City Dev

City Dev: 3Q13 net profit slid 10.4% y/y to $120.6m while revenue inched 1.2% lower to $822.7m. Property development contributed the largest chunk of pretax profits (50.2%) and saw a 16% growth to $88.9m, due to profits booked from 10 projects/JVs (ie. 368 Thomson, Buckley Classique, H2O Residences and Cube 8 which just obtained TOP at end 3Q13, and Tree House obtained TOP in the quarter, Bartley Residences, HAUS@SERANGOON GARDEN). Profit was not registered for some developments like Echelon and Bartley Ridge as these were either in early stages of construction or construction has not commenced yet. On the office space, occupancy remained healthy at 96.4%. Business Times reported on 7 Nov that Rabobank had secured 26,000 sq ft of office tower at South Beach. Marketing for the office tower will begin in 4Q13. The Hotels’ 3Q13 pretax profit was down 11.4% to $49.3m (28% of group contribution). For 9M13, contribution was affected by the ongoing refurbishment program, where management highlighted net 240,000 rooms were removed from inventory. Less favourable trading conditions in some Asian hotels also affected contributions. On the rental side, although revenues were stronger y/y in 3Q13, pretax profit fell 55% to $32.3m as there were lower gains on disposal of non-core assets (1 strata floor in 3Q13 vs several strata units in 3Q12) Balance sheet remains strong, backed by cash of $2.6b, comfortable net gearing of 22% and NAV of $8.36. MBKE opines that growth opportunities are scarcer due to high land costs in Singapore, with land cost rising in London. There was also a London acquisition made to convert a multi-storey carpark near Harrods into a luxury development. MBKE views that focus might be on launching at least 1 project in China in 2014. On opportunities outlook, StanChart tones its optimism and points that the near term impact of overseas investments are likely immaterial, but could be a strategy shift in asset mix. Deutsche believes that pre-sold projects will provide relatively resilient earnings despite slowing Singapore housing market. Latest broker rankings as follows: MBKE maintains sell with TP:$9.00 (increased from $8.85) StanChart maintains O/PF with TP $10.08 (decreased from $13.30) Deutsche Bank maintains Hold with TP$ 11.15 CS maintains O/PF with TP $13.60