I have seen a couple of submissions to the Straits Times forum criticising Purpose Built Workers Accommodation (PBWA) operators in Singapore.
I know Singaporeans are upset about the rising number of Covid-19 cases which are largely contributed by foreign workers living in PBWAs.
There’s something at stake here for everyone: Singapore has entered into Circuit Breaker mode until Jun and we risk another extension if the numbers are not kept under control.
It is easy to point the finger at the PBWA operators and accusing them of providing poor shelters to the foreign workers that led to the outbreak of Covid-19 in the dorms.
It becomes even more upsetting when the government has to build new accommodations and get taxpayers to pick up the tab.
The conversation is becoming more left-leaning and starting to sound like socialism.
I would like to give some balance to the current view of this situation and to verify with data, if indeed PBWA operators have fat profit margins.
Firstly, there’s nothing wrong with companies making profits operating PBWAs. The profits are rewards for risk taking. Businesses have high rate of failure and the rewards must be high enough to entice some individuals to assume such risks.
Before we ask businesses to cough out profits, have we asked ourselves if we, as a society, are willing to donate to business owners who have failed. I doubt so. Hence, it isn’t totally right to ask for rewards to be shared just because some businessmen took the risks and have made money. An armchair critic has no skin in the game.
A vibrant economy is fuelled by entrepreneurs. It is also true that a capitalistic society would breed a large rich-poor gap if not kept in check. Hence, we need to tread the fine line of fostering business activities and at the same time not leave too many people behind in the wake of economic growth. I personally believe that the rich should be magnanimous to give part of their wealth to help the poor. But to get criticised for not doing enough is something I cannot agree with. It is their money at the end of the day. I am ok as long as their wealth were not created out of operating frauds, scams or from cronyism.
I don’t think finger pointing is the way to go. We should own this problem as a country and to agree on the best way to resolve this. It is likely we have to pay for it one way or another.
The government may use taxpayers money to build the new facilities. They would subsequently tender out lower priced projects to the PBWA operators and cause their margins to go down. Or, the government may impose more stringent building and facility standards on PBWAs and this would lead to higher operating costs. In turn, these additional costs are passed on to the other companies who employ foreign workers (construction/manufacturing/oil and gas). Eventually, these costs are priced into the products or properties we buy.
Secondly, the publicly listed companies that operate PBWAs were obvious targets. For example, the following was mentioned in a forum submission,
“the net profits of Singapore Exchange-listed companies Centurion Corp, Wee Hur Holdings and Lian Beng Group from their dormitory and other businesses were $103.8 million, $34.9 million and $32.9 million, respectively.”
Stating the companies’ overall net profits can be misleading as they may include other business segments such as construction and property development that can be the core businesses of these companies. We need to drill down to the PBWA segment to see if the profits are fat.
And numerical values have not much meaning. While $100 million profits may sound a lot, it is just merely 1% margin if the revenue is $10 billion. Hence, we would want to see the profit margins of the PBWA business.
Don’t get me wrong. I am not defending the PBWA operators. I am trying to be objective by giving some balance to the matter because I kept seeing left-leaning comments.
I would like to dive into the data of PBWA businesses and evaluate if indeed they have enough fats to be cut.
23 Out of 43 PBWAs Gazetted As Isolation Areas
There were 43 of them. Out of which, 23 were gazetted as isolation areas due to Covid-19.
These 23 PBWAs have at least 169,003 beds (I was unable to find the capacity for 3 of them).
It seems like there’s still room for the cases to climb considering that Singapore has a total of 28,038 cases at the time of writing. A far cry from 169,003.
23 Dorms Gazetted As Isolation Areas and their Capacities
|Name of dormitory||Name of operator||Capacity||Address|
|Acacia Lodge||Keppel Housing Pte Ltd||?||540 Bukit Batok Street 23, Singapore 659553|
|Avery Lodge||Averic Pte Ltd||8,000||2D Jalan Papan, Singapore 619415|
|CDPL Tuas Dormitory||Capital Development (Tuas) Pte Ltd||12,800||6 Tuas South Street 15, Singapore 636906|
|Cassia @ Penjuru||Keppel Housing Pte Ltd||?||11 Penjuru Walk, Singapore 608541|
|Changi Lodge 2||S11 Capital Investments Pte Ltd||4,000||80 Tanah Merah Coast Road, Singapore 498736|
|Cochrane Lodge 1||Vobis Enterprise Pte Ltd||5,000||51 Admiralty Road West, Singapore 757443|
|Cochrane Lodge 2||Vobis Enterprise Pte Ltd||4,000||49 Admiralty Road West, Singapore 757444|
|Homestay Lodge||Homestay Management Pte Ltd||6,000||39 Kaki Bukit Avenue 3, Singapore 415920|
|Jurong Penjuru Dormitory 1||Labourtel Management Corporation Pte Ltd||7,500||58 Penjuru Place, Singapore 608562|
|Jurong Penjuru Dormitory 2||Labourtel Management Corporation Pte Ltd||7,500||36 Penjuru Place, Singapore 608560|
|Kranji Lodge 1||Vobis Enterprise Pte Ltd||12,000||12 Kranji Road, Singapore 739522|
|Mandai Lodge 1||Cushman & Wakefield Facilities & Engineering (S) Limited||2,000||460 Mandai Road, Singapore 729760|
|North Coast Lodge||Draco Venture Pte Ltd||9,000||51 North Coast Avenue, Singapore 756992|
|PPT Lodge 1A||Tee Up Dormitory Pte Ltd||?||8 Seletar North Link, Singapore 797455|
|PPT Lodge 1B||S11 Granuity Management Pte Ltd||14,000||2 Seletar North Link, Singapore 797601|
|Shaw Lodge Dormitory||Hallton Investment Pte Ltd||915||12 Shaw Road, Singapore 367951|
|Sungei Tengah Lodge||TG25 Pte Ltd||25000||500 Old Choa Chu Kang Road, Singapore 698924|
|Tampines Dormitory||TPD Facilities Management Pte Ltd||4,040||2 Tampines Place, Singapore 528821|
|Toh Guan Dormitory||Capital Development Pte Ltd||7,168||19A Toh Guan Road East, Singapore 608567|
|Tuas South Dormitory||Nexus Point Investments Pte Ltd||9,180||1 Tuas South Street 12, Singapore 636946|
|Tuas View Dormitory||TS Management Services Pte Ltd||16,800||70 Tuas South Avenue 1, Singapore 637285|
|Westlite Dormitory (Toh Guan) Pte Ltd||Westlite Dormitory Toh Guan Pte Ltd||7,800||18 Toh Guan Road East, Singapore 608591|
|Westlite Mandai Dormitory||Lian Beng / Centurion (Dormitory) Pte Ltd||6,300||34 Mandai Estate, Singapore 729940|
PBWAs’ Profit Margins Ranged from -80% to 54%
As most of the PBWA operators are privately owned, I have to use ACRA to get their financial figures. Even so, I couldn’t retrieve all of them and for those that I could, they were rounded off to the nearest millions. These were as close as I could get.
Worker Dorms Profit Margins
|Operator||Private / Public||Number of Dormitories||Total Capacity||Revenue ('000)||Profit ('000)||Profit Margin||Remarks|
|Westlite||Owned by listed companies - Centurion and Lian Beng||5||28,000||$109,222||$58,825||54%||Less valuation gains. Included both Centurion's and Lian Beng's Dec 2019 segment results.|
|TG25||Private||1||25,000||$72,000||$13,680||19%||Jan 2019 results from ACRA|
|TS Management Services||Owned by a listed company - Wee Hur||1||16,800||$37,453||$14,841||40%||Dec 2019 segment results.|
|S11||Private||2||18,000||$32,000||$4,480||14%||Jun 2019 results from ACRA.|
|Nexus Point Investments||Owned by listed companies - TA Corp and King Wan||2||10,680||$18,000||$6,300||35%||Dec 2018 results from ACRA.|
|Capital Development||Private||2||19,968||$11,000||$(8,800)||-80%||Tuas only. Dec 2018 results from ACRA.|
|Vobis||Private||3||21,000||$8,000||$400||5%||Jun 2019 results from ACRA.|
|Labourtel||Private||4||23,900||$5,000||$-||0%||Jun 2019 results from ACRA.|
|Hulett||Private||1||1,270||$5,000||$1,400||28%||Dec 2018 results from ACRA.|
Two of Centurion’s dorms have been gazetted as isolation areas. One of which is co-owned with Lian Beng (SGX:L03).
Lian Beng’s revenue and profits have been added to Centurion in the table. Separately, Lian Beng generated $23 million in revenue and about $20 million in profits. That’s a fat profit margin of 86%!
On the other hand, there were companies like Labourtel and Capital Development that had no profit and a $8.8 million loss respectively. The results varied a wide range.
But still, the average profitability of the PBWAs is impressive. Based on the companies in the table, they made a total profit of $91 million out of a total revenue of $298 million. That’s a profit margin of 31%.
Some businesses would be very happy with a 20% profit margin. Indeed, PBWAs are lucrative businesses.
Should worker dorm operators give up their profits?
Not for the profits that have already been earned.
But going forward, I believe there’s a more reasonable arrangement that the Government should work out with these PBWA operators. The profit margin indicates that the current Foreign Employee Dormitories Act (FEDA) skewed the economics to the dorm operators.
At the same time, we should not squeeze the operators too much such that no quality bidders come forward to run this business. We may end up with worse living conditions for the foreign workers.
For investors, I believe the current limelight on the listed PBWA operators is not helping their businesses. It might be better to lower your expectation on their performances in the coming years. Wee Hur, Lian Beng, TA Corp and King Wan have construction or property development as their main businesses. Should the dorm policies be changed and disadvantage the PBWA business, they have less to worry about as compared to Centurion.