Property firms report weak set of Q2 numbers

August 15, 2008
Property firms report weak set of Q2 numbers
Most developers see their business hit in 3rd and 4th quarters
By UMA SHANKARI

HIT by fewer home sales, lower revaluation gains from investment
properties, drops in divestment gains - and even the stronger
Singapore dollar - property companies largely reported weak results
for the second quarter.

And the future doesn't look rosy either.

Most listed developers have warned that the global slowdown and
weakening market could hit their business in the third and fourth
quarters. Even the most upbeat are only 'cautiously optimistic'.

The big three developers - CapitaLand, City Developments and Keppel
Land - all posted lower profits for Q2.

CapitaLand, Singapore's and South-east Asia's largest developer, said
its Q2 profit fell 43.5 per cent to $515.2 million, partly due to
lower revaluation gains from investment properties, lower portfolio
gains and development profits, and the absence of previous write-back
provisions. Analysts called the results disappointing.

City Developments saw Q2 net profit drop 15.1 per cent to $165.2
million. Among other factors, CityDev was hurt by the translation of
its overseas hotels earnings at weakening exchange rates due to the
strengthening Singapore dollar.

Keppel Land reported that Q2 profit fell 16.4 per cent to $52.7
million as it sold fewer homes in Singapore and abroad.

'I think the mood is generally very cautious, and this has hurt the
developers,' said an analyst. 'The trend is likely to continue for
the rest of the year.'

Right now, the fear is that sectors that are currently contributing
strongly to top lines, such as hospitality, may soon start to weaken.

The Ministry of Trade and Industry's latest quarterly economic survey
showed there are increasing signs that segments within services -
including the retail trade and hotels - are showing slower growth.

Property stocks with exposure to those sectors - such as CapitaLand,
CityDev and UOL Group, to name just a few - could see contributions
from those divisions drop.

For UOL, for example, a 4 per cent increase in Q2 in revenue was due
largely to hotel operations, with its hotels in Singapore, Australia
and Vietnam performing better.

As for the residential market here, Citigroup has said prices of
luxury homes could correct sharply, which could have a negative
impact on some developers.

'Scrapping of the deferred payment scheme and tighter bank financing
for investment properties may have also hurt property transactions,
which are off some 70 per cent from recent highs,' Citi noted in a
recent report. 'Some developers may have also over-committed in terms
of land purchases during the boom periods.'

Citi analyst Wendy Koh expects a 20-30 per cent price correction for
high-end properties from their recent peak, and reckons the mid-tier
is likely to decline 10-20 per cent.