CDL’s Q1 profit falls 19% to S$85.5 million

SINGAPORE – City Developments (CDL) on Thursday (May 11) reported first-quarter profit fell 18.9 per cent from the corresponding period a year earlier, but its executive chairman Kwek Leng Beng sounded an optimistic note, saying that the housing market in Singapore is showing signs of recovery.

For the three months ended March 31, net profit amounted to S$85.5 million, down from S$105.3 million in the year-earlier period, even while revenue rose 8.4 per cent to S$783.8 million from S$723.3 million, Singapore’s second-largest listed developer said in an aftermarket statement.

The drop in net profit was due to a wide range of factors, CDL said. These include the absence of contributions from two joint venture projects - Bartley Ridge and Echelon - which were completed last year; foreign exchange losses incurred primarily from the repayment of a New Zealand dollar-denominated inter-company loan under the group’s indirect subsidiary, CDL Hospitality Trusts (CDLHT); a disappointing performance by the group’s London subsidiary, Millennium & Copthorne Hotels; and lower investment income earned from the realisation of an investment in Real Estate Capital Asia Partners, a private fund.

The rise in the top-line was attributable to improved performance from the property development segment, which posted a 33.9 per cent increase in contribution, primarily led by the progressive handover of units in Phase 1 of Suzhou Hong Leong City Center and strong take-up for its Gramercy Park luxury project along Grange Road.

To date, 74 out of the 87 units in Gramercy Park’s North Tower launched in Phase 1 have been sold, or 85 per cent. Phase 2, comprising the 87-unit South Tower, was soft launched at the end of March and to date, 16 of the 20 units released have been sold. Average sale prices have risen from over S$2,600 per square foot for Phase 1 to over S$2,800 psf for Phase 2, CDL said.

Mr Kwek said: “The residential property market in Singapore is beginning to show some signs of recovery. Property prices appear to be stabilising, especially in the high-end market, and there is increased investor confidence as Singapore remains a relatively safe haven in a highly volatile marketplace.”

“Recent policy relaxations are measured and prudent, and support the aim of buying property as a form of long-term investment. We are confident that the Singapore Government will continue to monitor market conditions closely and make the necessary tweaks to the other property cooling measures as and when the situation warrants,” he added.

In March, the Government eased cooling measures on home purchases, cutting the holding period during which seller’s stamp duty is payable to three years while reducing the rate by 4 percentage points for each tier. The Total Debt Servicing Ratio framework will also no longer be applied to mortgage equity withdrawal loans with loan-to-value ratios of 50 per cent and below.

In the office segment, CDL’s portfolio continued to have a healthy occupancy of 95.3 per cent as at the end of the first quarter, above the national average of 88.4 per cent, the company said.

“During this lull period in the office market cycle, the group is also actively exploring asset enhancement initiatives for some of its office properties such as Republic Plaza, which will benefit from any rental growth potential in the foreseeable future as office supply remains limited in 2018 and 2019,” CDL said.

Before the aftermarket earnings announcement, CDL shares rose 0.7 per cent to close at S$10.85. The shares have risen 31.5 per cent this year, outperforming by a large margin the 13.6 per cent rise in the benchmark Straits Times Index.