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City Developments sees growth opportunities in Asia

Property developer City Developments Limited wants to diversify its business as it has one of the highest exposure to the local residential market which has been weighed down by property cooling measures.

SINGAPORE: Private equity veteran Grant Kelley has been charged with helping property developer City Developments Limited (CDL) become less Singapore-centric.

Speaking on Thursday, at his first results briefing for CDL after being named CEO, Kelley says he sees growth opportunities in China, Japan, and Australia.

And for Western Europe and North America, he named markets like the United Kingdom and United States.

Mr Kelley said: "There are two investment styles that are probably noteworthy here. In the mature markets, it is very much a case of buying assets beneath their replacement cost. In the emerging markets, we are prepared to take on development risk.

"And one of the key reasons for that is that you can't buy unless you buy at very aggressive price points, existing assets that are already stabilised."

CDL may have outsold all other developers in Singapore but it wants to diversify its business as it has one of the highest exposure to the local residential market which has been weighed down by property cooling measures implemented since 2009.

The property developer sold a record 3,210 homes in Singapore last year with a value of S$3.3 billion - the highest sales volume among developers here in Singapore.

Despite the strong sales volume last year, CDL says its full-year net profit only inched up by 0.7 per cent to S$683 million.

This is partly due to an accounting rule that states profits can only be booked only upon the completion of construction.

For the fourth quarter alone, net profit fell 11 per cent to S$221 million. Meanwhile, revenue for the fourth quarter fell almost 12.6 per cent to S$774 million.

CDL said the property development segment was the main contributor to its earnings, representing 66.8 per cent of the group's profit before tax for Q4 2013, despite reporting lower profits.

It attributed the lower profit contribution to the completion of Hundred Trees and Tree House in 2013, coupled with the absence of similar gain from disposal of industrial land parcels at Jalan Lam Huat recorded in Q4 2012.

Basic earnings per share stood at 23.6 cents for Q4 2013, down from 26.7 cents in the previous year.

CDL said the board is recommending an ordinary final dividend of 8.0 cents per share.

CDL's shares closed unchanged on Thursday at S$9.32. However, the counter has dropped some 18 per cent over the past 12 months.

CDL's executive chairman Kwek Leng Beng said: "The shares have been hammered because (of) misunderstanding by a lot of people, especially some analysts who don't understand the business model we have. I'm not going to encourage my company or encourage the board to buy do buy back shares because we want better liquidity."

Despite a challenging property market, CDL says it does not anticipate any major writedowns, like the one taken by rival property developer Wheelock Properties on February 25. Wheelock had to make an impairment loss of S$110 million on The Panorama condominium project.

Looking ahead, CDL expects macro headwinds to continue to weigh on the Singapore property market following recent announcements by the government that it will not be easing property cooling measures soon and that it will further tighten foreign labour rules in the construction sector.

CDL adds that it is hopeful that some of the cooling measures could be tweaked in due course, particularly in the area of foreign investment, to mitigate any prolonged down cycles, taking into account time lags in implementation and unforeseen risks.

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