City Developments Ltd - OCBC Investment 2016-08-11: Aided by Lush Acres TOP, 2Q profits tread water

CITY DEVELOPMENTS LIMITED C09.SI

City Developments Ltd - Aided by Lush Acres TOP, 2Q profits tread water

2Q16 PATMI was mostly flat (up 0.2% YoY) at S$133.8m despite revenues for the quarter increasing 32.4% to S$1,092.4m.
The stronger revenues were mainly due to progress recognition being fully booked from Lush Acres (a fully sold EC) upon attaining TOP in 2Q16; but this was offset by FX losses, reduced finance income and higher tax expenses over the quarter.
Year-to-date PATMI now constitute 40.0% of our full year forecast and we see 2Q16 results to be broadly within expectations.
We do expect a somewhat back-loaded FY16 in terms of profit recognition, particularly as contributions from its overseas development projects roll in from 2H16.
CDL is declaring a tax-exempt (one-tier) special interim dividend of 4.0 S-cents per share.

Management reports that 31 units at the 174-unit Gramercy Park development has been sold to date, while the Jewel@Buangkok, Coco Palms and The Brownstone are almost 100%, 90% and 73% sold, respectively. The group aims to launch the 519-unit Forest Woods development in Paya Lebar over the next few months.
In central London, CDL has also obtained planning consent for a luxury care home development, which will comprise 34 2-bedroom apartments and a potential GDV of GBP200m (S$356m). We understand that management is monitoring market conditions and will launch sales at an appropriate time.
As at the end of the latest quarter, CDL’s balance sheet remain fairly robust with a healthy net gearing of 27% (without factoring any fair value surpluses on investment properties) with over S$3.3b in cash and 10.1x in interest cover over 1H16.
We continue to like CDL near current prices and see fundamental value over the long term.
Maintain BUY with an unchanged fair value estimate of S$9.89.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2016-08-11

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 9.890 Same 9.890