SINGAPORE (Feb 27): Analysts remain optimistic on property developer City Developments (CDL) following the release of its FY2019 results ended December, on Feb 26.
The group’s earnings inched up 1.3% to $564.6 million, from $557.3 million in FY2018. This comes on the back of stronger revenue from its property development segment, mainly from Singapore projects under construction and balance units from some of its overseas properties.
The group’s core segments are in property development, investment property holdings, fund management and hotel ownership.
The increase is despite an 18.8% drop in full year revenue to $3.4 billion, as revenues of several properties under its overseas projects and Singapore Executive Condominiums (ECs) can only be recognised upon completion.
Overall, net profit was down 7.2% to $613.4 million, from the $660.8 million it logged in FY2018.
This is in line with expectations, say analysts from DBS and OCBC.
However, they caution of volatile times ahead, as the ongoing novel coronavirus (Covid-19) outbreak dampens consumer spending, tourist arrivals and in turn, demand for hotel stays.
“Unsurprisingly, CDL mentioned that its hotel business has been the most badly hit [as] occupancy rates for its Singapore hotels are around the 40-50% level. While the impact is limited for its Europe and UK assets for now, the management is monitoring the situation in Italy as this could have negative spill-over effects in the region,” OCBC analysts point out in a Feb 27 note.
Aside from this, DBS’ Rachel and Derek Tan say a possible property market tightening by the government to appease the economy, “may result in negative sentiment on the stock and its ability to sell unsold inventory”.
Even so, the analysts from both houses say the group has its merits as it re-develops its property at Liang Court, rejuvenates its Millennium & Copthorne (M&C) Hotels portfolio, grows its fund management portfolio and re-develops its commercial/industrial assets.
Specifically, the group’s $140 million M&C capital expansion plans, potential re-development of its Fuji Xerox place to increase its gross floor area by 25% and renegotiation its investments in Sincere Property Group, are expected to diversify its portfolio and offset impairment losses.
To this end, both OCBC and DBS post buy calla at target prices of $12.01 and $13 respectively.
As at 3.44pm, shares at CDL were down 2.03% at $10.16.
