City Developments Limited - OCBC Investment 2016-02-26: Significant Value at Current Price

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CITY DEVELOPMENTS LIMITED C09.SI 

City Developments Limited - SIGNIFICANT VALUE AT CURRENT PRICE 

• 4Q results in line 
• Robust & diversified earnings profile
• Upgrade to BUY with S$8.67 FV 

4Q15 results broadly within expectations 

• CDL’s 4Q15 PATMI increased 6.6% YoY to S$410.5m mostly due to gains from the monetization of three office assets through the group’s second Profit Participation Securities Platform in Dec15, a maiden S$12m contribution from the sale of Emerald House in the UK and higher profit recognition from development projects in Singapore. 
• FY15 PATMI cumulates to S$773.4m, up 0.5% from S$769.7m last year, and we judge these results to be broadly in line with expectations after accounting for one-time gains and extraordinary items. 
• A final dividend of 8.0 S-cents and a special final dividend of 4.0 S-cents are proposed. 

Solid execution on key market pipelines 

• The group reports that both ECs launched in Singapore in 2015, The Brownstone and The Criterion, are 55% and 15% sold, respectively, with other launched projects also registering reasonable sales over the year. 
• In addition, the group made strong progress in China with several successful launches over the year. 
• CDL’s UK real estate development platform (established in 2013) have so far acquired seven freehold properties for GBP400m, out of GBP550m that had been set aside for deployment. 
• The group expects to secure the permits for the construction and sales for its condo project in Tokyo’s Minato ward by end 2017 and also re-entered the Australian market with a A$275m condo project in South Bank, Brisbane. 

Active capital recycling and international diversification 

• Over the last five years of active diversification into international markets, we believe that the group’s asset and income profile has become significantly more robust. 
• As at end 2015, we note that 45% of total assets fall in overseas markets while 51% of total assets also fall into the group’s recurring income segments. 
• We see significant value in CDL’s current share price, which reflects a PB ratio of 0.74x and a sizeable 42% discount to our RNAV estimate. 
• Our fair value estimate increases to S$8.67, versus S$8.35 previously, as we incorporate the latest acquisitions and the 2015 PPS divestment into our valuation model. 
• Upgrade from hold to BUY. 

Eli Lee CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-02-26

OCBC Securities SGX Stock Analyst Report BUY Upgrade HOLD 8.67 Up 8.35