Firm posts 11% fall in Q4 profit as property development earnings decline
Speaking at the group's full-year results briefing, he noted that the QC rules put the heat on developers which purchase private land to push projects out quickly, depleting their land bank. These developers then have to turn to Government Land Sales sites and put in high bids to secure the land needed to replenish their land bank.
Mr Kwek said: "I believe that with the QC in place, bidding for every site will be competitive. To a developer, land is our stock-in-trade. Without sites, business will come to a standstill, so there is no choice but to bid at higher prices."
Paying top dollar for land means developers need to sell the units at a high-enough price, but current market conditions do not allow for this, he said.
He believes residential property prices may fall by 10 per cent this year, though he acknowledged that this may not happen, as the world economy is improving, even amid uncertainty. "If you are prepared to price them (the units) cheap, you can sell . . . but if you price it cheap today and buy the land today, you will make a loss," he said.
He added, however, that the government was unlikely to want that to happen: "If you read the Finance Minister's (Budget) speech very carefully, he said that they are not engineering a collapse in property, which I believe to be so."
Mr Kwek has long been lobbying for the government to relook its QC rules; in 2012, the Real Estate Developers' Association of Singapore submitted a proposal to the government to extend the two-year timeframe for developers to sell their units.
For its results briefing, CDL announced yesterday that its net profit fell 11.4 per cent to $221 million in its fourth quarter, as earnings from property development declined. Earnings per share for the period ended Dec 31, 2013 were 23.6 cents, down from 26.7 cents a year ago. Revenue slipped 12.6 per cent to $774.4 million from $886.4 million.
The company proposed an ordinary dividend of eight cents per share, taking the total dividend for FY2013 to 16 cents.
The fall in earnings came partly from the group being unable to recognise profits for some of its launched private residential projects because construction had yet to start or reach recognition stage, said CDL. These projects include Echelon, D'Nest, Jewel @ Buangkok and The Venue Residences and Shoppes.
Also, no profits were booked from sales of the three fully-sold executive condominium (EC) projects, namely, Blossom Residences, The Rainforest and Lush Acres; this was the result of the prevailing accounting treatment for ECs, which require them to be completed before profits can be recognised.
In Q4, CDL launched launched two projects, both in October. The first was The Venue Residences and Shoppes, a mixed development of 266 apartments and 28 retail units at the junction of Upper Serangoon Road and MacPherson Road. Half the retail units and 46 of the 70 apartments released for sale have been taken up.
The other project was The Inflora, a 396-unit joint-venture condominium in Flora Drive in the Changi/Pasir Ris area. All units there have been sold.
Chia Ngiang Hong, group general manager at CDL, told reporters on the sidelines of the results briefing that the group will launch for sale a 944-unit residential project in Pasir Ris next month or in April, and an 845-unit development in Commonwealth Avenue in the second quarter.
CDL disclosed in its financial statement that construction of the superstructures for the South Beach project is "progressing well". The 34-storey South Beach Tower designated for offices will be completed next month; the 190-unit high-end South Beach Residences will be launched "at an appropriate time".
For the full year, net profit rose 0.7 per cent to $683 million. Revenue fell 5.7 per cent to $3.2 billion. Net asset value per share as at end-December was $8.63, up from $8.03 a year ago.
CDL's shares closed 0.2 per cent higher at $9.34 yesterday.
Source from Business Times