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City Developments Limited’s Latest Earnings: Record Revenue in a Tough Year

City Developments Limited (SGX: C09), or CDL in short, reported its fourth-quarter earnings yesterday for the year ended 31 December 2014. The reporting period was for 1 October 2014 to 31 December 2014.

CDL is a property developer and hospitality conglomerate based in Singapore with real estate interests around the globe. Established since 1963, the company has a certain pedigree given its track record of having developed more than 34,000 high-end homes around the world.

With these as a backdrop, let’s dig into CDL’s latest set of results.

Financial highlights

Revenue for 2014 was up 17.1% from a year ago to S$3.76 billion, the highest ever annual revenue CDL has pulled in.

CDL has three business segments, namely, Property Development, Hotel Operations, and Rental Properties. The first two are by far CDL’s most important business segments; in 2014, the two segments collectively accounted for 87% of the company’s total revenue.

In 2014, both Property Development and Hotel Operations enjoyed strong growth. The former had seen a 32% jump in annual revenue from S$1.20 billion a year ago to S$1.58 billion despite experiencing “tough market conditions.” Meanwhile, the latter saw its revenue increase by 10% from S$1.53 billion to S$1.68 billion, driven by contributions from acquisitions and refurbished hotels.

Some of the top-line growth had made its way to the bottom-line with CDL’s annual profit after tax and minority interests (PATMI) climbing 12.2% to S$769.6 million. It’s worth noting that CDL’s PATMI for the fourth quarter of 2014 – at S$384.9 million – is the highest quarterly profit achieved so far.

Changing gears to CDL’s financial position, the big picture takeaway is that the company has a strong balance sheet, although things have weakened slightly compared to a year ago.

For instance, the net gearing ratio for CDL had edged up from 18% at end-2013 to 19% as of end-2014. The company’s interest cover ratio (generally, the higher the number, the better) had also fallen from 13.7 at end-2013 to 12.1 at end-2014.

Having a strong balance sheet may come in handy for CDL as it can give the company the fortitude to tide over any slowdown in the business or economic environment. This is especially pertinent now that Singapore’s property market has started to soften with the government’s property cooling measures taking effect.

CDL ended 2014 with a net asset value per share of S$9.25, up 8.8% from a year ago. The company also declared a dividend of 12.0 cents per share for the fourth quarter (consisting of a 4.0 cents special final dividend and an 8.0 cents ordinary dividend), bringing the total dividend for 2014 to 16.0 cents per share, unchanged from 2013.

Valuation & prospects

There are many moving cogs in CDL’s business but Kwek Leng Beng, Executive Chairman of the company, managed to highlight key happenings with the firm’s business in the earnings release:

“In 2014, we made very deliberate efforts to focus on CDL’s diversification strategy through geographic expansion and development of new investment platforms. In line with these objectives, CDL has acquired approximately S$1.3 billion worth of assets in the US, UK, Italy, Japan and China in 2014. We also created the Profit Participation Securities (PPS) platform which raised S$1.5 billion for the Group’s global plans. CDL has demonstrated the ability to be nimble and innovative, and with the fresh perspectives via new senior management appointments, we have continued to build value for shareholders.”

Judging from the following comments, it can be seen that Kwek remains optimistic about CDL’s future despite Singapore’s current property slump and lacklustre economic growth globally:

“Headwinds are expected to persist for the Singapore market and the global economy remains fragile. Despite these uncertainties, there will always be pockets of opportunity. We remain poised to capitalise on this down cycle by building on our capabilities, expanding geographically, diversifying our products and creating our own opportunities both locally and abroad.”

All said, CDL has done well to score a remarkable increase in revenue and profits in 2014 despite experiencing challenging market conditions in Singapore, a core geographical market for the company. In my opinion, this highlights the diversity of the firm’s portfolio.

Based on CDL’s closing price of S$10.26 yesterday, the company is selling for 1.1 times its latest net asset value and carries a dividend yield of just 1.56% (based on the dividend of 16 cents for 2014).

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.