City Developments Limited - Respectable set of 4Q16 numbers
- 4Q16 results in line.
- Sharp execution overseas.
- FV estimate raised to S$10.50.
Impact from absence of 2nd PPS profit and lower gross margins
- 4Q16 PATMI decreased 40.6% YoY to S$243.8m mainly due to the absence of contributions from the group’s 2nd PPS platform recognized in 4Q15 and lower gross margins.
- In terms of the topline, however, 4Q16 revenues increased 36.5% YoY to S$1.2b, cumulating to a record S$3.9b of revenues in 2016 which similarly showed an 18.2% increase.
- The growth is attributed to maiden contributions from Hong Leong City Center in Suzhou, sales at Singaporean developments and full recognition upon TOP from the fully sold Lush Acres EC which obtained TOP in June 2016.
- Overall, we see this as a respectable set of results which came in broadly in line with expectations.
- Note that the group has also proposed, in addition to a final dividend of 4.0 S-cents per share, a special final dividend of 8.0 S-cents per share. This brings total dividends in 2016 to 16.0 S-cents per share.
Maintain BUY with higher S$10.50 FV estimate
- In Singapore, the group sold 1,017 residential units (including ECs) over FY16 with a total sales value of S$1.25b. 64% (56 units) of Phase 1 at Gramercy Park has been sold, and the 2nd phase will be launched in 1H17. The group also looks to launch the 124-unit New Futura in 2H17, subject to market conditions. The South Beach project obtained final TOP in Dec 2016 with the office and retail space fully leased and the 634-room JW Marriot Hotel component soft-opened.
- In China, the Hong Leong City Center in Suzhou put up some firm sales numbers and 1,038 out of the 1,374 Phase 1 units has been sold. In the UK, CDL has also received full planning for the 220- unit Teddington Riverside project and we understand that Block A (57 units) will be launched in 2Q17.
- The group now has over S$3.5b in funds over management and we expect management to continue their capital recycling in 2017-18, which will allow them to achieve their S$5b target by end 2018.
- We update our valuation model with the latest financials and sales figures and our fair value estimate increases 6.2% from S$9.89 to S$10.50. Maintain BUY.