Latest Earnings From City Developments Limited: What Lies Ahead?

City Developments Limited (SGX: C09) announced its second-quarter results yesterday. The reporting period was for 1 April 2016 to 30 June 2016.

As a quick background, City Developments is a real estate developer and investor. It also has interests in hotels, serviced apartments, and serviced offices.

With that, let’s take a look at the company’s latest results. 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$1.09 billion, up 32.4% from a year ago.
  2. But, profit attributable to shareholders managed to inch up by only 0.2% year-on-year to $133.8 million.
  3. Earnings per share (EPS) consequently came in flat, remaining unchanged at 14.0 cents.
  4. The company reported an increase in its net asset value from S$9.36 per share in the second-quarter of 2015 to S$9.75 in the reporting quarter.
  5. Cash flow from operations came in at S$59.3 million with capital expenditure clocking in at S$7.3 million. This puts the firm in positive free cash flow territory to the tune of S$52 million. This is down from the prior year when there was free cash flow of S$231.3 million (cash flow from operations of S$235.7 million and capex of S$4.4 million).
  6. As of 30 June 2016, City Developments had S$3.29 billion in cash and equivalents and total borrowings of S$6.37 billion. This implies a net debt position of S$3.08 billion, implying a net gearing (net debt divided by total equity) of 28%. The company ended the second-quarter of 2015 with a net gearing of 28% too.
  7. Lastly, City Developments announced a special interim dividend of S$0.04 per share, unchanged from the year before.

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

City Devevlopments Q2 2016 segment table
Source: City Developments’ earnings release

The bulk of City Developments’ growth came from the Property Development segment, as you can see in the table above. The segment enjoyed revenue and profit recognition from the Lush Acres executive condominium project that gained its Temporary Occupation Permit (TOP) during the reporting quarter.

To sum up City Developments’ outlook and future plans, Kwek Leng Beng, the company’s executive chairman, said the following in the earnings release:

“In view of the global economic uncertainties and domestic market challenges, we are recalibrating and evaluating our asset portfolio more intensively. The Group is constantly reviewing ways to optimise and unlock the value of our rich asset portfolio through instruments such as the Profit Participation Securities platform.

We have a robust balance sheet, high liquidity and conservative accounting practices. This provides us with the firepower to continue investing overseas, given prevailing headwinds in the Singapore property market.

We have seen increased competition from local and overseas developers as well as contractors undertaking a dual role as developers, who have been submitting high bids for land in Singapore. Moreover, there is difficulty in land banking in Singapore especially for listed companies.”

Grant Kelley, the company’s chief executive, had some words to share as well on City Developments’ future:

“Our investment approach remains value driven and growth focused, yet disciplined. As part of our diversification strategy, we continue to look out for suitable opportunities to acquire more overseas properties. Our prudent capital management of the past will provide the basis for quickly capturing opportunities whenever they arise.

We will also continue to grow our funds management business. This will enable us to both fortify our recurring income stream and generate alpha from development projects.”

Share of City Development closed at S$8.87 each on Thursday with a price to book ratio of 0.91.

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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 company mentioned.