CDL looks overseas for growth, as net profits decline

SINGAPORE — City Developments Ltd (CDL) posted a 40.6 per cent decline in net profit to S$243.8 million for the fourth quarter ended Dec 31, 2016, compared to S$410.5 million a year ago. For the whole of 2016, net profit fell 15.5 per cent to S$653.2 million. Revenue for the fourth quarter, however, jumped 36.5 per cent to S$1.17 billion, while revenue for 2016 increased 18.2 per cent to a record S$3.91 billion.

Acknowledging the challenging economic conditions, CDL executive chairman Kwek Leng Beng said despite headwinds facing the Singapore property market and challenging trading conditions for the group’s hotel properties, the company’s balance sheet remained robust.

“Looking ahead, we plan to be more acquisitive with a focus on finding in-place income in Singapore and overseas. Our robust balance sheet and war chest place us in a strong position to deploy capital for acquisitions which can be in the form of physical assets, equities or debt instruments,” said Mr Kwek.

Singapore home prices fell 3 per cent in 2016, as the government held steadfast on cooling measures. Prices slipped for a 13th straight quarter in the three months ended Dec. 31, the longest streak since data was first published in 1975.

In response to what he thought about the likelihood of property cooling measures staying in place for the near to medium term, Mr Kwek noted that the Government has in its view the bigger picture for Singapore. “Sometimes they press the button a little too slow for my liking (but) they still get things done,” he added.

Market conditions in Singapore’s residential property sector remain challenging, with property cooling measures still in place and as deadlines from penalties arising from Qualifying Certificate (QC) conditions and Additional Buyers’ Stamp Duties (ABSD) draw nearer. With interest rates likely to rise, buyers are taking a more cautious approach, according to the group.

CDL’s results were also hampered by pressure on the group’s hotel properties – in London, leisure business throughout 2016 was impacted by the end-2015 Paris terror attacks, while Brexit ushered in reduced corporate travel; its New York hotels significantly underperformed; and in Singapore, visitor numbers rose but average lengths of stay were reduced.

Nonetheless, new launches are likely to continue to enjoy brisk sales.

Given the encouraging sales achieved by a limited release of units at Gramercy Park, the Group is contemplating launching its upmarket freehold condominium the New Futura. The property development segment also saw strong contribution from Suzhou-based Hong Leong City Centre.

In view of the headwinds in the domestic market, the group has been active in seeking opportunities in its five key overseas markets – China, the United Kingdom, Japan, Australia and the United States. Over 80 per cent of the group’s land bank in terms of proposed gross floor area is overseas, with China and UK as its largest markets.

“These strategic investments will enhance our recurring income streams and boost our profit from overseas property development,” Mr Kwek added. The company said it is in the process of setting up an outfit akin to a venture capital fund that will house investments largely in start-up companies.