Bukit Sembawang Estates : Responses to Substantial and Relevant Questions for Annual General Meeting 2022

BUKIT SEMBAWANG

ESTATES LIMITED

Company Registration No. 196700177M

RESPONSES TO SUBSTANTIAL AND RELEVANT QUESTIONS

FOR ANNUAL GENERAL MEETING 2022

Bukit Sembawang Estates Limited ("BSEL", "the Company", together with its subsidiaries, "the Group") would like to thank our shareholders and the Securities Investors Association (Singapore) ("SIAS") for submitting questions ahead of the Company's 56th Annual General Meeting ("AGM") to be held through electronic means on 28 July 2022 at 10.30am.

The Company would like to share our responses to the questions received in the following categories:

1. Strategy
2. Financials
3. Project Sales and Development
4. Board and Management
5. Dividends

1. Strategy
2. 1. What are the future plans of the Group to enhance shareholder value? Response
      The Group has a healthy land bank and a steady sales pipeline of landed housing and condominiums. It also has in its portfolio, a long-term recurring income asset, namely Fraser Residence Orchard Singapore. Together, this drives the Group's revenue generation.
      The Group takes a long-term portfolio view of all its development properties and continues to closely monitor prevailing market conditions to determine the appropriate time to purchase additional land, if necessary, to supplement its existing land bank.
3. Financials
4. 1. As at 31 March 2022, the Group has $530 million (FY2021: $729 million) in cash
      and cash equivalents, with over $480 million (FY2021: $575 million) in fixed deposits (page 95 of Annual Report; Note 12 Cash and cash equivalents).
      As shown in the statements of financial position (page 65 of Annual Report), borrowings amount to $130.9 million as at 31 March 2022 (FY2021: $337.9 million). The net finance cost of the group was $3.37 million (FY2021: $4.36 million) despite the Group being in a net cash position.
      For shareholders' benefit, can the Board elaborate further on its capital management strategy? Are there any reasons for the Group to borrow and incur finance costs of $5-6 million when the Group is in a net cash position?
      Response
      As at 31 March 2022, the Group has reduced bank borrowings from $337.9 million to $130.9 million. During this period of global economic uncertainty, caused primarily by the protracted and lingering impact of the COVID-19 pandemic, and aggravated by the Russia/Ukraine crisis, the Group is conserving cash to fund existing and upcoming developments as well as to preserve financial strength for growth and reinvestments, taking into consideration a probable prolonged period of economic uncertainties.

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1. 1. Given that interest rates have increased and are widely expected to rise more, what is the Board's strategy to better manage the Group's capital to minimise the Group's net finance costs?
      Response
      The Board is closely monitoring the Group's cashflow requirements and after taking into consideration expected expenditures, will be looking into further repayment of the bank borrowings to minimise the Group's finance costs, when appropriate.
2. Project Sales and Development
3. 1. In the Chairman's statement, it was disclosed that the Group will be focusing its efforts on LIV @ MB and Pollen Collection, the latter planned for launch in Q3/4 of 2022. The Atelier is a 120-unit,22-storey residential development, situated in prime District 9. The project sits on the freehold land on Makeway Avenue which was acquired in March 2018. The Atelier was previewed in February 2021 but saw its March 2021 launch shelved. With just 12% sold, what is Management's strategy to improve the sales? For the benefit of shareholders, are there any reasons why The Atelier was not discussed as a key focus of the Group in this new FY? Is Management exploring alternate options for The Atelier?
      Response
      The Group intends to reposition The Atelier as the aspirational address in prime District 9 Newton and is currently fitting out new show flats to showcase the various possibilities to interested buyers as well as to enhance the development's attributes.
   2. Can the Board help shareholders understand if the Group is agile enough to execute on its development projects and to successfully launch the projects in a timely manner to de-risk the Group? Has the Board reviewed if the "lag" of 3-4 years to launch a project is in line with the industry? If not, how will the Company be improving its "time-to-market"?
      Response
      The Group takes a long-term portfolio view of all its development properties and continues to closely monitor and assess prevailing market conditions to determine the appropriate time for the launch of any of its development projects.
   3. What is the Group's view of the market sentiment for landed homes in Singapore, especially high end, luxury large terraced and semi-detached houses? Does Management expect the rising interest rates to dampen demand for the Pollen Collection? How is the Group marketing this project to attract potential buyers?
      Response
      Interest rates are expected to rise, and may or may not have an impact on the interest of buyers in both landed and non-landed properties. However, as a result of the pandemic, there appears to be a greater interest in the purchase of properties with larger floor areas, based on sales achieved in 2021 and 1H2022. With the limited supply of landed homes, especially brand-new developments from the primary market, we expect demand for landed homes to remain resilient.
   4. Given that Fraser Residence Orchard, Singapore is externally managed, what is the level of influence and oversight by Management? How does Management value-add to the operation of the Group's luxury serviced apartments?
      Response
      The Management works closely with international hospitality provider, Frasers Hospitality, to remain competitively comparable with other serviced apartments within the vicinity, so as to provide sustainable recurring income to the Group. The recurring income segment will continue to complement the property development segment of the Group.

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