Tuesday, August 6, 2013

City Dev

City Dev: strong 2Q13 bottom line showing , with net profit up 48% yoy to $203.8m, though the boost came mainly from gains on disposal of an industrial site in Singapore. Topline performance was tepid with revenue at $801.6m, up 1.8% yoy. Rental properties segment was the lead contributor to pre-tax profits, largely due to the gain recognized from the disposal of 100G Pasir Panjang following its sale completion in 2Q13. Property devt segment was the next highest contributor, as brisk sales were achieved for its recent mass mkt residential projects but locked-in profits could not be recognized as construction of these projects has yet to reach recognition stage. Hotel earnings however, were affected in some key mkts, as trends in parts of Asia remained subdued due to economic uncertainties, increasing supply of competitor hotel rooms and greater cost pressures. In addition, the on-going refurbishment programme at the group’s hotel subsidiary, Millennium & Corpthorne Hotels resulted in temporary loss of a net 181k room nights from its inventory. The group declared a special interim div of 8¢ vs nil in 1H12. Balance sheet remains strong, backed by cash of $2.5b, healthy net gearing ratio of 22% (excl revaluation surpluses from invmt properties) and interest cover at 15x for 1H13. Mgt notes the global economy remains fragile and unpredictable. Expects stronger headwinds in 2H13, as the latest round of property cooling measures has proven most effective to date. Notes transaction volume for private residential sales is beginning to be more measured and prices in general are expected to be moderated for the mass market segment, due to the tightening of bank borrowings. The group will continue to focus on developing its existing overseas growth engines, which includes an ever expanding China platform, with devt through CDL China and FSCL (M&C’s associate) and also its latest real estate devt arm in London. At the last close of $10.70, City Devt trades at 1.3x P/B (NAV = $8.30).

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