ST : CDL targets bigger China footprint

Aug 13, 2010

CDL targets bigger China footprint

$300m allotted to beef up presence; chief says time is ripe to snap up sites

By Jessica Cheam

PROPERTY developer City Developments (CDL) is looking to boost its presence in the fast-growing Chinese market and has set aside $300 million for its newly minted unit, CDL China.

CDL executive chairman Kwek Leng Beng said yesterday the time looked ripe to snap up sites or investment properties at attractive prices in China, given the tightening of its property market by regulators.

The group has in its sights about 12 Tier 1 or Tier 2 cities, according to CDL China's newly appointed chief executive Sherman Kwek, who was speaking at the group's results briefing yesterday.

The new venture aims to focus on mid-tier to mid-high-end residential properties and will also look for commercial developments 'for medium- to long-term capital value and steady streams of income', said Mr Kwek, the elder son of Mr Kwek Leng Beng.

CDL China currently owns a 36-storey office building - Tianjin City Tower - in the north-eastern Chinese city, and CDL unit Millennium & Copthorne (M&C) has hotels across China.

CDL China's Mr Kwek said the group will first look into acquiring land directly from the government and developing properties on its own before seeking joint ventures.

Chairman Kwek Leng Beng stressed yesterday that the group intended to retain a firm foothold in Singapore, despite it seeking a larger footprint overseas.

CDL will be launching the first phase of two new projects - NV Residences in Pasir Ris and Copthorne Orchard in Bukit Timah - in the third quarter of the year, he said.

Singapore's strong economic growth has benefited the group's property development, hotel operations and rental properties. But this growth 'needs to be measured and taken in its context as there are still many external risks in the world economy, especially in Europe and the United States, with the possible impact yet to be determined', added Mr Kwek.

Despite recent concerns of a property bubble, he said Singapore was not at risk. Current prices, which climbed 5.3 per cent for the three months ended June, have not spiked and are at levels only slightly above previous peaks, he noted.

Private home prices are now 1.5 per cent ahead of the 1996 peak, and 3.7 per cent higher than the one in 2008.

Mr Kwek said recent government measures to cool the market were sufficient, but it would take a while for the effects to be felt.

He did not expect further price-calming measures from the Government, and pointed out that luxury properties had not sold as well as the industry had expected. This segment would perform well - perhaps next year - only if the wider global economy stabilises.

For the second quarter ended June 30, CDL posted a 17.6 per cent rise in net profit to $164.6 million over the figure in the same period last year.

Healthy sales of Singapore homes helped push revenue up by 19.6 per cent to $941.7 million for the period, and half-year sales rose 20 per cent to $1.7 billion.

Net profit for the half-year rose by 36.2 per cent to $304 million compared with that in the same period last year.

Earnings per share were 17.4 cents for the quarter, up from 14.7 cents a year ago; while net asset value for the group increased to $6.78 as of June 30 from $6.57 as of Dec 31 last year.

CDL unit M&C posted a 56.3 per cent rise in net profit to £25 million (S$45 million) in the second quarter. Its net profit for the half-year rose by 62 per cent to £37.2 million on the back of a recovery in the hotel sector.

DMG and Partners Securities investment analyst Brandon Lee said yesterday that the group's 45-year domestic track record was a key competency, but its overseas footprint - aside from hotels - remained less established.

Commenting on the timing of CDL's entry into the China market, which has lagged behind some of its competitors', Mr Lee said CDL's success will depend on the location of its investments.

'There are still growth opportunities with demand from genuine home buyers strong in certain cities,' he said, adding that he expected initial progress to be 'tepid, with earnings contribution only in the medium to long term'.

CDL China's Mr Kwek acknowledged that 'there's a lot of work to be done' since competitors are already established in the market, but the group 'will make the best' out of its latest move.

jcheam@sph.com.sg