CDL share price: 2020 first half profit to drop 'substantially'

City Developments shares fall 2.9% to start the week

Share price of City Developments Ltd (CDL) fell 2.9% within the first hour of trading on Monday 13 July 2020, after the company provided soft earnings guidance for the first half of 2020 (H1 2020).

The real estate group said in this latest update that its pre-tax profit for six months ended 30 June 2020 is 'expected to reduce substantially' from the same period a year prior. It also 'anticipates that its net attributable profit after tax and minority interests for H1 2020 will be materially and adversely impacted'.

CDL’s share price drop also coincided with Singapore’s latest general election results, in which the opposition, led by Worker’s Party, won 10 out of 93 parliament seats – an increase of four seats from 2015. The incumbent, People’s Action Party, retained a majority with 83 seats and 61.24% of all votes.

As at 11:15 SGT on Monday, CDL shares are trading S$8.48 per share. Share price is down as much as 4.85% for the month of July.

Latest IG market analysis also show that 'buys' form 83% of all trades on the CDL counter on Monday morning.

CDL’s hotel segment to see loss of S$120 million to S$140 million

The group attributed the weak earnings forecast mainly to its hotel operations segment, which it says ‘is expected to contribute significant losses’ for the first half.

It added that this is primarily due to the prolonged Covid-19 pandemic, which has resulted in widespread travel restrictions and movement measures, an unprecedented collapse in global tourism, and mass cancellations or postponement of events.

These measures have adversely impacted the Group’s hotel operations, even with the receipt of applicable government grants which mitigated the impact.

As such, revenue per average room is expected to decline by around 50 to 60% for H1 2020. While aggressive cost-containment measures continue to be in place, the hotel operations segment is expected to post a pre-tax loss in the range of S$120 million to S$140 million for 1H 2020, as compared to a pre-tax profit of S$76 million in H1 2019.

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CDL’s property development revenue to drop by 10%

CDL’s property development segment is also expected to register a decrease in revenue by about 10%.

It explained that this is because H1 2020 contributions will primarily be derived from projects including The Tapestry, Whistler Grand as well as Amber Park, compared with fully completed projects such as New Futura and Gramercy Park that yielded higher profit margins in the corresponding period in 2019.

Finally, investment properties will also be impacted, after taking into account over S$30 million of property tax and rental rebates given to tenants, especially for its retail malls in Singapore and overseas for the full year of 2020.

However, there was a bright spot in the form of a significant $197 million pre-tax gain resulting from the closure of the Group’s Profit Participation Securities 2 platform, following the sale of Manulife Centre, and 7 & 9 Tampines Grande in H1 2019.

In view of the above factors, the company said that ‘the near-term outlook continues to remain highly challenging and uncertain until the pandemic situation abates together with the re-opening of international borders’.

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