The Business Times | MARCH 01, 2013
City Developments Ltd (CDL), which posted its fourth-quarter and full-year financial results yesterday, has urged the government to review its Qualifying Certificate (QC) policy governing the purchase of residential land.
In particular, it hopes the authority will reconsider the definition of foreign ownership.
For the fourth quarter ended Dec 31, 2012, CDL reported a net profit attributable to shareholders of $249.3 million, a jump of 52.8 per cent from the previous corresponding quarter's $163.2 million. This translated to earnings per share of 26.7 cents, up from 17.2 cents. Revenue climbed 22.8 per cent to $886.4 million.
For FY 2012, the group posted a net profit attributable to shareholders of $678.3 million, down 15.1 per cent from the preceding year's $798.6 million. Revenue was a record $3.35 billion, up 2.2 per cent.
CDL said it hopes the government will review its QC policy, given that the QC conditions have made it difficult for developers to buy land from the private market, resulting in developers bidding aggressively for GLS (government land sales) sites.
Under the Residential Property Act, developers whose shareholders and directors are not all Singaporeans have to obtain a QC to purchase residential property - specifically private land, including collective sales sites - for development.
"The group expects competitive bidding to continue from developers for plum GLS sites in H1 2013, as many have limited or no land bank, which in turn is likely to result in property price increases. It believes that with a relaxation of the QC policy and with less punitive restrictions, developers can look towards both the GLS as well as private collective sale for land, which could balance out the high bidding process and better manage escalating cost," said CDL.
Including profit attributable to minority interests, which rose to $68.9 million from $39.5 million, earnings for the October-December period last year were $318.3 million, up 57 per cent from $202.7 million.
Although revenue was up by more than a fifth, gross profit was up just 10.5 per cent at $506.2 million because of a 44.3 per cent surge in cost of sales.
A $44.4 million rise in "other operating income" to $54.2 million - mainly due to gains from the disposal of several strata units in certain properties - was partially offset by a $13.2 million drop to $1.41 million in share of after-tax profit of associates. Profit share from jointly controlled entities rose $1.65 million.
On the property development front, the group, with joint venture associates, sold 2,395 units (including executive condominiums) in FY 2012 versus 1,818 units the previous year, registering a 58 per cent increase in sales of about $2.78 billion.
CDL is looking to launch three projects - D'Nest at Pasir Ris Grove, Bartley Ridge along Bartley Road, and a third project at Buangkok Drive/Sengkang Central - within the first half of this year. The group is also planning to launch its sixth EC project, located at Fernvale Link.
While acknowledging that the investment sentiment in the residential luxury segment is likely to be affected for a period of time, Kwek Leng Beng, CDL's executive chairman, stressed that "patience is the name of the game".
With regard to the W Residences, Mr Kwek said he was in no hurry to sell its balance units and can hold on to them for investment, as there is no more residential land for development in Sentosa. Moreover, his land cost is based on 2006 prices.
Highlighting the example of The Oceanfront @ Sentosa Cove which CDL launched in 2006 at an average price of about $1,300 psf, Mr Kwek noted that prices have since exceeded $3,000 psf, and is today selling at above $2,000 psf.
"I can likewise sell W Residences at around the same price (as The Oceanfront), but why should I? When there is demand, however low it is, and no supply, prices have no way to go but up."
The group is also looking to focus on deriving more earnings from its overseas growth engines, said Mr Kwek. This will be done via existing platforms including its hotel operations, its operations in China via First Sponsor Capital Ltd, and CDL China Ltd, plus other investment properties in the region.
The board has recommended a special ordinary dividend of five cents per share in addition to the ordinary dividend of eight cents per share.
CDL's counter rose four cents to end trading at $11.17 yesterday on a cum-dividend basis.
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