Latest Earnings From City Developments Limited: More Insight On The Road Ahead

City Developments Limited (SGX: C09) had released its fiscal first-quarter earnings (for the three months ended 31 March 2016) yesterday evening.

As a brief background, the company is involved in the business of real estate. It is a property developer and investor, and also has interests in hotels, serviced apartments, and serviced offices.

With that, let’s look at the company’s earnings. The following’s a quick summary of some of the latest financial figures from City Developments:

  1. Revenue for the quarter came in at S$723.3 million, down 11.2% from the S$814.9 million recorded for the same period a year ago.
  2. Profit attributable to shareholders consequently dropped by 14.4% year-on-year to $105.3 million.
  3. Earnings per share (EPS) for the quarter saw a matching 14% drop from 13.5 cents a year go to 11.6 cents.
  4. The company reported a 4.5% increase in its net asset value (NAV) per share from S$9.43 to S$9.85 for the same reporting period in 2015 and 2016, respectively.
  5. City Developments ended the reporting quarter with positive free cash flow of S$132.2 million thanks to its S$176.9 million in cash flow from operations and S$44.7 million in capital expenditures. In the first-quarter of 2015, the company reported positive free cash flow of S$56.8 million (cash flow from operations of S$82.7 million and capex of S$32.6 million).
  6. As of 31 March 2016, City Developments had S$3.34 billion in cash and equivalents and borrowings of about S$6.19 billion, putting it in a net debt position to the tune of S$2.84 billion. This implies a net gearing of 19%.

The breakdown of the results for the different segments can be seen below:

City Developments segment revenue and profit
Source: City Developments’ earnings release

As the table above shows, the bulk of City Developments’ revenue decline can be traced to lower revenue from the property development and hotel operations segments. For the former, there was lower contribution from project completions in the reporting quarter as compared to the same period a year ago. Hotel operations were impacted by weak trading seen in the company’s hotels in key gateway cities. In addition, the competitive environment led to lower room rates and occupancy.

To sum up City Developments’ outlook and future plans, Kewk Leng Beng, the company’s executive chairman, had the following to say in the earnings release:

“Given the challenging market conditions, our diversified portfolio enables us to achieve stability from recurring income streams, primarily from our hotel operations, rental properties and funds under management businesses, which currently account for 62% of our EBITDA. We remain watchful of the Singapore residential property market and will respond with agility when the market environment improves.

In view of our highly diversified portfolio, we stand to benefit from any signs of recovery across a wide range of market segments It seems even though the company was rescued by a huge one off gain from the sale of three properties to a joint venture for the previous year, management is confident of the company’s prospects going forward.“

The company had also added some context to its diversification plans, stating:

“A year ago, the Group announced that in light of the subdued domestic property market and its persistent headwinds, it was deliberately embarking on accelerating its diversification strategy across two dimensions – firstly, expanding its core real estate development business overseas and secondly by developing an unlisted funds management business.

The Group has made good progress in these fronts and under the current environment, new opportunities continue to present themselves. However, the Group will continue to apply discipline in its investment choices, act decisively to capture opportunities with a focus on assets classes where the Group has scalability that will enhance and add value to its existing portfolio.

Even as the Group expands overseas and works actively to develop new platforms, its investment in Singapore will remain the mainstay of its business.”

Share of City Developments closed at S$8.04 on Wednesday, giving rise to a price to book ratio of 0.82 based on the latest book value per share.

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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 Esjay does not own shares in any companies mentioned.