City Developments 1Q09 Results flash - Net profit down 50% yoy to S$83.1m, in line with expectations

1Q09 results in line with expectations. PATMI declined 49.6% yoy to S$83.1m while turnover fell 18.0% yoy to S$622.5m. Excluding provisions the results are in line with our expectations but below consensus expectations. Results came in weaker primarily due to lower contributions from the property development segment and hotel operations. Against the backdrop of a severely weakened economy, PBT for the property development segment and hotel operations fell 56% and 60%, respectively, on a yoy basis.

DPS payments received. The Group stated that almost all requisite payments in relation to residential units that have obtained Temporary Occupation Permits (TOP) have been received, including those under the Deferred Payment Scheme (DPS).

Mass and mid market projects enjoy success. During the quarter, response to mass and mid market projects gained traction due to pent-up demand and lower developer prices. The selling prices for Livia were marginally adjusted 5% downwards to shore up the demand and it was met with good response with total sales crossing over 400 units. The Arte at Thomson, which was officially launched in April has also been well received, and more than 250 units of the 336-unit project has been sold to date.

Hotel operations suffers. 53.5%-owned Millenium & Copthorne Hotels plc saw worsening demand across all regions, particularly in the US markets. Global RevPAR declined by 1.9% based on reported currency and 18.2% on a constant currency basis.

Stronger office rentals partially mitigate weaker results. Office occupancy fell from 94% in 4Q08 to 91% in 1Q09. However, PBT for the rental properties segment came in 47% stronger yoy due to better rental reversion rates that were secured before sharp declines took place.

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