City Developments Limited

Good morning ladies and gentlemen, friends from the media, analysts, bankers, investors and also fellow CDL colleagues. My name is Belinda and I'm the Head of Investor Relations and Corporate Communications at CDL. So on behalf of the CDL management and also my other colleagues as well, A very warm welcome to CDL's briefing on its unaudited financial results for half year ended 30th June 2023. Thank you very much for joining us here this morning. This is a hybrid briefing session. We do have guests that are physically here at the M Hotel, as well as those that are joining us virtually on the live webcast. For all of us at M Hotel, it is a pleasure to see you again. We have a full house in the room today and we are delighted that you are here. And to all of the Singaporeans and PRs here and also virtually, I hope you had a very happy National Day celebration yesterday. So to all, for today, the briefing in line with CDL's commitment to environmental sustainability, we will not be providing printed materials. As you can see, you do not have any on the seats today. We will encourage you to instead please scan the QR code that is on the screen right now to download the documents that were uploaded to SGXNet this morning. Now, these documents were uploaded before trading, and they include a copy of the detailed financial statement, a press release summarizing some of the key highlights of our announcement, and also a presentation deck that we will be going through very briefly this morning. So for all of our guests that are joining us virtually, you would similarly be also able to download these documents, which are available on the CDL website. Now, I would like to introduce you to the CDL Management Panel. In the center, we have our Chairman, Mr. Quack-Ling Ping, Executive Chairman on his right, our Group CEO, Sherman Quack, Mr. Sherman Quack on his left, our Group COO, Quack Ik-Shing, and we have Mr. Chia-Niang Hong, our Group General Manager, and the lady nearest to me is Ms. Yong-Yin Ming, our Group CFO. Now, the format of today's briefing is in two parts. We will kick off with a presentation, just highlighting some of the key highlights of our performance, then followed by, I hope, a rather engaging Q&A session. Now, without further ado, I would like to invite Sherman Quek, CDL CEO, to give his summary of the presentation, please.

Thank you, Belinda.

A very warm and engaging introduction and, of course, very nice to see everyone here today. Thanks for taking time out to attend this media and analyst briefing. Key Financial Highlights Not the prettiest set of results, I have to admit, and obviously it's already garnered some headlines this morning, but it is what it is. Revenue, as you can see, has jumped up tremendously. That's mainly because we had a completion of an EC project, a PMR grant in Punggol, so we recognize revenue and profit, full revenue and profit upon completion, so that greatly boosted our revenue, but When you look at the rest of the lines, obviously it's quite hard to compare against last year. Last year we had substantial divestment gains, and these gains mainly resulted from the sale of the Millennium Soul Hilton Hotel in Korea, as well as we deconsolidated our CDL Hospitality Trust when we did an in-specie distribution of the shares. And we did show you, just as a basis of comparison, what it looks like if we include divestment gains and impairment losses. So I think the encouraging part, you can see that on the operational side, especially if you look at the EBITDA and the PBT. There has been a substantial jump in our results. Our operations are actually going strong. It's just that last year was a very hard year to compare games. And of course, aside from the divestment games and from last year, the two things that made this year extremely difficult for us, one was impairment losses. That's mainly on our UK investment properties. Right now, I think it's no surprise to everyone, UK investment properties are all going through a very rough time in the office landscape there. We suffered about probably 30 to 50 basis points of cap rate expansion. Properties are doing well themselves. They are occupancy strong, rents are strong, but with cabaret compression, I mean cabaret expansion, sorry, obviously that's going to lead to a drop in valuation. So hopefully that's temporary, and I think we continue to see very bright prospects in future once we get over the current turmoil that we are going through. And of course, something that's hit almost all companies and REITs has been financing costs. Despite the best efforts of me and Yin Ming to try to lock in as much as we can and contain the net financing costs, but our net financing costs have gone up probably close to four times what it used to be against the same period last year. So certainly putting a lot of strain on us. But again, the good news is that we see things as starting to stabilize and plateau. Next slide. NAV, RNAV per share, pretty much the same. Slight dip because obviously we've just done a big dividend for FY 2022. We did it in March, and we did take a small amount of exchange losses to reserve, but mainly it's the dividends, so that's why it's a slight dip, but more or less the same. Share price, I think all of you are aware. I mean, You know, thankfully, we're back above $7. There was certainly a period when it was, you know, it did below $7 and certainly was not great because we're trading at a great discount, a very big discount to be it, you know, so-called RNAV1 or RNAV2, depending on how you want to look at our portfolio. But you can see out there trading a substantial discount, and we're certainly working hard to close in this gap. Key operational highlights, I think all of you know that despite we haven't really launched much in the first half this year, mainly Tempusu Grand, our JB project in Katong, but that has done well. We launched that last quarter and we sold 53% of the units during launch weekend. The other great news, of course, is that we've finally fully sold out on three projects, two of which have ABSD deadline this year. One is House on Handy and one is Amber Park. And of course, there's Nobel 18 where we manage it as part of this structure that we did called PPS3. and that is also fully sold out. China, not much to report for now. Most of our residential inventories sold out and therefore we are looking at further land replenishment there. Singapore, you can see our commercial portfolio of office and retail still doing very well. In fact, our occupancies are far above, I think, the national average. And likewise, as mentioned earlier, office assets are actually very stable overseas. It's just that some are just facing a bit of a cap rate issue. And for strategic acquisitions, I will touch more on this later, but we further expanded our living sector ambitions with more acquisitions in Japan, as well as in the UK. All of you would have heard about our St. Catherine Docks acquisition. And that has no impediment, obviously, because we bought that well. And I previously shared that that was trading at a very, very strong yield. So I think we're very pleased with that acquisition. And that's brought our overall UK portfolio to slightly over a billion pounds commercial portfolio. Hotel side obviously still continues to be a bright light for us. We've shown very strong recovery performance. Global occupancy up close to 12 percentage points and our average room rate across the world has jumped up tremendously as well. So I think we're very pleased with the hotel recovery and we continue to be very optimistic about global travel. And in tandem with that optimism, we have, of course, also acquired two hotels. I will flash it up shortly. And one is in Australia, in Brisbane, and the other is in Korea, in Seoul. And on the fund management, I'll talk about that later as well. This slide, I think all of you will be very familiar with. We usually tend to break out our assets as well as if we have fair value, our IP and our hotels, what it would look like. So you can see on the bottom row that Singapore still accounts for slightly more than half of our asset value. But the other regions are also coming along nicely. And as I've always said, I believe it's healthy to be well diversified. Okay, our GET, all of you are familiar with our strategy, growth enhancement transformation. On the growth side, we continue to deploy capital. I think right now, as the world is in a bit of turmoil and under pressure, I do think it's a great time for us to deploy capital and get attractive acquisitions done. So as mentioned earlier, one of the first big acquisitions we did earlier this year was St. Catherine's Docks. We closed that in March. That is giving us a yield of over 7%. So it's a positive carry situation again, regardless of how UK borrowing rates perform. And we're very pleased with that. And then over in Asia, we acquired Sofitel in Brisbane. This is above Central Station, so arguably one of the best locations in Brisbane. And then we acquired this nine-tree hotel in Myeongdong. Myeongdong, as you know, is one of the key retail districts in Seoul. And we anticipate this will do very well for us. And in Japan, we have two more PRS projects that will be joining our fold, our stable of multifamily. So that brings us up to 10 multifamily properties in Japan. On Singapore, we continue to focus on executing well on our development projects as well as replenishing our land. You will see that in Q3, which is July last month, we did launch the MIST in Upper Bukit Timah. Take-up rate was a little bit lower than what we would have preferred. I think that area, because prior to our launch, there were two launches in that area that soaked up over 800 units, so at that point in time, there was probably a bit of buyer's fatigue, so it didn't do as well as we would have preferred, but still, I mean, we are around one-third sold right now, and I'm very confident that this project will continue to do well. It's very nicely designed and offers a great amount of amenities and also a lot of work from home spaces. With Newport Residences, as all of you know, we did announce that we are postponing the launch. We were just about to launch and then obviously some new measures came out. Since this project is an ultra-luxury project located in the central region, therefore, we do feel that it will need to depend on some foreign buying interest. Therefore, I think we wanted to wait until the market stabilises before we do this launch. We are still discussing internally. We review it often as to when we want to launch it. But the great news is that we're not under too much pressure. This project doesn't have ABSD considerations, but does have QC. But we've also gotten an extension from the government. So our QC deadline to complete all sales will be in 2031. So we actually got quite a lot of time, but obviously I'm hoping I can launch it as soon as possible and not have to wait too long. But I just need to see how the landscape pans out. And then, as mentioned earlier, in Q2, we launched Tembusu Grand, which is now 58% sold. So we're very pleased with that project and the sales launch. All of you would have noticed that we also went into a tender for a land in Katong that's right next to our Tembusu Grand site. So we went in for that tender, and there were only two bidders, and unfortunately we were number two. We lost by $1 per square foot, so that was certainly a very, very painful defeat. But that's the nature of land tendering, right? I mean, sometimes you win, sometimes you lose. Of course, we have this Bukit Batok West EC that will be launching in the first half of next year. And right now, the EC market seems to be pretty strong. And in fact, the recent EC launch, which I shall not name and which you all know, has done very well, notching up prices in excess of 1,004 per square foot. So I think the EC market continues to do well. And lastly, we have our redevelopment of Central Mall, Central Square. More on that later. So touching on the growth aspect of our overseas expansion, we have continued, I think, to acquire various new projects. So last year, we did our first foray, maiden foray, into this purpose-built student accommodation, or PBSA. So we ended the year with six acquisitions, and so far they're all doing really well for us, with 98% committed occupancy and strengthening rents. and we also have three multi-family PRS properties across the UK. One of them is the junction in Leeds where three out of five blocks are already completed and in operation and the other is in Birmingham, in the best location, Birmingham, right in the city centre and the last one is the castings in Manchester. That's a project by CDL Hospitality Trust but we are helping them with the project management. So we give you an idea of what this whole portfolio is worth by listing the AUM, which is based on GDD because the PRS projects are development projects. Over in Japan, we continue to expand our PRS portfolio there. Really pleased right now, we have 10 properties, seven in Osaka, which obviously is going to have a major boost when the casino, the integrated resort comes into place, as well as three properties in Yokohama, which is a strong feeder market to Tokyo. People live in Yokohama and commute to Tokyo because of the high prices in Tokyo. I think we're really glad. I mean, the rental trend is strengthening substantially in Japan as high prices turn people off and send them more into the rental market. So, portfolio is doing well. Obviously, still a bit small at the moment, so we're looking to really substantially increase our scale here, and we're currently looking at a few exciting opportunities. and portfolio-wise, platform style. And we think this sector will continue to do well. A lot of capital has been chasing after PRS in Japan, so very positive about it. And our style has been, I think, to avoid hefty capex or repair and maintenance, we tended to do forward commitments. So basically we buy a property 6 to 12 months before physical completion So our portfolio is actually in really good shape. The average age of all of our 10 properties is about two years old. So very, very pleased with how the portfolio is performing so far. And over in Australia, we have a site in Melbourne and Brisbane, and both are also for multifamily, for rental apartments, but they're development sites. So they'll take a while to come to fruition. So the expected completion is 2025 for Melbourne and 2026 for Brisbane. Over to enhancement. How do we drive more from our existing asset and enhance their value? So here, obviously, we have various asset enhancement initiatives. There we listed Palais, which we completed earlier in the year, and it's been doing really well for us. And aside from that, we are also looking at redevelopment. So I think on the right side, you already know, Newport Plaza is already underway. And this project we are targeting to launch it when market conditions are good. Central Moor Central Square targeting to get written permission or WP as we call it before the end of the year and we can then target to launch next year and we are looking to commence demolition by Q4. So this is going to be a very exciting project hopefully by the next time we meet I can unveil a lot of very pretty pictures to show you what this project is going to look like. It's certainly very iconic in terms of what we've designed. Over in Phuket, in Thailand, we have been making use of the fact that obviously during COVID, Thailand as well as especially Phuket, tourism has gone down substantially because borders were closed. So therefore, we made use of the time to put in place a very substantial AEI for this Changslaan Shopping Centre. This is one of the top performing malls in Phuket and after our AEI is completed, we are very optimistic about how this mall will perform. So we anticipate to finish the whole AEI by the end of this year. Enhancement for MNC I think, you know, as I mentioned before, mSocial has been the brainchild of our chairman and he wants to really position this as a forward-looking, you know, hip lifestyle hotel. And so we started, you know, with our mSocial expansion. Obviously, the first one was in Singapore and then the next one was in Auckland. and the ones you see here are all so-called in the works right now. One that's just opened is M Social in Suzhou, which is part of the Suzhou Hongliang City Centre, Suzhou HLCC mixed-use development project that we have fully completed a few years ago. So the hotel is the last component to open, and it opened in April, and so far we've garnered a lot of positive feedback about the hotel. And the last part of our enhancement is obviously how do we continue to hold up our commitment towards making this planet more sustainable. We continue to be very focused on our net zero commitments, net zero carbon commitments for 2030 and 2050. So we have two big milestones coming up and working hard to meet them. And of course, on the governance side, we are also very pleased that recently the new SGTI index ratings have come out for 2023. And we had a drop of one place, went from fourth to fifth, but still very pleased that we have continued to demonstrate our commitment towards governance and transparency. Transformation Transformation is how we continue to grow and achieve our fund management ambitions, how we continue to transform our hospitality portfolio, especially after our big privatisation in November 2019 of Millennium Copton, or MNC as we call it. And of course, we have also been inculcating a mindset of innovation internally for the last five years and also making various venture capital investments in prop tech startups that we feel are very synergistic to our real estate and hospitality business. So in terms of fund management, I mean, I think we try to grow it organically and inorganically. So one of the ways inorganically is basically via acquisitions where you acquire other fund management platforms. So we have acquired a 21% stake in iREIT, in the REIT units, and we are 50% of the manager together with TKO. Fund Managers in Europe Equity Fundraise exercise last week, or sorry, was it a week before? Time's blurring on me. But anyway, I think the EFR exercise was very successful. It was almost 135% oversubscribed. CDL was prepared to take up its excess rights, but we didn't get the chance because there was so much interest in it. Basically, they acquired 17 retail assets across France, long whale, and basically at the yield of close to 8%. So we are very positive that this acquisition will drive more value for iREIT. On the right-hand side, we just gave you an idea of how when we invested in iREIT and also in the manager as well as the units in 2019, how much the portfolio has grown from £500 million to now around £1 billion. as well as from 1 to 3 countries, from 5 to 54 properties, and obviously our initial stake was 12% in REIT units, now it's 21%. So I think we are very positive, and iREIT helps to not only complement our fund management ambitions, but also helps to fill in the fact that it's a pan-European REIT, so an area where CDL has been light on its investments. So this helps to give us exposure to a very key region of the world. Okay, at this stage, I will pass it over to Yiming, who will take you to financial highlights, and then we'll open it up for Q&A. Thank you.