City Developments - Acquisition of luxury residential site in London
- City Developments Limited (CDL) announced the acquisition of Ransomes Wharf Site in Battersea, London from Curtaus Trust for GBP58.0m (SGD103.2m), phased over the next 18 months.
- CDL plans to develop the site into a luxury residential project with an estimated gross development value of GBP222.0m (SGD395.2m). The site has an existing planning permission for 118 apartments including 24 affordable homes, eight commercial units and 103 car parking spaces.
- The acquisition doesn't come as a surprise as CDL's lowly geared balance sheet (net gearing of 0.19x) provides it with ample debt headroom (more than SGD3bn assuming comfortable gearing of 0.5x) to undertake acquisitions.
- The move is positive as it allows CDL to build on its existing portfolio of ten prime properties and also capitalise on a weak GBP.
- As its UK properties mainly caters to local market, we expect demand to remain fairly robust despite the ongoing Brexit developments. Assuming a 15% EBIT margin for the project will translate into marginal 5 cent ( < 1%) accretion to our RNAV.
- Maintain BUY with a TP of SGD9.70, pegged at a 30% discount to our RNAV of SGD13.86.