Nine-month profit soars 128.5% to $490m; record full-year profit seen
CITY Developments Ltd (CDL) looks headed for record profits for full-year 2007 after achieving net earnings of $169.5 million for the third quarter ended Sept 30, and $490 million for the first nine months. Third-quarter earnings were up 32.1 per cent and nine-month earnings 128.5 per cent from the corresponding periods last year.
Market watchers reckon that for the full-year, the property and hotel group should be able to surpass its best showing of over $500 million net earnings about a decade ago.
On the group's prospects, CDL said yesterday: 'With the outstanding sales achievements over the past few years, this has enabled the group to lock in its profits, placing it in a rewarding position to perform well in the next few years as profit will continue to be recognised progressively.'
CDL executive chairman Kwek Leng Beng said that 'continued capital appreciation in the next few years is likely and the prospects for the property sector continue to be good'.
In the first nine months, the group sold 1,590 homes with sales value of $2.9 billion. The group is planning to launch a few residential projects in the coming months, including the 40-unit Wilkie Studio in the Mount Sophia area, the 77-unit Shelford Suites off Dunearn Road and a 228-unit condo on The Quayside Collection site at Sentosa Cove. Another project in the pipeline is a 336-unit condo at the former Lock Cho apartments site on Thomson Road.
Despite the initial 'knee-jerk' impact on market sentiment following the withdrawal of the deferred payment scheme, Mr Kwek highlighted that 'the fundamentals in the economy and property market in Singapore remain very well-founded and strong' and 'there is still room for sustained growth'.
Office rentals are still improving and the rental market for the next two to three years looks strong. 'Several key leases are up for renewal next year and beyond and this will significantly enhance rental yields,' he said.
The group has a size-able commercial portfolio of 4.3 million sq ft lettable area, which offers it several options. However, as many of CDL's office buildings have a low historical cost, and given the group's strong balance sheet, 'there is no immediate urgency to monetise this commercial portfolio even though there is a market trend to recycle capital', Mr Kwek said.
The group's strategy of maintaining a land bank helps CDL respond quickly to changing market demands, to create value for its shareholders in the mid to long term without the need to bid aggressively for new sites. CDL's current land bank can be developed into 9.12 million sq ft gross floor area.
CDL's 32.1 per cent improvement in Q3 earnings was achieved despite last year's third quarter being buoyed by $150.9 million one-off divestment gains from the sale of its long leasehold interest in four Singapore hotels to CDL Hospitality Trusts.
For the first nine months, profit before income tax from property development was $385 million, up 165 per cent from the corresponding year-ago period, with contributions from projects like City Square Residences, Tribeca, Monterey Park, St Regis Residences, The Sail @ Marina Bay, The Oceanfront @ Sentosa Cove, Parc Emily, Edelweiss Park, Residences @ Evelyn and Botannia Residences.
The group is expected to begin booking profits from The Solitaire from Q4 2007, while profits from One Shenton and Cliveden at Grange will only be recognised in stages from next year onwards.
Profit from rental properties in the first nine months jumped from $8.3 million to $44.6 million.
Other listed property groups also continued reporting improved earnings for the quarter ended Sept 30, 2007 on the back of fair-value gains on investment properties, strong residential sales and their ability to progressively recognise earnings on units sold based on the percentage of project completion.
Like CDL, many groups can be expected to post record earnings for full-year 2007. CapitaLand's net earnings for the first nine months more than tripled to $2.08 billion - double the $1.018 billion record for the whole of last year.
Analysts say next year developers should still be able to book strong residential development profits from progressive recognition of profits for units already sold. However, a critical factor that could affect their bottom lines is office valuations.
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