City Developments likely to suffer 23.1% profit drop

It's all about wrong timing, says analyst.

According to Maybank Kim Eng, on the back of lower residential profit recognition and decelerating earnings growth from its hotel business, it expects CDL to report a full-year PATMI of SGD614.5 be a 23.1% YoY decline. Profits are likely to pick up again in FY13, but in our view, CDL’s valuations remain rich.

All a matter of timing. Pre-tax profit from residential development slumped by 30% YoY for 9M12 to SGD273.7m, which is a main cause for the expected earnings decline in FY12.

Here's more from Maybank Kim Eng:

However, we note that it is largely due to the timing of profit recognition, given that profits from the already sold-out ECs, namely Blossom Residences and The Rainforest, can only be recognized upon completion, which are expected to be in 2014 and 2015 respectively.

Credit must be given to CDL’s management as most of its ongoing projects are substantially Echelon at Alexandra View also achieved a very respectable 65% take up rate within its first month of launch in December 2012, just before the government’s introduction of the latest round of cooling measures.

Hospitality Trust’s (CDREIT SP) results, earnings growth from Millennium & Copthorne’s key market Singapore is likely to remain languid. Demand from both corporate and business travelers have softened due to the global economic malaise guided that 1Q13 performance is likely to remain weak due to the absence of the bi-annual Singapore Airshow and the Lunar New Year falling later this year.

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