City Developments’ profit rises 17% to S$220.9m in 2Q11

City Developments announced a 17% YoY increase in 2Q11 PATMI to S$220.9m versus restated 2Q10 PATMI of S$188.9m. We note that there was a disposal gain of S$82.6m, without which we judge 2Q11 PATMI to be broadly in line with our expectations. 2Q11 revenue were mostly flat (-0.2% YoY) - again within our expectations. In 1H11, CDL sold 809 residential units at a total value of S$794m on a 100% effective stake basis versus 773 units in 1H10, with total value of S$948m.

For the hotel segment, we saw REVPAR up 5.5% for 1H11 with Singapore, London and New York leading the growth at 9.6%, 13.1% and 6.6% respectively. Hotel occupancy rates in 1H11, however, tracked down YoY in Asia, Europe and New Zealand while we saw occupancy rates in the US grow 1.1 percentage points from a low base of 62.0% in 1H10. Management also announced a special interim ordinary dividend of 5 S cents. We would speak with management later this morning and in the meantime we put CDL's rating and fair value estimate of S$10.86 under review.