$CityDev (C09.SG)$ A triple whammyThe huge loss was caused b...
A triple whammyThe huge loss was caused by a triple whammy of impairments and accounting losses brought about by the crisis.The main culprit was CDL’s one-off impairment of S$1.78 billion on its joint venture investment in China, Sincere Property Group (“Sincere”).This massive impairment accounted for 93% of the group’s total investment in Sincere.The Chinese government had implemented a new “Three Red Lines” policy to cap borrowings for real estate developments in light of the pandemic.This policy was enacted in August last year to rein in housing prices and prevent a housing bubble from bursting.Developers will be assessed on three conditions: liabilities to assets cannot exceed 70%, net debt to equity should be less than 100%, and cash to short-term borrowings ratio needs to be at least one.As of 31 December 2020, Sincere had not met any of these three criteria.Because of this, Sincere may face significant liquidity problems and may require CDL to inject rescue financing.In addition to this impairment, CDL also had to record impairment losses of S$99.5 million for its hotels and investment properties.Operating statistics for the group’s hotel operations showed that for the fiscal year 2020, room occupancy fell almost 36 percentage points year on year to just 38.6%.The average room rate dipped 31.6% year on year to S$137.2, while revenue per available room (RevPAR), a key measure for hotel profitability, plunged by nearly 65% year on year to S$52.9.CDL also booked allowance for foreseeable losses on development projects of S$35 million due to overall weaker buyer sentiment.Core business still profitableExcluding the above impairments and losses, CDL would have reported a profit before tax of S$120.8 million.Aside from the group’s hotel operations, the rest of CDL’s portfolio remained fairly resilient and could hold its own.Investors should note that the impairments made are essentially accounting entries that have no cash flow impact.For 2020, however, operating cash flow turned negative due to the unprecedented challenges faced by the group on multiple fronts.Free cash flow was therefore also negative, a sharp reversal from 2019.Despite the poor showing, CDL still declared a final dividend of S$0.08 and a special dividend of S$0.04, bringing 2020’s full-year dividend to S$0.12.The total dividend was 40% lower than the dividend of S$0.20 paid out in 2019 but does show CDL’s commitment to rewarding shareholders despite its poor financial performance.https://sg.finance.yahoo.com/news/cdl-impairs-93-sincere-group-233008656.html
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HolyCow123 OP : How Healthy Is City Developments' Balance Sheet?
According to the last reported balance sheet, City Developments had liabilities of S$6.91b due within 12 months, and liabilities of S$8.37b due beyond 12 months. On the other hand, it had cash of S$2.69b and S$2.20b worth of receivables due within a year. So it has liabilities totalling S$10.4b more than its cash and near-term receivables, combined.
The deficiency here weighs heavily on the S$6.45b company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. After all, City Developments would likely require a major re-capitalisation if it had to pay its creditors today. The balance sheet is clearly the area to focus on when you are analysing debt. https://simplywall.st/stocks/sg/real-estate/sgx-c09/city-developments-shares/news/is-city-developments-sgxc09-using-too-much-debt-1
不入虎穴焉得虎子 : This is news from July 8. The stock market has already digested this bad information; otherwise, the stock price of urban development would not have fallen so low. This is just a personal opinion.
Quee Gary 不入虎穴焉得虎子 :