Reactivate asset recycling mode
- FY23 Core profits almost quadrupled y-o-y to S$189m; in line
- Key positives: i) Strong contribution from property development; ii) recovery in other segments; offset by higher interest costs
- Data to watch: i) Potential asset recycling; ii) share buyback
- Maintain BUY; TP S$10.50. 12 Scts FY23 dividend declared
FY23 Core profits almost quadrupled y-o-y following completion of Piermont Grand EC; other segments improved but were offset by higher financing costs; 12 Scts FY23 dividend declared
- After delivering record-high FY22 results – mainly from divestment gains – City Developments (City Dev)’s FY23 headline PATMI fell 75% y-o-y to S$317m (in line with our estimates) largely due to the absence of substantial divestment gains coupled with higher interest cost (+73% y-o-y; +S$207m).
- Excluding divestment gains and impairment losses, FY23 PATMI almost quadrupled y-o-y to S$189m (vs. S$47m in FY22). EBITDA and PBT saw 53% and 90% y-o-y growths.
- Property Development contributed more than 90% of the group’s PBT and saw the largest increase (+110% y-o-y to S$340m) mainly from the completion of Piermont Grand EC in 1H23 (S$121m in PBT), sale of land at Shirokane in Jul ‘23 (S$155m in PBT) and higher contributions from Amber Park, Irwell Hill Residences, and Hong Leong Tech Park Shenzhen.
- PBT contribution from the other segments were largely impacted by higher interest costs.
- The hospitality segment delivered strong growth in revenue, EBTIDA, and PBT (ex-divestment gains) of 9% y-o-y, +62% y-o-y, and +77% y-o-y, respectively.
- Gearing (on fair value of properties) increased to 61% (vs. 57% in 1H23 and 51% in FY22).
- Debt ratio ((D+P) / A) increased marginally to 0.5x (vs. 0.4x in FY22). Debt-to-EBITDA fell to 12.8x vs. 17.7x in FY22.
- EBIT ICR ratio improved y-o-y to 1.3x from 0.8x in FY22, following improvement in operating income from hospitality and investment properties, coupled with higher recognition from property development.
- Average cost of debt almost doubled to 4.3% from 2.4% in FY22 (4.1% in 1H23). Management expects borrowing costs to peak at this level and hopefully moderate marginally by year-end with the potential interest rates cut.
- City Dev declared a final dividend of 8 Scts, same y-o-y. FY23 dividend was 12 Scts vs. 28 Scts dividend in FY22 when City Dev shared its huge divestment gains with shareholders.
