City Developments Profit Rises 18% on Singapore Demand for Homes, Offices
City Developments Ltd., Singapore’s second-largest property company, posted an 18 percent increase in second-quarter profit as the city-state’s economic recovery boosted demand for homes and office space.
Net income for the three months ended June 30 rose to S$164.6 million ($120 million), or 17.2 cents a share, from S$140 million, or 14.7 cents, a year earlier, the company said in a statement to the Singapore stock exchange. Revenue climbed 20 percent to S$941.7 million.
Singapore’s economy expanded 24 percent in the second quarter and growth for the full year may reach as much as 15 percent, according to government estimates. Home prices climbed 5.3 percent during the three months ended June, a fourth consecutive quarterly increase.
“Riding on the back of Singapore’s strong economic growth for 2010, the positive sentiments will be beneficial to all the group’s business segments,” Chairman Kwek Leng Beng said in the statement. “The euphoria of the strong growth needs to be measured and taken into its context as there are still many external risks in the world economy.”
City Developments fell 2.2 percent to S$11.66 at the midday break in Singapore, dropping for a seventh straight day, the longest losing streak in three months. The drop trimmed its gain this year to 0.9 percent. The benchmark Straits Times Index has climbed 0.8 percent during the period.
“We’re still quite optimistic on the Singapore property market, which is being underpinned by genuine demand, but a lot of people are aware that going into the second half, things are likely to slowdown,” said Wilson Liew, an analyst at Kim Eng Securities Pte in Singapore. “The shares had a good run in the last month so this is a good profit-taking opportunity for City Developments as well as the other developers.”
Kwek said in a briefing today he doesn’t expect the Singapore government to take further steps to cool the property markets. The government has introduced measures ranging from increased land sales and a ban on interest-only mortgages in the past year. Next year may be a better time to market luxury homes, he added.
Revenue from the property development business grew 29 percent to S$444.19 million, the biggest contributor to overall sales. Its hotel operations, rental properties and other business units also reported higher revenue. The company owns a majority stake in Millennium & Copthorne Hotels Plc, an operator of more than 120 properties worldwide that last week reported a 56 percent increase in second-quarter profit.
City Developments said it plans to start selling homes at two projects in Singapore over the next few months amid “continuing healthy demand.” It agreed to sell all the units it owns in Chinatown Point, a commercial building in downtown Singapore, for S$250 million, the developer said.
City Developments also sees “opportunities” in China to buy land and investment properties amid an easing in prices and sales, according to the statement. It appointed Sherman Kwek as chief executive officer of CDL China Ltd. and will set aside S$300 million in investment funds for expansion in the country.
Prices in 70 major cities across China climbed 10.3 percent in July from a year earlier, the slowest pace in six months, the statistics bureau’s newspaper, China Information News, reported on Aug. 10.
“Their plans for China are still in the initial stages and it’ll take at least three to five years,” Kim Eng’s Liew said. “While it does give them a foothold into China, Singapore will remain their focus in the medium term.”
To contact the reporter on this story: Shiyin Chen in Singapore at email@example.com