City Developments reports 2% rise in full-year net profit to S$593m

Singapore’s City Developments on Thursday said it expects to remain profitable this year, and does not expect to see much impact from recent government measures to cool the property market.

The developer booked a 2 per cent increase in full-year earnings to S$593 million or US$420 million. That is its second highest on record.

Revenue last year hit an all-time high of almost S$3.3 billion.

The Oceanfront@Sentosa Cove was one of the projects that helped to boost the bottomline for City Developments last year.

The group sold some 1,500 residential units in 2009 – more than three times the previous year.

City Developments believes that there is potential in the high-end market, which it said is still 25 per cent off its peak.

Chia Ngiang Hong, group general manager, City Developments, said: “The recovery in the residential market was led mainly by the mass market segment, especially in the second quarter, but buyers’ interest filtered up to the mid- and and high-end markets.

“Healthy take up in the mid- to high-end market segments since the start of 2010 indicates that residential drivers remain strong – underlying demand is enough to support current pricing.”

For the fourth quarter alone, City Developments booked a net profit of S$176.7 million – up some 77 per cent on-year. Revenue moved up by about 29 per cent to S$922.4 million.

City Developments expects cash flow in 2010 to be “healthy” but instead of committing the cash to pay dividends, the group may look at possible acquisitions or takeovers in the market.

With supply expected to flood the office sector in the next few years, the property developer said it is open to the idea of converting its office units into condominiums.

Kwek Leng Beng, chairman, City Developments, said: “Yield from office rentals here is relatively low, but once in a while, you have a chance to convert into residential development – as we did in No.1 Shenton Way.

“It is a question of looking at the demand – we do not want to come out with everyone else and undercut each other. It does not follow that because today’s market is not as buoyant as before, then you must quickly go and do something.

“I know of cases over the 40 years of business I have been in, when you convert, the market went down, when you convert back, the market went down again. One has to be careful with the timing.”

City Developments is expecting to remain profitable over the next 12 months. It sees little impact from recent government measures to cool the property sector, which include the introduction of a seller’s stamp duty and reducing the loan-to-value ratio to 80 per cent from 90 per cent.

Mr Kwek said: “It will not help developers sell as fast as before, but if there is a genuine demand with a medium- to long-term horizon, I think it should not affect the market that much.”

City Developments is proposing to pay a final dividend of 8 Singapore cents per share.

Source : Channel NewsAsia – 25 Feb 2010

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