City Developments - RHB Invest 2016-07-07: Acquisition of remaining 50% stake in Nouvel 18

City Developments - RHB Invest 2016-07-07: Acquisition of remaining 50% stake in Nouvel 18 CITY DEVELOPMENTS LIMITED C09.SI 

City Developments - Acquisition of remaining 50% stake in Nouvel 18

  • City Developments (CDL) acquired the remaining 50% stake in Nouvel 18 from its JV partner Wing Tai Land Pte. Ltd. for an aggregate consideration of SGD411m. 
  • Nouvel 18 located at 18 Anderson road is a 156-unit freehold site and is within walking distance to Orchard road shopping belt. The site was acquired in 2007 for SGD477.7m (SGD1,650 psf ppr) and was completed in Nov 2014. No units has been sold till date.
  • The acquisition price translates to SGD2,619psf based on estimated net sellable area of 313,874sqft. 
  • We believe the acquisition is fair considering the nearby new launches Ardmore 3 is selling at effective price range of SGD2,600-3,200psf. The acquisition is also 17% above our breakeven assumptions of SGD2,240psf. 
  • CDL has until Nov 2016 to sell the units in the project after which it will start incurring qualifying certificate (QC) extension charges on unsold units. Assuming no units being sold the extension charges for the first year works out to about SGD38.2m. 
  • We believe CDL with its strong balance sheet strength (net gearing of 0.26x) and access to private equity partners is better positioned to unlock the value of the project via bulk sale or a capital market transaction. 
  • We maintain our BUY recommendation on CDL with a TP of SGD9.04.




Vijay Natarajan RHB Invest http://www.rhbinvest.com.sg/ 2016-07-07
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 9.04 Same 9.04


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