193 and the Ministry of Trade and Industry (“MTI”) downgraded 2020 GDP growth forecast to “-7.0 to -4.0%”, from “-4.0 to -1.0%” 4. For Singapore’s commercial property sector, Grade-A core CBD vacancy rose to 4.6% as at 30 June 2020, due to newly completed buildings which have lower occupancy. Looking ahead, vacancies could rise further in the second half of 2020 with a contraction in net demand and incoming supply5. The Group’s premium Grade-A office towers at Tampines Regional Centre’s average occupancy rate remains high and leasing is underway. Meanwhile, sales of the residential project, The Crest at Prince Charles Crescent, is subject to the impact of cooling measures in the Singapore property market and the COVID-19 pandemic.

Indonesia’s GDP in the second quarter of 2020 contracted by 3.8%, as a result of the economic impact of the COVID-19 pandemic. Indonesia’s President Joko Widodo (Jokowi) was re-elected in 2019 for a second five-year term, which is perceived to provide several years of political stability for the nation and this should also provide market confidence for both developers and buyers of real estate. Developers in 2019 attempted to make unit prices more affordable by compressing unit sizes and, in general, smaller, cheaper units continued to attract more interest. Residential is the most active sector in terms of investor activity. International investors, particularly those from Japan, Singapore and Hong Kong, are consistently interested in developing both condominiums and landed housing in Greater Jakarta’s sprawling townships. A number of these developers are currently working on multiple projects6 . This bodes well for our two residential projects in Jakarta, namely Trans Park Juanda, Bekasi and Trans Park Bintaro, whose construction milestones are progressing well and are on track while sales and cash collections for our projects are slow due to the COVID-19 pandemic restrictions.

In the UK, take-up in the Central London office sector declined during 2Q2020 to a total of 1.1 million sqft because of the COVID-19 pandemic, a decline of 66% from the 10-year quarterly average. Availability continued to increase over the period, growing by 18% to stand at 16.1 million sqft7. Our office property at 5 Chancery Lane continues to be fully leased through 2023. Meanwhile, Manchester residential prices are forecast to grow around 3.2% per annum over the next five years, while rental growth is expected to average 3.1% per annum8. For the Middlewood Locks development project in Manchester, we remain on track towards another major milestone with the submission of planning approval of Phase 3 development in May 2020. Phase 3 is expected to commence construction in early 2021 with completion expected in 2023. Development efforts on Vidrio House, Sheffield, is in progress.

On 7 July 2020, in Australia, the Reserve Bank of Australia (“RBA”) decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points9. The property buyers remain focused on Sydney and Melbourne CBD office assets, as well as retail non-discretionary properties in Sydney, Brisbane and Melbourne10. This augurs well for the Group’s recent acquisition of the 14 quality freehold properties, comprising four office buildings and 10 retail centres located in CBD and regionally respectively. As at 31 March 2020, the portfolio occupancy stood at 96.7%.

The retail division continues to operate amidst difficult trading conditions. Metro continues to focus on cost discipline amidst this highly competitive environment, to cope with margin pressures, while leveraging on our online platforms and multi-media strategy to capture the growing e-commerce market.

In Conclusion
Through strategic partnerships, we have expanded our geographical presence over the years in China, Singapore, Indonesia, the UK, and most recently, into Australia. Today, Metro has a well-diversified portfolio and we will continue to build our recurring income base.

Amidst the evolving COVID-19 pandemic situation, each region is in a different phase of the global challenge including the possibility of further lockdowns in the countries Metro operates and this has created huge uncertainty and volatility in the markets. Metro will continue to monitor the situation closely and take proactive measures to strengthen our financial position, including preserving cash, optimising cash flows and liquidity, and actively managing our existing investment portfolio, for optimal returns. With regards to our asset management strategy, we will prioritise critical asset enhancement, while deferring uncommitted capital expenditure and implementing cost savings, where possible.

Moving forward, we would continue to demonstrate our ability to capitalise on opportunities with prudent capital structure and are confident that we will be able to continue with our strategic expansion to achieve resilient growth.

To reward shareholders, the Board has recommended, on a per share basis, dividends totalling 2.0 Singapore cents. This represents a dividend yield of 3.0%11 and a payout ratio of 51.4% of the net profit attributable to shareholders for FY2020.

I wish to thank our loyal shareholders, valued customers, business partners, associates and stakeholders for their support and understanding throughout Metro’s journey of over 60 years. Specifically, I would like to thank our staff for their commitment and dedication to the company during this extremely challenging period.

I would also like to take this opportunity to extend our appreciation to my fellow Board members for their guidance, counsel and advice.

We look forward to your continued support as we forge ahead with on our long term strategy of driving sustainable growth and value for our shareholders. With our strong foundation and clear vision, we are well-positioned to continue our growth as a leading property investment and development group in both new and existing key markets.

Lt-Gen (Retd) Winston Choo

7 August 2020

1 IMF, World Economic Outlook – June 2020
2 IMF, Policy Responses to COVID-19
3 MTI Singapore, Singapore’s GDP Contracted by 12.6 Per Cent in the Second Quarter of 2020 – 14 July 2020
4 MTI Singapore, MTI Downgrades 2020 GDP Growth Forecast to “-7.0 to -4.0 Per Cent” – 26 May 2020
5 Colliers, Opportunities for Resilient Occupiers | Office Q2 2020 – July 2020
6 JLL, Jakarta Property Market Review 4Q19 – February 2020
7 CBRE, Central London Office Market View Q2 2020
8 JLL, Living with 2020 Vision: UK City Centre Forecasts – March 2020
9 Reserve Bank of Australia, Statement by Philip Lowe, Governor: Monetary Policy Decision – July 2020
10 Savills, Asia Pacific – Q4 2019, Investment Quarterly
11 Share price of S$0.660 as at 31 March 2020