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3 Things to Know About City Developments Limited’s 2017 Earnings

City Developments Limited (SGX: C09) is one of the largest property companies in Singapore with a global presence spanning 26 countries.

Last week, the firm announced its financial results for the full year ended 31 December 2017. Let’s look at three main aspects of the announcement here.

Show me the money

Full-year revenue slipped 2% year-on-year to S$3.83 billion. The decline was mainly due to lower contributions from property development and rental properties, partially offset by higher contribution from hotel operations. Revenue from the hotel operations segment grew mostly on the back of full-year revenue from certain hotels within the group’s listed subsidiary in the UK, Millennium & Copthorne Hotels plc (M&C).

For the year, City Developments and its joint venture associates sold 1,171 units, including executive condominiums, with a total sales value of S$1.93 billion. In comparison, in 2016, they sold 1,017 units with a total sales value of S$1.25 billion.

The following compares City Developments’ revenue contributions and total assets by geography for 2017 and 2016:Source: City Developments Limited 2017 earnings presentation

In 2017, the bulk of total revenue was from Singapore, followed by others, the US and the UK. China contributed to 9% of the pie. In terms of overall assets, most of the assets were in Singapore while the UK contributed to 15% of total assets.

Meanwhile, profit from operations tumbled 13.4% year-on-year to S$799.8 million, and net profit attributable to shareholders came down 17.6% to S$538.2 million.

City Developments said that in 2016, its performance was lifted by a variety of factors which were not present in 2017. Such factors include contribution from Hong Leong City Center in China, projects with higher profit margin such as Coco Palms and Lush Acres, sale of its 52.52% interest in City e-Solutions Limited and divestment of Exchange Tower.

As a result of the decline in the bottom line, 2017’s diluted earnings per share was 56.4 cents, down from 68.5 cents in 2016.

City Developments’ balance sheet strengthened over the year. As at 31 December 2017, it had S$3.78 billion in cash and cash equivalents, and total debt of S$5.04 billion. This translates to a net debt position of S$1.26 billion. In comparison, at the end of 2016, it had S$2.08 billion in net debt.

The net gearing ratio, without any revaluation surplus from investment properties, stood at 9% in 2017, the lowest ever. In 2016, the net gearing ratio was 16%. Interest coverage for 2017 was higher at 13.6 times versus 12.5 times in 2016.

The net asset value stood at S$10.54 at the end of 2017, up from S$10.22 one year prior.

Cash flow from operations for the year fell 8.9% to S$1.08 billion. With a capital expenditure of S$44.9 million in 2017, free cash flow came in at S$1.03 billion. This is down from 2016’s free cash flow of S$1.59 billion.

Ka-ching!

The board has proposed a final dividend of 8.0 cents per share and a special dividend of 6.0 cents per share. Together with the special interim dividend of 4.0 cents already paid out, the total dividends for 2017 would be 18.0 Singapore cents per share, 12.5% higher year-on-year.

What the future holds?

In 2018, City Developments will be focusing on growth, enhancement and transformation, as shown below:Source: City Developments Limited 2017 earnings presentation

On top of unlocking value through asset enhancement initiatives, it is looking to start a fund management business to generate new streams of recurring income, diversify its earnings and expand its investor base. By 2023, the group aims to be one of the top 15 fund managers in Asia with assets under management of US$5 billion.

As for its core business, Kwek Leng Beng, the executive chairman of City Developments, said:

“After a challenging four-year period, there is a boost in sentiment for the Singapore residential market, with increased sales volume and prices. To drive growth, we will look to our property development business, particularly in Singapore where the upturn in the property cycle is only just beginning. Singapore is a market we know intimately well, having operated here for over 50 years. We are well-poised to ride the upturn with around 2,750 residential units in the pipeline across the mass, mid- and high-end segments. CDL will continue to be highly disciplined and selective in making strategic bids. For our hospitality business, we will prudently expedite the refurbishment of M&C’s portfolio which is a key contributor to our recurring income.”

At the closing price of S$12.38 yesterday, the property outfit was going at 1.2 times its latest book value and had a dividend yield of 1.5% (including special dividends).

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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 Sudhan P doesn’t own shares in any companies mentioned.