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CDL has faith in luxury property sector

(Another interesting headline. The reporter used the word “faith”, as if implying that CDL is not basing their optimism on facts.)

Straits Times – 01 Mar 12

Summary:

  • The subdued sentiment has forced CDL to halt marketing its premium project The Residences at W Singapore Sentosa Cove. (Forced? Developers are never forced to stop marketing their developments. They are profit-driven. It just means that it is not that profitable for them to sell this development and they have the holding capacity to stop marketing this development because they do not need to sell it below their ideal price. AND obviously, since they are holding it, it means that their long-term view of the property market is still very positive.)
  • CDL director and executive chairman Kwek Leng Beng told a results briefing yesterday that the additional buyer’s stamp duty measure introduced last Dec was aimed at preventing a property bubble and it was not designed to crash the property market. (Yes, I will have to agree with this.)
  • He added that the Government will likely review its various property measures if necessary: “The effect of the medicine cannot result in a cure overnight. It has to take time.”
  • He also said that he is not worried about the health of the high-end sector because most developers have strong balance sheets and can afford to hold on and sell when better times return. (YES, this is the point that I have always emphasized to my clients. Developers can afford to hold on to their properties i.e. they are NOT SELLING, but they are BUYING. That is why, as an investor, your ability to hold a property is very important. Always invest in a market where you can hold onto the property.)
  • “There is also a business model that some of the developers may be starting to think about… we don’t want to sell but keep it and get rental income… One day, the property will appreciate a lot,” noted Mr Kwek. (Take note of this: many developers like Far East are already doing that. My suggestions to investors are: spend a little bit more money to get a good property and keep it for residual income. You might even be able to pass it on to your children if you do it right.)
  • CDL is equally optimistic about China. It already has 3 sites there an an additional $500 million has been allocated to CDL China subsidiary for acquisition opportunities. Mr Sherman Kwek, CDL China’s chief executive, noted that property cooling measures in China have enabled the group to find opportunities by tendering for prime sites at reasonable prices. (Noticed that they are buying and not selling at this point of time.)
  • CDL reported a 32.2% drop in 4th quarter net profit to $163.2 million due to the absence of several one-off gains made in 2010. (Note: CDL is still making profits. It is just lesser, that’s all.)
  • Revenue for the 3 mths to 31 Dec 2011 improved 7.4% to $721.5 million. Profit for the full year rose 1.9% from $784 million to $798.6 million, while revenue was up 5.7% to $3.28 billion. (Profits, profits and a lot of profits.)
  • Quarterly earnings per share fell 33.3% to 17.2 cents but full-year earnings per share climbed slightly to 86.4 cents. Net asset value per share rose from $6.89 to $7.51.
  • A divident of 13 cents per share, which includes a special final dividend, has been declared.
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