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How City Developments Tripled Profits In FY2025 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  So you sent over a pretty massive stack of documents today.
• 0:11
  Oh, yeah. A real brick of a financial report. Yeah, literally.
• 0:14
  It's the newly released full year 2025 financial statements and news releases
• 0:19
  for City Developments Limited or, you know, CDL. Right.
• 0:23
  Along with some of my own notes on what they've been up to lately. Exactly.
• 0:26
  And our mission for this deep dive is to basically figure out how this legacy
• 0:32
  giant cargo ship of a property developer suddenly pulled off this high speed maneuver.
• 0:37
  Pretty wild to see. It really is. Yeah. Because they essentially tripled their
• 0:40
  profits in a single year.
• 0:42
  And usually, you know, when we look at these massive real estate conglomerates,
• 0:45
  there's this underlying expectation that they move, well, slowly.
• 0:49
  Right. Like molasses. Yeah. You buy land, you spend years building a massive
• 0:53
  structure, you collect rent, and you just slowly turn the wheel over decades. It's farming.
• 0:58
  Exactly. It's farming. You plant the seeds and wait a very long time for the harvest.
• 1:01
  But the numbers in this 2025 report, I mean, they completely reset that expectation for the sector.
• 1:08
  They really do. And you have to remember, we're looking at a business operating
• 1:12
  in a year marked by, you know, global economic uncertainty. Right.
• 1:18
  Unpredictable inflation, geopolitical tension that works. Yeah, all of that.
• 1:21
  Yet CDL reported what the documents call PATMI. That's Profit After Tax and
• 1:27
  Non-Controlling Interest.
• 1:28
  Basically, their bottom line net profit. OK. And what was the number? It was $629.7 million.
• 1:35
  Which is just staggering because that's up from, what, $201.3 million in 2024? Yep.
• 1:41
  They literally tripled their net profit. Wow. And, you know,
• 1:45
  looking at this purely from an investor's perspective, a profit jump of that
• 1:49
  magnitude, it isn't just a lucky quarter. No, absolutely not.
• 1:52
  It means management pulled some massive strategic levers behind the scenes.
• 1:55
  So we really need to unpack this.
• 1:57
  We need to look at their core business engines, their financial health,
• 2:00
  what this massive windfall actually means for the shareholders,
• 2:03
  the people listening to this, and what the runway looks like for 2026.
• 2:07
  Right. And I think we should probably start by examining the traditional side
• 2:11
  of their business, right, before we get into all the crazy financial engineering.
• 2:14
  Yeah, the bread and butter.
• 2:16
  Exactly. The property development segment. Basically, their core engine of building
• 2:20
  and selling properties. That was the heavyweight champion of the revenue growth this year.
• 2:25
  Okay, so how did that division actually do? Well, total revenue for the group
• 2:29
  grew by 9.7% to reach $3.6 billion.
• 2:33
  But the really standout metric is their performance in Singapore specifically.
• 2:37
  Oh, right. Because in 2025, CDL hit the highest residential sales value in its
• 2:43
  entire history in the country, didn't it?
• 2:45
  They did. Which is, I mean, hitting an all-time historical high in this current
• 2:49
  macroeconomic climate. That requires serious volume.
• 2:52
  Yeah, people are still buying houses. A lot of them. A lot. They achieved $4.35
• 2:57
  billion in sales value, and that's moving 1,657 units.
• 3:02
  That's a lot of keys to hand over. Yeah, and it represents a 46% jump in sales value year over year.
• 3:08
  The execution there relied heavily on a string of these, like,
• 3:12
  highly successful large-scale project launches.
• 3:15
  Right, I saw a few of those names in your notes. Yeah. For example,
• 3:18
  a project called the Ori.
• 3:19
  It's got 777 units, and it's already 95% sold. Wow.
• 3:24
  95% is basically sold out in real estate terms. Pretty much.
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  And then you look at Zion Grand, another massive project with 706 units,
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  and that's sitting at 87% sold. Jeez.
• 3:36
  And this is all happening alongside progressive, steady sales from other ongoing
• 3:40
  projects like the Mist and Norwood Grand.
• 3:43
  You know, it really reminds me of the movie industry. Oh, yeah. How so?
• 3:47
  Well, a studio can release like 20 mid-tier movies a year and make a decent
• 3:51
  return. But to have a record-breaking historic financial year,
• 3:55
  you need back-to-back summer blockbusters that completely sell out the theaters.
• 4:00
  Ah, I see what you mean. Right. The Oregon Zion Grand, those are clearly CDL's
• 4:04
  summer blockbusters. I mean, revenue only tells part of the story.
• 4:08
  You can sell $4 billion worth of property, but if your land and construction
• 4:11
  costs are too high, your actual net profit barely moves. That's the key point right there.
• 4:16
  Profit margins matter. And the profit margin boost in this segment came heavily
• 4:21
  from a very specific accounting mechanism.
• 4:23
  Oh, tied to project completion, right. Exactly.
• 4:25
  A massive surge to their bottom line suddenly materialized in April 2025.
• 4:31
  This is when a fully sold executive condominium project, Copengran,
• 4:35
  finally received its temporary occupation permit.
• 4:38
  Right. Okay, let's break that down for a second. Because the way Singapore recognizes
• 4:42
  executive condominium, or EC, profits...
• 4:46
  Is really unique. Yeah. It's very different from regular private condos.
• 4:50
  Right. With regular private condos, developers can book profits progressively
• 4:54
  as construction hits certain milestones, you know, like building the foundation, pouring the concrete.
• 4:59
  But EC profits are only recognized in full upon completion.
• 5:03
  Which means they had all this cash from Copingran basically locked up. Exactly.
• 5:08
  Copingran was already completely sold out. The buyers were locked in.
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  The money was essentially there. But CDL couldn't put a single dollar of that
• 5:15
  profit on their scorecard until that permit was officially issued in April.
• 5:19
  Yeah. And when that dam finally broke, all that pent up profit just flooded
• 5:24
  the Inkay statement all at once. Like a financial tsunami.
• 5:27
  Yeah. The cash was just sitting there waiting to be crystallized on the balance sheet.
• 5:31
  But, you know, even with Copingran's completion and those blockbuster project
• 5:35
  sales we talked about, moving residential units alone does not entirely explain
• 5:41
  a tripling of a multibillion dollar company's net profit. No, definitely not.
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  Selling houses gives you steady, predictable growth. To triple your bottom line
• 5:50
  like that, there has to be a secondary mechanism at play here.
• 5:53
  And there is. The documents heavily emphasize a strategy called capital recycling.
• 5:57
  This was really the profit multiplier for CDL in 2025. five.
• 6:01
  Capital recycling. OK, so in mechanical terms, explain how they're using that. Sure.
• 6:05
  So capital recycling basically means taking a hard look at your portfolio of
• 6:09
  existing income generating properties.
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  You identify which ones have kind of matured, you know, ones that have already peaked in value.
• 6:15
  Exactly. You sell off these older or non-core assets to free up the cash that's trapped inside them.
• 6:22
  This allows you to actually realize the capital appreciation that is built up
• 6:26
  over all those years. Right.
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  And then you take that newfound liquidity and reinvest it right back into new,
• 6:33
  higher yielding opportunities.
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  So it's like you're playing poker. You're taking the chips off the table from
• 6:37
  a winning bet, pocketing your initial stake, and putting the winnings on a whole
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  new table where the odds of outsized returns are just better.
• 6:45
  That is a perfect analogy. And in 2025, CDL executed this aggressively.
• 6:49
  They secured around $2 billion in global divestments.
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  $2 billion. That is not a small pivot. No, it's massive. And the crown jewel
• 6:56
  of this strategy, which was the primary driver of that huge profit spike was right in Singapore.
• 7:01
  They sold off their 50.1% stake in the South Beach mixed-use development.
• 7:06
  Oh, South Beach. That is a huge property. Yeah. And that one single move generated
• 7:11
  a massive $473.1 million gain based on a $2.75 billion valuation of the property.
• 7:19
  Okay. I have to push back on this strategy for a second, just from a long-term
• 7:22
  investor's perspective.
• 7:23
  Sure. Go ahead. If I'm looking at a premium, iconic, income-generating property like South Beach...
• 7:30
  I mean, this is a property that commands top-tier rents in a prime location.
• 7:36
  Isn't selling that off essentially trading away long-term, reliable,
• 7:41
  recurring rental income for like a short-term sugar rush on the balance sheet?
• 7:46
  I mean, it's a fair question.
• 7:47
  Right. Because you get this huge $470 million spike in 2025.
• 7:52
  But what happens in 2027 and beyond when you no longer have those millions in
• 7:56
  rent rolling in every single month?
• 7:58
  I get that. it definitely looks like a sugar rush on paper.
• 8:01
  But if you really dig into management's rationale on the report,
• 8:04
  holding on to South Beach was actually a case of trapped equity.
• 8:07
  Trapped equity, meaning the value is there, but you can't touch it. Exactly.
• 8:11
  South Beach was held on their books at its historical cost. Over the years,
• 8:15
  because of the location and the sheer quality of the build, its true market
• 8:19
  value just skyrocketed.
• 8:20
  But as long as CDL simply held the building and collected rent.
• 8:23
  That massive capital appreciation was completely locked away.
• 8:28
  Shareholders couldn't touch it and the company couldn't use it to grow.
• 8:30
  By selling their stake at a premium, they crystallized that paper wealth into
• 8:35
  actual deployable cash.
• 8:37
  Ah, okay. I see. So the heavy lifting of value creation at South Beach was already done.
• 8:42
  It's fully built, fully tenanted, fully optimized. The growth curve had essentially
• 8:46
  flattened out into just a steady yield. Exactly.
• 8:50
  And the crucial second half of the capital recycling equation is what management
• 8:54
  actually does with that liquidity.
• 8:56
  They didn't just hoard the cash to make the 2025 balance sheet look pretty.
• 9:00
  Right, they had to put it to work. Yeah, they immediately used it to acquire
• 9:04
  new assets with higher growth potential, properties where they can control the
• 9:07
  development margin all over again.
• 9:09
  For example, they took part of that war chest and acquired a mixed-use site
• 9:13
  in Shanghai's prestigious Shintiandi area. Okay, so expanding in China.
• 9:17
  Yep, and they also bought the Holiday Inn London-Kensington High Street for
• 9:22
  280 million pounds. So they've unlocked all this trap cache through South Beach
• 9:27
  and redeployed it globally.
• 9:29
  You know, aggressive capital recycling is a double-edged sword. Oh, absolutely.
• 9:34
  When you step out of a highly stable market like Singapore and expose your balance
• 9:38
  sheet to global markets like Shanghai and London, you also expose yourself to
• 9:43
  international macroeconomic shocks.
• 9:45
  And reading through these financials, it wasn't a perfect year.
• 9:49
  No, far from it. An objective investor definitely has to look at the financial
• 9:53
  speed bumps, and CDL took some significant hits, particularly in China.
• 9:57
  Yeah, what happened there? They had to recognize an $80.5 million foreseeable
• 10:03
  loss, which stemmed mostly from a residential project in Shenzhen.
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  Ouch. And on top of that, they absorbed a $74.3 million impairment loss on investment
• 10:13
  properties again, largely tied to their portfolio in China.
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  You know, taking an impairment loss, it's kind of like realizing the used car
• 10:20
  you bought last year just depreciated by $10,000 because a newer model came
• 10:24
  out or because the secondary market for cars suddenly collapsed.
• 10:28
  That's a great way to put it.
• 10:29
  You haven't sold the car yet, so you haven't actually lost the physical cash from your wallet today.
• 10:33
  But your net worth has undeniably shrunk.
• 10:36
  You have to adjust your personal balance sheet downward to reflect reality.
• 10:40
  And that applies perfectly to the Chinese real estate market right now.
• 10:44
  When the broader Chinese property sector cooled down significantly,
• 10:47
  mostly driven by oversupply and macroeconomic headwinds, The projected market
• 10:52
  value of those Shenzhen assets just dropped below what CDL actually paid to build them.
• 10:58
  And the accounting rules say you have to recognize that immediately.
• 11:01
  Yes. They require companies to recognize that foreseeable loss right away on
• 11:07
  the income statement, even if the building isn't finished or sold yet.
• 11:10
  So they basically cleaned up the balance sheet by taking the medicine now.
• 11:14
  Pruning the dead branches so the rest of the tree can grow. Exactly.
• 11:18
  And the robust profits from their Singapore operations were strong enough to
• 11:22
  easily absorb the shock of those overseas write-downs.
• 11:25
  Okay, so let's talk about the leverage required to run a machine this size.
• 11:29
  Because to buy prime land in Shanghai, a massive hotel in London,
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  and absorb the costs of multiple new developments in Singapore, you need serious debt.
• 11:39
  You do. And the key metric to watch here is the net gearing ratio.
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  This shows how much of the company's operations are funded by debt versus what
• 11:47
  actually belongs to the shareholders.
• 11:49
  After factoring in the fair value of their investment properties,
• 11:53
  CDL's net gearing ticked up slightly.
• 11:55
  It's at 71% compared to 69% in 2024. Now, a 71 percent gearing ratio is substantial.
• 12:01
  But I mean, in the context of their aggressive expansion, it feels like a calculated
• 12:06
  weight. Yeah, it's strategic debt.
• 12:09
  They're taking on that debt specifically to fund those massive acquisitions
• 12:13
  in Shanghai and London, plus, you know, securing three new government land sites
• 12:17
  in Singapore for future development.
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  But borrowing heavily across different countries introduces a massive foreign exchange risk.
• 12:23
  If global currencies swim wildly, the debt you took out in a foreign country
• 12:27
  could suddenly become exponentially more expensive to pay back.
• 12:30
  Right, which is why management relies heavily on what's called a natural hedge
• 12:34
  to mitigate that exact risk.
• 12:36
  Currently, CDL utilizes a high natural hedge of 77% across its entire global portfolio.
• 12:43
  Let's break down the mechanics of a natural hedge for a second, just to be clear.
• 12:47
  It essentially means matching the currency of your loans directly with the currency
• 12:52
  of the asset you're buying.
• 12:53
  So if CDL buys a massive hotel in London, they do not borrow Singapore dollars to finance it.
• 13:00
  They go to a bank and borrow British pounds.
• 13:02
  Right. That way, if the British pound suddenly weakens significantly against
• 13:06
  the Singapore dollar, the paper value of their London hotel drops when translated
• 13:11
  back to their home currency.
• 13:12
  But crucially, the cost of paying back that British pound debt also drops by
• 13:17
  the exact same proportion.
• 13:18
  You nailed it. The asset depreciation and the liability reduction just cancel each other out.
• 13:23
  They move in tandem, effectively insulating the company's core balance sheet
• 13:27
  from sudden catastrophic currency shocks.
• 13:29
  It's a really smart defense mechanism. It really is. And the documents actually
• 13:34
  note their natural hedge for the British pound is currently sitting at 99%. Almost perfect.
• 13:39
  Yeah. And for the Japanese yen, it's 92%. It is a necessary and highly prudent
• 13:45
  way to manage a multi-billion dollar global portfolio without suddenly turning
• 13:49
  into a currency speculator.
• 13:51
  They're building houses, not day trading forex. Exactly.
• 13:55
  OK, so we've seen the company make historic residential sales in Singapore.
• 13:58
  We've seen them flip massive assets for huge gains.
• 14:01
  We've seen them take strategic losses in China, and we've seen how they manage
• 14:05
  their international debt. The ultimate question is.
• 14:08
  What does this actually mean for the everyday retail investor holding CDL stock
• 14:13
  in their brokerage account?
• 14:14
  Well, the good news is it translates into a very tangible, immediate reward.
• 14:18
  Alongside these financials, the board announced a newly enhanced dividend policy.
• 14:22
  Moving forward, CDL has committed to a minimum payout ratio of 35% of the reported net profit.
• 14:29
  Wait, OK, let's do the map on that. They paid out 10.0 cents per share in 2024, right?
• 14:33
  Under this new policy, because 2025 was such an anomaly of a stellar year,
• 14:38
  they are actually exceeding that 35% minimum.
• 14:41
  They're paying out 40% of their
• 14:43
  net profit, which totals an ordinary dividend of 28.0 cents per share.
• 14:48
  Which is a huge jump. It is.
• 14:50
  Bumping a dividend from 10 cents to 28 cents isn't just like an incremental increase.
• 14:54
  They are directly matching the tripling of their corporate profit and handing
• 14:59
  that cash straight back to the shareholders.
• 15:01
  It is a massive boat of confidence from management in their own liquidity.
• 15:05
  But, you know, beyond just handing out cash and selling off prime real estate,
• 15:09
  they're also heavily focused on maximizing the properties they chose not to
• 15:12
  sell. Right, making the existing stuff better. Yeah.
• 15:15
  The documents detail extensive efforts in AEI asset enhancement initiatives. Got it.
• 15:21
  These are basically major strategic renovations designed to physically upgrade
• 15:25
  a property so it can command significantly higher rents from much better tenants.
• 15:29
  So like you take an outdated mall, gut the interior, modernize the layout,
• 15:33
  bring in higher tier anchor tenants, and suddenly the square footage is worth a premium.
• 15:37
  Exactly. And CDL recently completed major AEIs at City Square Mall in Singapore
• 15:42
  and the Yung Ceylon Shopping Center in Phuket. And did the numbers back it up?
• 15:47
  Oh, the metrics completely validate the capital expenditure.
• 15:50
  Young Ceylon, for instance, saw an 18.5% positive rental reversion. Wow.
• 15:55
  Meaning, when the renovations were done, new leases were being signed at rates
• 16:00
  18.5% higher than the old leases.
• 16:03
  Yep. They are actively squeezing more yield out of their existing footprint.
• 16:07
  And we see a similar trend in their hospitality arm, too. Hotels. Right.
• 16:11
  Despite a general slowdown in the broader Asian travel market,
• 16:15
  CDL's Global Hotel RevPay, that's Revenue Per Available Room,
• 16:19
  basically the ultimate health metric for a hotel that actually ticked up by 1.3%.
• 16:24
  Really? Even with the Asian travel slowdown? Yeah, because it was driven by
• 16:27
  sustained strength in markets like Australasia, Paris, and New York. Fascinating.
• 16:31
  So all of this paints a very clear picture of 2025.
• 16:34
  But, you know, the stock market is a forward-looking machine.
• 16:36
  Investors do not price a stock solely based on the past 12 months.
• 16:40
  They price it based on projected future cash flows.
• 16:43
  That's the real game. So as we look at the runway for CDL moving deep into 2026,
• 16:48
  what are the macroeconomic opportunities and, of course, the inherent risks?
• 16:53
  Well, the macro indicators in their core market of Singapore remain highly supportive.
• 16:58
  Singapore's GDP growth forecast for 2026 has been officially upgraded to between
• 17:02
  2% and 4%. Which is solid. Right.
• 17:05
  Furthermore, the current environment of easing interest rates is really helping
• 17:09
  to keep home buying demand resilient.
• 17:11
  You know, cheaper mortgages inherently expand the purchasing power of the average buyer.
• 17:16
  That makes total sense. And there's also a highly specific policy catalyst mentioned
• 17:21
  in your notes regarding HDB income ceilings. Oh, right.
• 17:25
  So for the listeners, HDBs are Singapore's public housing.
• 17:28
  The government is currently reviewing the income ceilings. Basically,
• 17:31
  the maximum amount a household can earn to still qualify for public housing.
• 17:34
  Or subsidized hybrid housing. The mechanism here is vital.
• 17:38
  If the government raises that ceiling from, say, $16,000 a month to $18,000
• 17:43
  a month to account for inflation, thousands of newly eligible middle-to-upper-middle-class
• 17:48
  families suddenly flood into the market.
• 17:51
  And because CDL is the dominant player in the executive condominium space.
• 17:56
  Expanding that buyer pool directly and disproportionately benefits their future project pipeline.
• 18:01
  And keep in mind, the last time the income ceiling was revised was over six years ago.
• 18:05
  So a favorable adjustment is a very real near-term catalyst. That's huge. Yeah.
• 18:10
  And speaking of the pipeline, 2026 is already underway with significant momentum.
• 18:15
  In January, they launched an ultra-luxury freehold project called Newport Residences.
• 18:19
  Oh, I've seen the renderings for that. It's priced at a staggering average of $3,370 per square foot.
• 18:25
  And even at that premium price point, the project is already 66% sold.
• 18:29
  Which really proves that despite global economic jitters, there is still deep
• 18:33
  structural liquidity waiting to deploy into the right luxury product in a safe
• 18:37
  haven market like Singapore.
• 18:39
  Exactly. And looking further down the calendar to the third quarter of 2026,
• 18:43
  they're preparing to launch Lakeside Drive.
• 18:45
  That's a massive 570 unit project strategically located to benefit directly
• 18:51
  from the ongoing government development of the Jurong Lake District.
• 18:55
  Lots of residential volumes still coming.
• 18:57
  But, you know, I do want to touch on their commercial office portfolio before we wrap up. Sure.
• 19:02
  Because it feels like every time you read a financial paper today,
• 19:04
  there's a doom and gloom editorial about the death of the commercial office,
• 19:08
  you know, due to the permanence of remote work.
• 19:10
  So how is CDL actually navigating the office sector?
• 19:14
  The documents address this by highlighting a specific countertrend in corporate
• 19:18
  real estate called the flight to quality.
• 19:20
  Flight to quality. It is absolutely true that generic, older grade B office
• 19:25
  spaces in secondary locations are struggling with high vacancy rates right now.
• 19:29
  Yeah, nobody wants to commute to a dingy cubicle farm. Right.
• 19:32
  However, as major tech companies and multinational corporations increasingly
• 19:37
  mandate strict return-to-office policies, they are demanding premium.
• 19:42
  Centrally located, highly amenitized, and heavily green-certified office cases.
• 19:47
  They need these top-tier environments to actually lure top talent back to the desks. Exactly.
• 19:52
  And to meet their own corporate sustainability goals.
• 19:55
  So CDL's commercial portfolio, especially following those aggressive asset enhancements
• 20:00
  we talked about, is positioned perfectly to capture this top-tier demand.
• 20:04
  In 2026, it's not simply about a company having an office. It's about a company
• 20:08
  demanding the best possible office.
• 20:11
  That makes a lot of sense. All right, let's bring all these threads together.
• 20:14
  CDL essentially engineered a tripling of its profits to nearly $630 million
• 20:19
  by executing record-breaking home sales in Singapore.
• 20:23
  They aggressively recycled their capital, unlocking massive trapped equity by
• 20:27
  selling off a stake in South Beach, and immediately used that cash to hunt for
• 20:30
  new, higher-yielding assets in London and Shanghai.
• 20:33
  They ruthlessly pruned their underperforming assets in China,
• 20:36
  taking the impairment losses on the chin while their balance sheet was strong enough to absorb them.
• 20:41
  And ultimately, they passed a massive 180% dividend increase directly into the
• 20:46
  pockets of their retail shareholders.
• 20:48
  All while setting up a strong, catalyst-rich pipeline for 2026.
• 20:52
  It is a textbook execution of a highly active, almost aggressive management strategy.
• 20:58
  And looking at all these documents from an investor's perspective,
• 21:01
  it leaves us with a critical new framework to consider. What's that?
• 21:05
  If massive traditional developers like CDL are no longer just passively sitting
• 21:09
  on land and collecting rent, but are instead operating with the agility of a private equity firm,
• 21:15
  ruthlessly buying, fixing, unlocking value, and selling assets on a global scale,
• 21:20
  what does that actually mean for the everyday retail investor?
• 21:23
  That is the million-dollar question. You might essentially be buying into a
• 21:26
  highly sophisticated global real estate private equity fund,
• 21:29
  but with the daily liquidity of a public stock.
• 21:32
  And crucially, without paying the exorbitant 2 in 20 management fees that private
• 21:37
  equity firms usually charge.
• 21:39
  I mean, it completely changes how the market should evaluate the stock's premium moving forward.
• 21:44
  It forces investors to reevaluate the entire sector. You are no longer just
• 21:49
  buying a portfolio of buildings.
• 21:51
  You're buying the management team's ability to constantly churn and optimize
• 21:54
  capital in a high interest rate environment.
• 21:56
  The cargo ship has definitely installed a speedboat engine, and it is navigating
• 22:01
  the macroeconomic waters masterfully.
• 22:03
  Thank you for joining us on this deep dive into CDL's 2025 financial transformation.
• 22:08
  This content is intended to serve strictly and only as an informational,
• 22:12
  independent, objective summary of recent events and should in no way be interpreted,
• 22:16
  construed, or relied upon by any party as insight, information, or financial advice.