CITY Developments Ltd : C09 0% (CDL) on Thursday (Feb 23) posted a net profit of S$165.8 million for the half year ended December 2022, up 42 per cent from S$116.8 million of the restated H2 FY2021 income.

Income was restated lower for FY2021 as the group reclassified its assets held for sale, along with their directly associated liabilities. This was after its proposed real estate investment trust listing of its two UK commercial properties fell through..

During H2 FY2022, the group recognised a pre-tax gain of S$256.3 million after completing the collective sale of Tanglin Shopping Centre, and S$75.6 million after Golden Mile Complex’s collective sale.

Revenue grew 27 per cent to S$1.8 billion from the previous year’s revenue of S$1.4 billion. The topline growth was driven primarily by the hotel operations segment, which contributed to 43 per cent of the group’s total H2 revenue.

Revenue per available room (RevPAR) for H2 FY2022 period rose 73.6 per cent, with improved room occupancies and average room rates, following the easing of border restrictions and a gradual recovery from the Covid-19 pandemic.

Gross profit margin fell to 36 per cent from 39 per cent the previous year, mainly due to allowance for foreseeable losses of S$61.8 million made on four development properties in the UK, and one development property in China.

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For the whole of FY2022, net profit was S$1.3 billion as opposed to restated profit of S$84.7 million, while revenue grew 25.4 per cent to S$3.3 billion from S$2.6 billion.

This represented the highest figure achieved since CDL’s inception in 1963, said the group, boosted by a “bountiful year of gains” including its sale of Millennium Hilton Seoul, and a gain on the deconsolidation of CDL Hospitality Trusts (CDLHT) following the distribution in specie of CDLHT units in H1.

Its board recommended a final dividend of S$0.08 and a special final ordinary dividend of the same amount for FY2022. Together with a special interim ordinary dividend of S$0.12 per share paid in September 2022, this brought CDL’s total cash dividend for FY2022 to S$0.28.

“Riding on the return of corporate travel and unabated pent-up demand for leisure travel, our hospitality segment will continue to strengthen and is poised to be a star performer for the year ahead,” said Kwek Leng Beng, executive chairman of CDL. “A key focus for our hospitality portfolio will be to accelerate plans for asset optimisation, alignment to the group’s sustainability goals, and driving growth.”

Nod for share buyback plan

Sherman Kwek, the group chief executive officer of CDL, said at the results briefing on Thursday that the group’s chairman and board have approved a share buyback plan. “Whether it gets put into action depends on the share price, as the buyback plan is tied to a certain predetermined share price. So we will only acquire at or below that level.” He did not reveal the price level.

The group will launch three Singapore residential projects this year: the 638-unit Tembusu Grand in the Tanjong Katong area, the 246-unit Newport Residences in Anson Road (both in H1), followed by The Myst, a 408-unit condo in Upper Bukit Timah Road, in H2.

The freehold Newport Residences will feature a 13,000 sq ft super penthouse, with a private infinity pool, five bedrooms (all ensuite) as well as entertainment and gourmet kitchens. The penthouse will be perched on level 45 of the mixed development, at above 200 metres. It will have a dedicated lift.

The group has also been building up its business in other segments of the accommodation spectrum, or “living sector”. These include the private rented sector (PRS), which are apartments for rent; and purpose-built student accommodation (PBSA).

Sherman Kwek noted that with high apartment prices around the world, more people are turning to renting. He is also upbeat on the PBSA market, with more overseas students, especially from mainland China, returning to universities. “This will drive the student accommodation sector, especially in the UK.”

CDL will consider creating potential fund management platforms for assets in its living sector portfolio when greater scale has been achieved.

Currently, CDL has an overall portfolio (comprising operational and pipeline assets) of 2,288 PRS units and 2,368 beds in the PBSA segment.

In the UK, the group’s assets under management (AUM), based on current gross development value, for its living sector portfolio is about S$1.04 billion. In Japan, it has S$164.4 million AUM for its PRS portfolio.

The group intends to “grow (our living sector portfolio) by probably four times what we currently have in terms of AUM/GDV”, Sherman Kwek said.

He added that CDL’s current PBSA portfolio of 2,300-plus beds reflects “pretty good economies of scale, but I would say in the long run, we probably want to increase this by another two to three times the current size to derive more economies of scale”.

Last month, the group was reported to be in discussions to buy St Katharine Docks in London, a predominantly office complex, for £400 million (S$648 million). If CDL buys this asset, it may provide the right scale for the group to revive plans to float a UK office Reit. Its two UK office assets intended for the Reit – 125 Old Broad Street and Aldgate House - were valued at about £600 million. “It is probably still a bit too small, I think, to do an IPO or even a (private) fund, especially if you want to attract strong institutional investors,” Kwek added at Thursday’s briefing.

CDL closed on Thursday S$0.11 or 1.4 per cent lower at S$7.84.