CDL's Q2 profit surges 80% to S$204.8m on strong residential sales

CITY Developments Limited (CDL) on Wednesday reported a second quarter net profit of S$204.8 million, up 80 per cent from S$114.1 million the year ago. (see amendment note)

This came on the back of a 60 per cent increase in revenue for the quarter to S$1.36 billion this year from S$854 million last year.

Earnings per share for the quarter ended June 30 came up to 21.8 Singapore cents, compared to 11.8 cents in the previous year.

The increases for second quarter 2018 were largely due to higher gross profit generated by the company's property development segment, said the property developer.

CDL said its launched projects performed well in H1 2018, before the new property cooling measures were announced in July. The group, together with its joint venture associates, sold 651 units including executive condominiums (ECs), with a total sales value of S$1.29 billion compared with 691 units worth S$1.15 billion for the same period last year.

In Singapore, CDL's property projects that did well include the 174-unit Gramercy Park at Grange Road which, launched in March 2016, is fully sold. The 124-unit New Futura at Leonie Hill Road saw 92 units (representing over 74 per cent of all units), including the two penthouses, sold to-date, achieving an average selling price (ASP) of about S$3,500 per square foot, said CDL. Since Phase 1 of The Tapestry, the group's 861-unit condominium in Tampines was launched in March this year, 488 or 89 per cent of the 550 units released have been sold to date with an ASP of about S$1,350 psf.

The board has declared a tax-exempt (one-tier) special interim ordinary dividend of six Singapore cents per ordinary share for the period, payable on Sept 12.

Mr Kwek Leng Beng, CDL's executive chairman, said: "We had two quarters of strong residential sales in Singapore, but market dynamics changed after the unexpectedly harsh property cooling measures were announced in July. Sales are expected to moderate though prices may be sustained for very few quality projects in good locations where there is limited supply and pent-up demand.

"Having navigated various property cooling measures over the years, we have seen that sentiment and timing are critical. As our land bank was bought relatively early before prices rose further, this gives us more flexibility for the commencement of construction and sales launches. Our investment horizon remains long-term and we will continue to adopt a disciplined approach to maximise returns for shareholders."

Giving his take at a results briefing on Wednesday, CDL's group chief executive Sherman Kwek said: "I think prices will...certainly be affected and we have already seen that in some of the newer projects that have recently launched (in the market), if you ask me for a personal opinion, I think they are probably launching at maybe 10 to 15 per cent below what they could have launched at in terms of per square foot pricing."

Commenting on prices at these recent market launches, he  said that their developers are "quite lucky" because they had acquired their sites earlier and thus "have that margin" to play with.

"But there isn't a lot of room for prices to go down a huge amount, so we're unlikely to see a huge massive tumble in prices because primarily most of the developers who replenished land over the last 12 months did so at very high prices. "There is limited flexibility when it comes to either giving out discounts or even paying so-called higher agent commissions to get sales moving."

The group is targeting to launch its Whistler Grand condo in West Coast Vale in November. Next year, it plans to release projects on the Amber Park and Handy Road sites as well as the EC project in Sumang Walk. Launch plans for the more upmarket South Beach Residences and Boulevard 88 are under review.

Amendment note:

An earlier version of this article incorrectly stated that second quarter net profit was S$235 million, up 49 per cent from S$157.8 million the year ago. It is in fact S$204.8 million, up 80 per cent from S$114.1 million. The article above has been revised to reflect this.