City Developments Ltd - OCBC Investment 2016-08-11: Aided by Lush Acres TOP, 2Q profits tread water

City Developments Ltd - OCBC Investment 2016-08-11: Aided by Lush Acres TOP, 2Q profits tread water CITY DEVELOPMENTS LIMITED C09.SI

City Developments Ltd - Aided by Lush Acres TOP, 2Q profits tread water

  • 2Q16 PATMI flat YoY at S$134m.
  • Boost from Lush Acres TOP.
  • Balance sheet remains robust. 

2Q16 PATMI mostly flat YoY 

  • 2Q16 PATMI was mostly flat (up 0.2% YoY) at S$133.8m despite revenues for the quarter increasing 32.4% to S$1,092.4m. 
  • The stronger revenues were mainly due to progress recognition being fully booked from Lush Acres (a fully sold EC) upon attaining TOP in 2Q16; but this was offset by FX losses, reduced finance income and higher tax expenses over the quarter. 
  • Year-to-date PATMI now constitute 40.0% of our full year forecast and we see 2Q16 results to be broadly within expectations. 
  • We do expect a somewhat back-loaded FY16 in terms of profit recognition, particularly as contributions from its overseas development projects roll in from 2H16. 
  • CDL is declaring a tax-exempt (one-tier) special interim dividend of 4.0 S-cents per share.

Balance sheet remains robust 

  • Management reports that 31 units at the 174-unit Gramercy Park development has been sold to date, while the Jewel@Buangkok, Coco Palms and The Brownstone are almost 100%, 90% and 73% sold, respectively. The group aims to launch the 519-unit Forest Woods development in Paya Lebar over the next few months. 
  • In central London, CDL has also obtained planning consent for a luxury care home development, which will comprise 34 2-bedroom apartments and a potential GDV of GBP200m (S$356m). We understand that management is monitoring market conditions and will launch sales at an appropriate time. 
  • As at the end of the latest quarter, CDL’s balance sheet remain fairly robust with a healthy net gearing of 27% (without factoring any fair value surpluses on investment properties) with over S$3.3b in cash and 10.1x in interest cover over 1H16. 
  • We continue to like CDL near current prices and see fundamental value over the long term. 
  • Maintain BUY with an unchanged fair value estimate of S$9.89.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2016-08-11
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 9.890 Same 9.890