S'pore Developers Seen Posting Sterling Results

Source : The Business Times, January 24, 2008

But market turmoil, govts' moves to curb inflation cloud this year's prospects

Singapore's top three property developers are expected to report a sterling year of results, benefiting from a boom in Asia, but market turmoil and government intervention to curb house inflation is clouding 2008 prospects.

Keppel Land, which kicks off results for developers on Jan 29, is set to report fourth-quarter net profit more than tripled on rising property values and a one-off divestment gain, according to a Reuters poll of four analysts.

For the full year, Keppel Land's net profit is expected to have more than doubled, reflecting strong residential property sales at its harbour-front Keppel Bay projects.

'We're expecting a very strong quarter for developers based on contributions from the residential sector,' said Daiwa analyst David Lum.

Analysts say Keppel Land, 53 per cent owned by conglomerate Keppel Corp, will see fourth quarter earnings boosted by the divestment of its one-third stake in the One Raffles Quay office building to 40 per cent owned K-Reit Asia for S$939 million.

Private home prices in Singapore jumped 31 per cent in 2007, the largest increase in eight years, while developers will also benefit from booming property markets in China, India and Vietnam.

Mr Lum said a move by the government in October to cool Singapore's housing market by ending a delayed payments scheme would have had little impact on the quarter.

But sales figures and the price growth of homes are expected to be slower in 2008, as homebuyers hold off on purchases to wait out the financial turmoil hitting global markets.

'New property launches will probably be delayed until the second quarter of the year and beyond because buyers are more cautious, but we think prices will still pick up especially in the middle end of the market,' said Wilson Liew, property analyst at Kim Eng.

Analysts expect CapitaLand's fourth-quarter net profit to have slipped 23 per cent year-on-year, due to the absence of one-off revaluation gains that lifted earnings in the fourth quarter of 2006.

For the full year, five analysts polled by Reuters expect CapitaLand, South- east Asia's largest developer by market value, to report a 135 per cent jump in earnings to S$2.4 billion.

Analysts say this would have been boosted by strong property sales in China, which currently contribute 32 per cent to CapitaLand earnings, despite a move by Beijing in July to curb property speculation by imposing a land appreciation tax.

'The change had no impact as CapitaLand's inventory in China is now close to fully sold, so any effect would probably only be felt later,' said CIMB-GK analyst Donald Chua.

He also expects CapitaLand's real estate investment trust (Reit) subsidiaries, which include CapitaMall Trust, CapitaCommercial Trust, and CapitaRetail China Trust, to continue making strong contributions.

City Developments, Singapore's second-biggest developer, is expected to report fourth-quarter net profit slid 2.9 per cent from the same period the previous year, which was inflated by a S$151 million one-time gain from the divestment of four hotels to CDL Hospitality Trusts.

But analysts expect City- Dev to continue booking strong income from sales of its luxury apartments including the waterfront Sail @ Marina Bay project, and the sold-out Solitaire apartments in Singapore's high-end Bukit Timah residential district.

For the full year, City- Dev's net profit is expected to jump 77 per cent, according to a Reuters poll of five analysts.

They expect a further boost from continued earnings growth from its UK hotels arm, Millennium & Copthorne Hotels, which is scheduled to post its full-year results on Feb 20.

Shares in the three companies underperformed the 4.9 per cent fall in the benchmark STI Index in the quarter. Keppel Land shed 12.3 per cent, CapitaLand fell 23.1 per cent and CityDev was down 12.4 per cent. -- Reuters