SINGAPORE (May 11): Property group City Developments announced $85.5 million in earnings for the 1Q ended March, 18.9% lower than the $105.3 million it posted in the same quarter a year ago.
This comes despite revenue growth of 8.4% to $783.7 million as compared to $723.3 million the year before, which was led by improved performance from the property development segment which posted a 33.9% increase in contribution.
In a Thursday filing to the SGX, CDL explains that its lower 1Q16 earnings was due to a range of factors which included the absence of share of profit contribution from two joint venture (JV) projects, Bartley Ridge and Echelon, which were completed in 2016.
CDL also incurred exchange losses primarily from the repayment of a New Zealand dollar-denominated intercompany loan under the group’s indirect subsidiary, CDL Hospitality Trusts (CDLHT).
Additionally, CDL notes a disappointing performance by the group’s subsidiary, Millennium & Copthorne Hotels plc (M&C), as well as lower investment income earned from the realisation of an investment in Real Estate Capital Asia Partners, a private real-estate fund.
The higher revenue contribution from property development was primarily led by the progressive handover of units in Phase 1 of Suzhou Hong Leong City Center (HLCC), in addition to a strong take-up for Gramercy Park.
This was partially offset by the absence of contribution from Haus@Serangoon Garden as well as Jewel @ Buangkok, which obtained their Temporary Occupation Permits (TOP) last year.
The rental properties segment also reported lower revenue over the quarter due to an exchange loss suffered under CDLHT, in addition to the absence of contributions from Exchange Tower, which was divested in 4Q16, and Le Grove Serviced Apartments, which was closed for renovations.
Hotel operations was also impacted by M&C’s losses in its New York hotels, in addition to increased room supply and declining corporate demand in Singapore, with geopolitical tensions impacting inbound tourism into Seoul and Taipei.
CDL adds that the weakened pound Sterling also brought about an unfavourable impact at the group level following the translation of M&C’s results into Singapore dollars.
As at March 31, the group’s net gearing ratio remains at 16% excluding revaluation surpluses from investment properties.
Cash reserves are at $3.7 billion, while interest cover is 8.1 times as compared to 9.4 times in 1Q16.
Noting healthy residential sales in Singapore and China, the group says its office portfolio in Singapore continues to enjoy favourable occupancy of 95.3% as at end 1Q17, which is above the national average of 88.4%, and is also in the midst of actively exploring asset enhancement initiatives (AEIs) for some of its office properties.
The group says it is currently taking advantage of the subdued sentiment and weaker currencies in some of its key target markets, such as the UK, which may offer an attractive entry point.
It also intends to remain disciplined in its capital deployment for physical assets, equities or debt instruments while looking for accretive funds management executions.
“Looking ahead, in a dislocating market, we remain alert to deploy our strong balance sheet for acquisitions in Singapore and abroad. We will seek new opportunities, value accretive assets and synergistic partnerships that complement our core business,” comments CDL executive chairman Kwek Leng Beng.
Shares of CDL closed 7 cents higher at $10.85 on Thursday.
