City Developments

City Developments: Reported 4Q10 and FY10 Results, slightly above expectations, with 4Q10 Rev at $690.9m, -25.1%YoY and -7.3%QoQ, while Net Profit at $249.2m, +31.9%YoY and +27.2%QoQ. Result brings FY10 Rev to $3.1b, -4.4%YoY and Net Profit to $748.97m, +26.2%YoY and ahead of consensus average estimates of $672.8m. Gross Magins also saw improvement, with FY10 margins at 53%, vs 49.9%YoY, despite a slight drop of 3b.p in 4Q10 vs 3Q10….

Strong bottom line, despite weaker top-line was largely attributed to a surge in Other Operating Income, at 387.3m, +9750.1% YoY, comprising mainly management fee, miscellaneous income and profit on sale of investments, investment properties and property, plant and equipment. A gain arising in respect of step up acquisition of Beijing Fortune by the Company’s 54% owned subsidiary, Millennium & Copthorne also recognised in 4Q…

Strong performance was generally driven across all of grp’s segments, with Grp’s residential, selling a total of 1,560 units valued at $2.1b, vs $1.9bYoY. Grp has planned six to seven property launches for 2011. Under the Commerical Segment, profit contribution from rental properties was the lead contributor in 2010 as Grp unlocked value of several of its non-core and secondary assets worth an estimated $967m…..

The office market also turned around unexpectedly, following strong GDP growth and is poised for further growth. Grp’s office portfolio continued to fare well with occupancy rate of 94.0% as at FY10. For the South Beach project, grp has contracted for the construction of the diaphragm wall and actual site work will commence in Mar11. Evaluation of the main construction contract is expected to be finalised by mid 2011…..

Going forward, grp tips growth to be supported by strong growth in the Asian region and remains optimistic that the positive sentiments riding on a dynamic GDP growth of between 4% - 6% this year will bolster sentiment and increase confidence across all business segments. Grp is expected to remain profitable over the next 12 months…..

At current levels, grp trades at 1.5x P/B, while balance sheet remains healthy, with a Net Gearing Ratio of 29%, while CS estimates grp RNAV at $15.60, and tips further rerating to targeted RNAV. Grp has announced a total proposed dividend of 18c/share, (comprising an ordinary div of 8c/share and a special div of 10c/share.)