CityDev gears up for series of launches with eye to replenishing land bank

Property group's Q4 net profit falls 54.7% to S$77.9m on impairment losses of S$94.1m - mostly from its US hotels

Fri, Feb 22, 2019


AS City Developments Limited (CDL) gears up for its slew of residential project launches, it's also taken a liking to some government land sales (GLS) sites later this year. The property group also won't rule out occasional en bloc deals.

Group chief executive officer Sherman Kwek said at its results briefing on Thursday: "We will continue to monitor the market... our land bank won't last for that long. In the next three to four years, we will have a shortage of land if we don't keep replenishing."

For its pipeline of launches ahead, group general manager Chia Ngiang Hong said the company will "do value engineering to bring the cost down... we should be able to launch projects at a reasonably good demand and good margin".

He said recent GLS tenders like a Tampines executive condominium (EC) site and the hotel site at Club Street still saw competitive bidding.

This year, CDL will launch high-end projects Amber Park, Haus on Handy and Boulevard 88 and two other projects: Sumang Walk EC and the mid-tier Sengkang Central.

On Thursday, CDL announced that net profit for its fourth quarter ended Dec 31 fell 54.7 per cent to S$77.9 million from a restated net profit of S$171.9 million, mainly due to impairment losses of S$94.1 million in Q4 2018, largely from its US hotels.

The results translate to earnings per share (EPS) of 7.9 Singapore cents.

Net profit would have risen 17 per cent if not for the impairment losses, a S$20.1 million allowance for foreseeable losses for two small-scale development projects in Central London which may be leased out, as well as a gain from the partial divestment of the group's interest in two China projects in Chongqing in 2017.

Overall, Q418 revenue was down 40.6 per cent to S$788.3 million, primarily due to the property development segment.

Profit before tax for property development for the past quarter fell to S$103.1 million from S$176.8 million.

The previous Q4 had included revenue contribution of The Brownstone EC in its entirety when it was completed in October in 2017, as well as Gramercy Park.

4Q18 revenue was recognised primarily from the projects New Futura, The Tapestry and Park Court Aoyama The Tower.

Hotel operations (largely from the group's London-listed subsidiary Millennium & Copthorne Hotels) recorded a S$53.2 million loss before tax in the quarter compared to a S$1.4 million profit a year ago, on the impairments as well as the full closure of the Mayfair hotel in July 2018.

The group's New York hotels remained loss-making due to its operating cost structure arising mainly from trade union staff employment.

For the full year, net profit rose 6.7 per cent to S$557.3 million, bolstered by the group's property development segment which contributed 71 per cent of pre-tax profits. FY 2018 revenue was up 10.3 per cent to S$4.2 billion.

The group proposed a final ordinary dividend of eight Singapore cents per share, and a special final ordinary dividend of six Singapore cents per share.

Including the special interim dividend of six cents paid out in September, the total dividends for FY2018 would amount to 20 cents per share, up from 18 cents per share in FY2017.

The company said restoring profitability in its New York hotels remains at the top of its objectives.

The company made over S$2.5 billion worth of acquisitions and investments in FY2018. As at the end of the year, net gearing ratio stood at 31 per cent.

Mr Kwek said the company is "looking at quite a few acquisitions" for the year ahead.

He said: "(Even if we double our net gearing level) it's still a lot lower than many other developers so we have substantial debt headroom to aid our ... acquisition efforts."

In terms of its portfolio, it expects to have more overseas exposure but Singapore will continue to make up around 50 per cent of revenue and assets.

One looming question surrounds the fate of some of its Profit Participation Securities (PPS). Mr Kwek said they are engaging their joint venture partners closely.

For PPS 1, the S$1.5 billion comprising the Sentosa Quayside Collection, the company said it is working with Blackstone to increase the fund life for the W Residences component.

As for the hotels component, it's looking at a few options given the industry's tailwinds.

As for PPS 3 concerning Nouvel 18, the group said that "at an appropriate time, they will look to launch this and capitalise on the market as well.

Return on equity was at 5.6 per cent, which Mr Kwek admitted "leaves quite a bit to be desired" and hopes will reach 8 to 9 per cent in time. The group is working to improve its capital recycling, he said.

The group continues to grow its fund management business and aims to bring its assets under management to US$5 billion by 2023.