City Developments - Maybank Kim Eng 2016-01-13: Accumulate on non fundamental sell-down

City Developments - Maybank Kim Eng 2016-01-13: Accumulate on non fundamental sell-down 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 BUY Maintain BUY 9.33 Down 10.64