CITY DEVELOPMENTS LIMITED
C09.SI
City Developments (CIT SP) Accumulate on non fundamental sell-down
Top sector pick; maintain BUY with new SGD9.33 TP
- We apply varying discount rates to CityDev’s sub-segments in our RNAV, which dips from SGD12.52 to SGD11.67. With this, we cut our TP to SGD9.33 from SGD10.64.
- We apply a 30% discount to its overseas developments to capture execution risks and its lack of track record.
- Our TP implies 1.0x P/BV, -1.0SD from its 10-year average.
- We believe its recent non-fundamental sell-down provides opportunities to accumulate.
- Catalysts are expected from lifting of cooling measures and further monetisation of its assets.
Good proxy for residential bottoming
- As one of the largest private home builders in Singapore, CityDev should be a good proxy for a potential bottoming of the residential market. Investors may be over-pessimistic on this segment as CityDev’s pre-sold homes already account for SGD2.4b of our revenue forecasts.
Two deals so far, more to come?
- CityDev has rolled out two private funds in the past two years. We expect it to introduce more.
- We value its investment properties at SGD4.5b and see scope for upside.
- Rumoured industrial-asset sales are low-hanging fruits (note) that should allow the company to book gains on assets conservatively held at cost.
Overseas risks, but our valuation is conservative
- Acknowledging its overseas execution risks, we build in a large 30% discount for this segment in our TP.
- Overseas projects account for c.16% of our valuation for 2016.
- We also incorporate valuation surpluses for Hong Leong City Centre and Eling Residences with all other projects conservatively held at cost.
Derrick Heng CFA
Maybank Kim Eng
|
http://www.maybank-ke.com.sg/
2016-01-13
Maybank Kim Eng
SGX Stock
Analyst Report
9.33
Down
10.64
