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Published February 28, 2014

CapitaLand and CityDev Q4 profits slide, KepLand bucks the trend

Singapore's top three developers looking overseas for future growth

By Mindy Tan [email protected]


[SINGAPORE] Singapore's top three residential developers by market cap have posted mixed results, even as they look increasingly outside Singapore's residential sector to drive profits.

Both CapitaLand and City Developments Limited (CDL) recorded dips in their Q4 net profit; Keppel Land broke ranks to post an increase.

CapitaLand posted the larger drop - 45.6 per cent to $142.9 million - but this was largely from one-off losses and higher impairments. Excluding the one-off Australand divestment loss - CapitaLand divested a 20 per cent stake in Australand in November - net profit would have inched up 0.4 per cent to $263.7 million.

CDL posted a drop of 11.4 per cent in net profit to $221 million on the back of a poorer performance in its property development and hotel operations, where the group has a 59 per cent stake in Millennium & Copthorne Hotels.

In Q4, Keppel Land booked a net profit of $567.3 million, up 7.6 per cent, primarily on a one-off gain from the divestment of its stake in Jakarta Garden City in November.

Looking ahead, all three developers are likely to ramp up their overseas presence.

Even CDL, traditionally viewed as a proxy for the Singapore residential market, has made giant strides in its diversification efforts with the acquisition of its first site in London at 28 Pavilion Road in Knightsbridge, close to Harrods.

CDL already has an interest in China through its wholly owned subsidiary CDL China, which has three projects there. If market conditions are favourable, both Eling Residences and Suzhou Hong Leong City Centre will officially commence sales in September/October. Huang Huayuan will start selling next year.

At its results briefing yesterday, CDL said it will actively seek opportunities in mature markets such as the US, Japan and Australia.

"These economies are just recovering and their capital markets have the sophistication, transparency and corporate-governance protocols . . . akin to Singapore's. This will enable the group to move swiftly with greater confidence to secure projects," it said.

Meanwhile, Keppel Land is likely to maintain its focus on growing its operations in China in the coming year, said Maybank Kim Eng, who added that demand from upgraders and first-timers is likely to be sustained.

In 2013, the group sold 3,870 units in China, more than double the 1,650 units sold in 2012. This resulted in sales value surging from 1.42 billion yuan (S$293 million) to 5.39 billion yuan (S$1.1 billiion).

Overseas profits for the full year rose 64 per cent to $141.1 million on greater contribution from China residential projects such as 8 Park Avenue and The Springdale in Shanghai. This resulted in the proportion of overseas earnings surging to 33 per cent of net profit before divestment and fair-value gain, up from 19 per cent in 2012.

But CIMB analyst Donald Chua cautioned that housing headwinds are building up again as liquidity tightens and cooling measures continue to be strictly enforced. This could result in a company with a highly volatile earnings profile, especially if China sales form a sizeable portion of the firm's Ebit (earnings before interest and tax).

Separately, CapitaLand sold 3,009 units in China over the financial year, a 4.8 per cent dip versus the previous year; sales value dropped 21.5 per cent to 5.5 billion yuan due to a change in mix to less high-end units.

Including township units, the number of units sold increased by 16 per cent to 7,688 even as sales value dropped 7 per cent to 8.5 billion yuan.

Looking ahead, the group said it expects total contracted sales in China to grow by 30 per cent, with more than 8,000 units expected to be handed over (about 60 per cent of this has been sold).

In addition, five new residential projects are expected to be launch-ready this year - Lian Mansion and New Horizon in Shanghai, Riverfront in Hangzhou, Vermont Hills in Beijing and Vista Garden in Guangzhou.

With new phases to be launched from existing projects, these will collectively yield more than 4,000 units.

Including CL Township's launch-ready units, more than 9,000 units will be ready for launch in China alone this year.

But even as these developers look outside Singapore, the Republic continues to be a core market.

Despite challenges in the domestic landscape, CDL is looking to launch two projects here in the first half - a 944-unit condominium with six retail units in Pasir Ris Grove and an 854-unit condominium in Commonwealth Avenue.

Last year, CDL sold a total of 3,210 units, including executive condominiums and projects with joint-venture associates, compared with 2,395 the previous year. This resulted in sales hitting $3.32 billion, surpassing the $2.78 billion in 2012.

CapitaLand, which too saw an improvement in local sales figures (1,260 units sold in 2013 versus 681 previously) is expecting to launch Marine Point this year. Its projects at Cairnhill Place and Coronation Road are expected to be launch-ready this year.

Keppel Land said it could launch up to six projects or phases in Singapore, China and Sri Lanka in the year ahead. This includes a condominium development in Tiong Bahru.