City Developments - RHB Invest 2016-02-26: Simply Compelling Valuations

CITY DEVELOPMENTS LIMITED C09.SI

City Developments (CDL) remains our Top Pick for its compelling valuations.
Executive chairman Kwek Leng Beng sees the possibility of cooling measures being relaxed this year – in line with our view on the Singapore residential market.
We like CDL’s strong balance sheet which provides huge investment opportunities in a period of market dislocation, and its ability to capitalise on available opportunities.

CDL has done two profit participation securities (PPS) deals valued at SGD2.6bn so far and expects this instrument to be a recurring feature going forward. It has set a target of SGD5bn assets under management (AUM) for its private funds platform by 2018.
With the two PPS deals, it is now at the halfway mark. CDL believes the PPS platform would be a useful instrument to narrow the price discount gap to its NAV.

CDL sold 674 units worth SGD692m in value last year, down 50% from SGD1.4bn in 2014. The group launched two executive condominium (EC) projects in 2015 – ie the Brownstone at Canberra Drive, which is expected to obtain the temporary occupation permit (TOP) in 1Q18, and the Criterion at Yishun Street 51, scheduled to obtain TOP in 2Q18.
In the project launch pipeline is Gramercy Park, a high-end project located at Grange Road. Timing of the launch is subject to market conditions.
The group clinched a government land sales (GLS) site at Lorong Lew Lian in Nov 2015, topping the second-highest bid by 2.6%. It plans to launch the project in 3Q16.

Nuovel 18 will approach the QC deadline in Nov 2016 and the group is exploring various options to deal with it.
Deadlines for other projects, Gramercy Park and New Futura, are still far out in 2Q18 and 4Q18 respectively.

Ong Kian Lin RHB Invest | Goh Han Peng RHB Invest | Ivan Looi RHB Invest http://www.rhbinvest.com.sg/ 2016-02-26

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 9.22 Up 9.18

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