CDL chairman Kwek Leng Beng promises to do more as H1 profit falls 94 per cent

SINGAPORE - City Developments Limited (CDL), which marks its 60th anniversary in September, has been through a rough patch in recent years with its ill-fated investment in Sincere Property Group in China.

In financial year 2020, the group booked a $1.78 billion impairment on the investment and posted a net loss of $1.9 billion for the year.

The group then posted an $85 million (restated) net profit in financial year 2021, followed by a record profit of $1.3 billion in FY2022.

On Thursday, CDL

posted a 94.1 per cent drop in net profit to $66.5 million f

or the first half of FY2023 ended June 30, from $1.1 billion in the previous corresponding period.

This was mainly due to the absence of the significant divestment gains booked in the first half of 2022, as well as greater financing costs and impairment losses for its British investment properties in the latest period, said the property developer on Thursday.

Mr Kwek Leng Beng, the 82-year-old executive chairman of CDL, said at the company’s results briefing on Thursday: “I would like to say that first, interest rates are not going to go up anymore, in my view, because inflation (has peaked) around the world.

“Second, we have for many years gone from one place to another, and we try to find a niche. And this niche is something that you know, you get it, you feel it, you cannot explain it in so many words. And I would like to grab opportunities, whether it is in Britain, Asia, America and so on.”

The property and hotel market veteran then said: “We make mistakes sometimes, once in a blue moon. But that is good – we are not perfect.”

Revenue for the first half of 2023 rose 83.6 per cent to $2.7 billion, from $1.5 billion a year earlier.

This was due to strong revenue contributions from the group’s property development segment, as well as revenue improvements from its hotel operations segment and investment properties.

Making a reference to revenue per available room, Mr Kwek said: “But having said that, I want you to bear in mind that I don’t want to be going too much into, ‘what is RevPAR?’, ‘what is this?’ I’m a big-picture man; I want to (go for the) kill when there’s opportunity to kill, I want to save (my bullets) for when there’s opportunity…

“I will bet you that our many journeys over the years have given us so much experience that I can’t tell you what I could do. But I will do (it).”

New Singapore launches

CDL, often seen as a proxy for the Singapore residential market, has been reviewing the launch of Newport Residences in the Anson Road area.

This is the 246-unit ultra-luxe freehold residential component of the 45-storey mixed-use development Newport Plaza that will come up on the former Fuji Xerox Towers site.

Sentiment in Singapore’s high-end residential market was dampened after the additional buyer’s stamp duty (ABSD) on foreign buyers was

doubled to 60 per cent in late April.

The regulatory deadline for CDL to finish selling Newport Residences will fall in 2031.

Meanwhile, near the Singapore River, CDL hopes to obtain written permission before the end of the year to develop a mixed-use project on the site where Central Mall and Central Square stand.

The group is aiming to launch the project’s residential component of about 366 apartments in the second half of 2024. The regulatory sales deadline will be in 2027.

The group is also preparing to launch a 512-unit executive condominium (EC) project in Bukit Batok West Avenue 5 in the first half of 2024.

Not one to shy away from the vast China market despite the group’s misfortune with Sincere Property, CDL’s group chief executive Sherman Kwek revealed on Thursday it has acquired a site in Suzhou, a city west of Shanghai, “at a very good price”.

The plan is to develop the site into a sizeable integrated project with a 250m-tall tower comprising predominantly offices; there will also be a small hotel component above the offices.

However, the majority of the project will be residences, housed in six shorter towers.

Said Mr Sherman Kwek: “Notwithstanding everything that’s happened, I think right now is a good time for us to get back into China; things can be bought at very good valuations.

“And parts of China are still doing very well, in spite of all the bad news that you hear in the press. Various cities still have very stable and very strong-performing residential markets.”

CDL has “more or less” fully sold its existing residential inventory in China and needs to replenish its land bank there, he added.

“We still continue to focus on the upper-tier cities. So, right now, for us, it’s Shanghai and Suzhou. We’re also looking at potential opportunities in Shenzhen.”

In the first half of 2023, the property development segment was the largest contributor to CDL’s revenue, with a 183.2 per cent increase to $1.7 billion.

This was largely due to the contribution from the group’s fully sold Piermont Grand EC. The project received its temporary occupation permit in the first half of 2023, allowing its revenue and profit to be recognised in their entirety upon completion under the current accounting policies for ECs.

Revenue from CDL’s hotel operations segment also rose by 12.4 per cent to $672.9 million, as RevPAR grew across all regions amid the recovery in international travel.

Global RevPAR stood at $151.50 for the first-half period, up 42.7 per cent from the same period in 2022.

The group enjoyed strong recovery in the Asia and Australasia regions, while the Europe and the United States markets continued to grow.

The addition of investment properties to the group’s portfolio, including St Katharine Docks in central London and two Osaka assets, also contributed to the revenue increase.

Mr Sherman Kwek said: “The record profit performance last year, driven by significant divestments, provided us with the significant cash to make strategic acquisitions that would add value to our portfolio.”

He noted that the group is focused on capital recycling and asset portfolio optimisation.

Finance costs in the first half of 2023 widened to $220.6 million from $99.5 million previously, mainly as a result of higher interest expenses and a fair value loss on financial derivatives booked in the period.

This came as opposed to a gain registered in the previous year.

Impairment losses amounting to $33.5 million on the group’s British investment properties contributed largely to the increase in the group’s other operating expenses in the first half of 2023.

An interim dividend of four cents per share was declared for the half-year, down from 12 cents in the same period the year before. The dividend will be paid on Sept 5, after the record date of Aug 21.

Shares of CDL ended 13 cents, or 1.8 per cent lower, at $6.99 on Thursday, after the earnings announcement.

THE BUSINESS TIMES