City Developments suffered a 15 per cent fall in quarterly profit on poor property sales but said it may issue up to $1 billion (US$712 million) in debt to build an acquisitions war-chest despite the global economic slowdown.
Mr Kwek: 'The group has very little unsold residential stock, a healthy balance sheet and locked-in profits yet to be recognised'CityDev, Southeast Asia's second-biggest property developer by market value, said it may issue Islamic debt in a notes programme and sell hotels to boost its financial prowess to make acquisitions.
'The current slowdown in the economy is different from the Asian Financial Crisis of 1997. The group has very little unsold residential stock, a healthy balance sheet and locked-in profits yet to be recognised,' CityDev Executive Chairman Kwek Leng Beng said in a statement.
CityDev, 37 per cent-owned by Kwek's family, reported net profit of $165.2 million in the April-June period, down from $194.4 million reported a year ago as property sales slumped in the first half of this year.
The company said the planned $1 billion debt deal would be Singapore's first Islamic unsecured financing arrangement and aimed at tapping new markets and investors.
Its 53-per cent owned hotel group Millennium & Copthorne will also look at the sale of hotel assets, many of which were bought at a low cost and have since appreciated in value, CityDev said.
M&C, which in June sold the Millennium Seoul Hilton Hotel to Kangho AMC for $628 million, last week posted first half pretax profits of 58.4 million pounds, up 9.2 per cent but below market expectations as it warned of slowing growth at its Asia hotels.
No quarterly estimates were available but CityDev is expected to post a 1.8 per cent rise in full-year to December 2008 earnings to $738 million from $725 million last year, according to the average of 15 analysts polled by Reuters before Thursday's results.
Poor sales
Singapore's developers have been hit by poorer sales as concerns about the economic outlook caused a steep drop in sales volumes, while some analysts predicted home prices to fall up to 40 per cent over the next three years.
But analysts had expected earnings for CityDev to hold steady this year as it books income from sales made during a four-year Singapore property boom, and as its mass market residential projects continued to sell well this year.
CityDev said it will release for sale the rest of its Singapore mass market residential project Livia due to strong response, but could hold off on launching its high-end projects to maximise its profits.
Rival Keppel Land reported last month a 16.4 per cent drop in quarterly profit, while CapitaLand, Southeast East's biggest developer, saw its earnings dip 44 per cent, hit by slower sales and lack of one-off gains.
Shares of City Developments are down 25 per cent so far this year, underperforming the 19 per cent drop in the broader Straits Times Index . Rival developer CapitaLand lost 19 per cent, while Keppel Land fell 41 per cent. -- REUTERS
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