Published February 27, 2009

CDL Q4 profit dives to $100m

Full-year earnings down 19.9%; group expects to stay profitable this year

By KALPANA RASHIWALA

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CITY Developments Ltd (CDL) yesterday said it expects to continue being profitable this year, after posting a dive in fourth quarter 2008 net earnings to about $100 million, less than half the $235 million net profit it booked in Q4 2007.

Full-year net earnings slipped 19.9 per cent to $580.9 million, with revenue easing 5.2 per cent to $2.95 billion.

CDL said the weaker full-year bottomline was largely due to lower contribution from the group's subsidiary Millennium & Copthorne Hotels' (M&C) operations as a result of the strength of the Singapore dollar, particularly against the British pound which had a significant impact when the exchange rate translation was factored in consolidation at group level. M&C also took in impairment charges relating to its joint-venture investments in Beijing and Bangkok and some assets in Asia, UK and US.

Unlike other listed property groups here, CDL group states the value of its investment properties at cost less accumulated depreciation and impairment losses, instead of revaluing them and recording fair value gains or losses for investment properties. As a result, the group's 'profit is not subject to volatility arising from anticipated lower valuations due to the current economic downturn', CDL said in its results statement.

'The group had no impairment on development properties and landbank in 2008,' it added. CDL also said a recent external valuation for the South Beach project was done and the conclusion is that no provision is required for impairment on this development.

Full-year profit before income tax from hotel operations shrank 14.2 per cent to $245 million; earnings from property development dipped 6 per cent to $476.1 million while profit from rental properties edged up 2 per cent to $136.3 million. These profit figures include share of after-tax profit of associates and jointly controlled entities.

Profits have yet to be recognised fully from pre-sold residential developments as these are still in the early stages of construction, CDL said. 'These healthy gains have been locked in and will be booked in progressively, based on the construction progress,' it added.

The group argued there is no reason to be alarmed about defaults by buyers who purchased units in the group's projects on Deferred Payment Scheme.

It said its exposure is limited as only 30 per cent of units sold were under this scheme. It also stressed that buyers cannot breach their contractual obligations. For properties presold prior to 2007, the group believes there is hardly any risk of DPS buyers being unable to fulfil their commitments for the properties.

For units presold especially during the second-half of 2007, the percentage of the group's exposure is relatively low. 'Notwithstanding the current market conditions, and considering the land cost of those presold developments, the group believes the situation has not arisen to warrant any alarming concern on DPS buyers defaulting,' the group added.

CDL had net borrowings of $3.378 billion as at end-Dec 2008, up $50 million from a year earlier. Net gearing remained unchanged at 48 per cent, with interest cover of 11 times last year compared with 10.5 times in 2007.

CDL's full-year earnings per share fell from 78.3 cents to 62.5 cents. Net asset value per share stood at $5.97 as at Dec 31, 2008, up from $5.72 as at end-Dec 2007.

The group also revealed it has sold 16 of the 30 additional units released at its Livia condo in Pasir Ris on Valentine's Day weekend.

'Singapore remains an excellent city to live, work, play and invest,' group executive chairman Kwek Leng Beng said. He advised investors to 'spread your portfolio as much as possible, and don't condemn real estate, because it is real'.

CDL also said: 'Real estate in Singapore is likely to outperform other classes of assets when viewed with a medium- to long-term perspective. The group believes that as the property market turns more active, confidence will increase which augurs well for the economic recovery.'