Published May 15, 2008

CDL offers words of cheer

It posts 30.8% increase in Q1 net profit to $165m


THE Singapore residential property market has slowed to a trickle, but shareholders of City Developments Ltd (CDL) should feel heartened by strongly worded reassurances in the group's first-quarter results statement, which showed a 30.8 per cent increase in net earnings to almost $165 million.

CDL vowed that it is 'committed to do everything possible within our means to face any problems which may arise'. 'Importantly, we continue to be creative and innovative in our business strategies.'

'With profits yet to be recognised from residential developments sold over the last three years which are still in the course of construction, the group is confident of remaining profitable during the next 12 months, even if it decides to continue to hold back or pace its property launches,' CDL, which is part of Singapore's Hong Leong Group, said.

When the future looks uncertain, there's nothing like turning to history to draw some inspiration. 'The group has seen many of such economic challenges, having operated for over 40 years. This is not new to us. Our track record has demonstrated profitability over many years, reflecting our success in weathering out these trials because we have remained flexible in our business approach,' CDL said.

For the first quarter ended March 31, 2008, profit before tax from property development rose 49.1 per cent from the same year-ago period to $155.1 million on the back of higher profit margin achieved for projects launched in recent years as well as profit recognised for The Oceanfront @ Sentosa Cove and Ferraria Park, and higher contributions from The Sail @ Marina Bay and St Regis Residences. Pre-tax profit from hotel operations rose 24.5 per cent to $52.1 million, thanks to encouraging hotel market conditions in New York and Singapore.

First-quarter pre-tax profit from rental properties nearly doubled from $12.9 million to $25.1 million primarily due to improved rental income, the recovery of some property taxes from tenants and increased contribution from CDL Hospitality Trusts.

Group revenue dipped 1.3 per cent to $758.8 million, but the figure excluded the group's share of revenue in jointly controlled entities. If this were to be included, Q1 revenue would show an increase of 6.9 per cent to $956.8 million.

CDL said the group has lined up four projects for launch 'once sentiments improve and when pent-up demand can be expected' - the 77-unit Shelford Suites; 336-unit The Arte @ Thomson; the first phase of a 724-unit condo at Pasir Ris; and The Quayside @ Sentosa Cove, with 228 units.

The Shelford and Thomson Road developments are freehold while the Pasir Ris and Sentosa Cove projects are on sites with 99-year leasehold tenure.

CDL, which is also a major office landlord here, said that it is expediting the construction of two office projects in Tampines to meet growing demand for offices outside the Central Business District. One is the three-storey Tampines Concourse, with 105,000 sq ft of total lettable area that will come up on a 15-year leasehold transitional office site CDL bought earlier at a state tender. The second project is 9 Tampines Grande, which will offer 300,000 sq ft housed in two eight-storey office blocks.

Earnings per share rose from 13.9 cents in Q1 2007 to 18.1 cents in Q1 2008. CDL closed unchanged at $11.70 yesterday.