Wednesday, March 05, 2008

Will City Developments continue exceeding expectations?

City Developments, Singapore's second-largest developer, said 2007 profit more than doubled after home prices rose to an 11-year high in the city state.

Net income climbed to S$725 million ($519 million), or 76 cents a share, from S$351.7 million, or 36.6 cents, in 2006, the company said in a statement to the Singapore stock exchange.

That's higher than the average estimate of S$616.6 million complied by Bloomberg from eight analysts. Sales rose 22 percent to S$3.11 billion from S$2.55 billion.

City Developments and rivals CapitaLand and Keppel Land may face declining demand in Singapore this year amid concerns the economy could fall into a recession. Singapore property prices may climb 8 percent to 10 percent this year, after surging 31 percent last year, London-based real estate consultant Savills said.

“Moving forward, the performance of the property market will largely depend on how the sub-prime crisis pans out and its impact on global economies,” the company said in the statement.

“Transaction volume and rental increase have slowed down in the fourth quarter.”

City Developments last year sold 1,655 homes worth S$3.38 billion, with 95 percent of these sold in the first nine months.

In 2006, it sold 1,337 units worth S$2.77 billion. The company may offer 427 homes for sale in the first half of this year.

“Compared to Keppel Land and CapitaLand, they have a larger exposure to Singapore,” Fera Wirawan, an analyst with ABN Amro NV in Singapore, said of City Developments. “They have traditionally held a pretty big land bank in the city.”

ABN Amro expects the luxury segment of the market to decline 10 percent to 20 percent by the end of the year. The lower end and mass-market will climb 10 percent, Wirawan said.

Developers have announced plans or are already building 65,400 private homes as of the third quarter, with about 41,600 units scheduled for completion by 2010, the Urban Redevelopment Authority, the government agency in charge of real estate, said Jan 2. About 58 percent of those projects, or 38,000 homes, haven't been sold, the authority said.

City Developments is also benefiting from a pickup in the global travel industry. The company controls about 53 percent of Millennium & Copthorne Hotels, the Horley, England-based chain that owns 110 hotels worldwide, including the Biltmore in Los Angeles.

The hotel operator said that fourth-quarter profit rose 36 percent as customers paid more for rooms in New York and Singapore. It also made a gain from selling three properties to a real estate trust in Singapore.

So will the property market optimism in Singapore hold up?