CityDev’s earnings drop 14.4% to $105.3m in Q1

Due to weak domestic hotel, property development businesses.

The first quarter of 2016 has come to a disappointing close for City Developments Limited (CityDev) as net profit tumbled 14.4% YoY to $105.3m

According to a report by OCBC, the drop in earnings is due to lacklustre performances from the domestic property development and hotel business segments.

During the quarter, CityDev was slammed by absences of profits from completed residential developments. This includes the Rainforest EC, for which profits were recognized wholly upon TOP in 1Q15.

The group’s hotel segment was also hurt by a tight competitive environment in key gateway cities, which resulted in reduced room rates and occupancy.

OCBC sees a backloaded FY16 for CityDev in terms of profit recognition, particularly as contributions from the developer’s overseas development projects roll in from 2H16.

Meanwhile, the group purchased for GBP37.4m ($73.5m) the Development House, its first office building redevelopment property in the UK, located north of London. It has a 28,300 sqft gross floor area, including ancillary retail space at the ground floor. With the limited supply, CityDev anticipates robust demand for the technology, media and telecoms sector.

As at end 1Q16, CityDev’s balance sheet remained stable with over $3.3b in cash and a relatively low net gearing ratio of 26% (without accounting for fair value surpluses on investment properties).

Further, management expects to continue making headway in its capital recycling and growth strategy in FY16.

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