City Developments Limited (SGX: C09), or CDL, is the latest blue-chip stock to release its 2023’s first-half (1H 2023) earnings.
In the last fortnight, we saw the three local banks release sparkling sets of results while utility giant Sembcorp Industries (SGX: U96) also announced a higher net profit.
CDL has similarly turned in an impressive report card as it saw both revenue and core net profit increase year on year.
The property giant also has various initiatives up its sleeve to further improve its financial numbers in the coming year.
We dig deeper into five aspects of the group’s latest 1H 2023 earnings.
1. A resilient financial performance
CDL’s revenue surged 83.6% year on year to S$2.7 billion as its property development division reported a more than year-on-year doubling of its revenue.
The main contributor to the increase was the group’s fully-sold executive condominium (EC) Piermont Grand which obtained its Temporary Occupation Permit (TOP) in 1H 2023.
However, operating profit plunged 81.2% year on year to S$286.5 million in the absence of an exception gain from the sale of Millennium Hilton Seoul in 1H 2022 along with the deconsolidation gain following the distribution-in-specie of units of CDL Hospitality Trusts (SGX: J85).
Net profit sank 94.1% year on year to S$66.5 million due to the same reasons above.,
If you exclude the one-offs, CDL’s core profit before tax increased by 48% year on year.
The property giant also generated a positive free cash flow of S$365.8 million for 1H 2023, reversing the free cash outflow of S$254.9 million in the prior year.
A special interim dividend of S$0.04 was declared, down from the S$0.12 that was paid out in 1H 2022.
2. Healthy development sales with a good project pipeline
Aside from the recognition of sales proceeds from Piermont Grand, CDL and its joint venture associates also sold 508 units in Singapore with a total sales value of S$1.1 billion.
These sales are attributed to the launches of condominiums such as Tembusu Grand, Haus on Handy, Amber Park, and Nouvel 18.
The group also enjoyed a steady uptake for its projects in Australia and is clearing its remaining backlog of units in China’s Shanghai, Suzhou, Chongqing, and Shenzhen.
As of 6 August, CDL has a launch pipeline of more than 1,100 units.
Upcoming launches include a new EC at Bukit Batok West Avenue 5 in 1H 2024 and Newport Residences condominium.
3. Promising enhancement projects
In line with CDL’s GET (Growth, Enhancement, Transformation) strategy, the group has lined up several asset enhancement initiatives (AEIs) to spruce up its portfolio.
An ongoing redevelopment project involves both Central Mall and Central Square and the group has obtained permission for a gross floor area (GFA) uplift of 67% to around 735,500 square feet.
Demolition will take place in the fourth quarter of this year (4Q 2023) with completion targeted for 2H 2024.
Jungceylon Shopping Centre in Phuket is also undergoing phased AEI works which are on track for completion by the end of 2023.
Over at its hotel wing, CDL is seeing M Social brand conversions for its hotels in the US, the UK, and Thailand.
4. A strong rebound for hotel operations
CDL’s hotel operations division saw a 12% year on year rise in revenue to S$673 million in 1H 2023.
Operating metrics also saw all-rounded improvements.
Room occupancy increased by 11.9 percentage points from 58% in 1H 2022 to 69.9% in 1H 2023.
The average room rate and revenue per available room (RevPAR) improved by 18.3% and 42.7% year on year to S$216.8 and S$151.5, respectively.
CDL launched its five-star 294-room M Social Suzhou back in April 2023 and in June, the group completed a S$30 million revamp of the Grand Copthorne Waterfront Hotel with a redesign of all its 574 guest rooms.
5. Boosting its recurring income streams
Aside from development profits, the group is also working hard to increase its recurring revenue streams.
For its UK Living Sector portfolio in Leeds, CDL has completed three out of five blocks and achieved a committed occupancy of 68.1% to date.
The group is building scale for both the private rented sector (PRS) and purpose-built student accommodation (PBSA) sector with a portfolio comprising 2,400 PBSA beds and a pipeline of over 1,300 PRS units.
In Japan, CDL acquired two PRS assets in Osaka and now owns 10 such assets in Japan with a high occupancy rate exceeding 95%.
These assets are generating stable rental income for the group.
Over in Australia, the group’s PRS development sites in Brisbane and Melbourne are set to deliver a total of 490 units in 2H 2023.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
