The City Developments Limited (CDL) said the previous day that it anticipates to continue to be profitable this 2009, having recorded $100 million net earnings in the fourth quarter of 2008.
With revenue easing to 5.2 percent to $2.95 billion, the full-year net earnings of CDL slide by 19.9 percent to $580.9 million.
According to CDL, the lower contribution from the operations of Millennium & Copthorne Hotels (M&C), the group’s subsidiary, was largely responsible for its weaker full-year bottomline. The subsidiary’s lesser contribution resulted from the strong Singapore dollar against the British pound in particular. Its strength had a huge impact when the exchange rate translation became part and parcel in the consolidation at the level of the group. Likewise, M&C received impairment charges from some of its assets in the US, UK and Asia and joint-venture investment in Bangkok and Beijing.
CDL group declares the amount of its investment properties at impairment losses and accumulated depreciation, rather than recording fair value losses and gains and revaluing them for investment properties like other listed property groups in the country.
Consequently, CDL’s “profit is not subject to volatility arising from anticipated lower valuations due to the current economic downturn”, said CDL in its results statement.
“The group had no impairment on development properties and landbank in 2008,” the group further explained. CDL also mentioned South Beach project’s recent external valuation, concluding that it does not require any provision for this development’s impairment.
Hotel operations’ full-year profit before income tax declined to $245 million, 14.2 percent down. While earnings from rental properties grew 2 percent to $136.3 million, profit from property development decreased 6 percent to $476.1 million. Such profit figures include share of after-tax earnings of jointly controlled entities and associates.
CDL said as residential developments are still in the early stages of construction, profit have yet to be fully recognized from the pre-sold projects. “These healthy gains have been locked in and will be booked in progressively, based on the construction progress,” CDL added.
For the units that were presold during the second-half of 2007, the rate of the exposure of the group is quite low. “Notwithstanding the current market conditions, and considering the land cost of those presold developments, the group believes the situation has not arisen to warrant any alarming concern on DPS buyers defaulting,” CDL explained.
At the end-December 2008, CDL earned $3.378 billion net borrowings, a growth of $50 million from 2007.
Full-year profit per share of CDL declined to 62.5 cents from 78.3 cents. As of 31 December 2008, net asset value per share stood at $5.97, up from $5.72 at end-December the previous year.
CDL also disclosed the 16 sold units out of 30 additional units released on the weekend of Valentine’s Day at its Livia condominium in Pasir Ris.
“Singapore remains an excellent city to live, work, play and invest,” said Kwek Leng Beng, executive chairman of the group. He suggested that investors must “spread your portfolio as much as possible, and don’t condemn real estate, because it is real”.
“Real estate in Singapore is likely to outperform other classes of assets when viewed with a medium- to long-term perspective. The group believes that as the property market turns more active, confidence will increase which augurs well for the economic recovery,” said CDL.