City Developments (CIT SP) - Maybank Kim Eng 2016-09-22: Visit to Gramercy Park

City Developments (CIT SP) - Maybank Kim Eng 2016-09-22: Visit to Gramercy Park CITY DEVELOPMENTS LIMITED C09.SI

City Developments (CIT SP) - Visit to Gramercy Park

Maintain HOLD; Fine-tuning RNAV 

  • We fine-tune our estimates post-visit to the Gramercy Park
  • Our ASP is lowered to SGD2,600 psf (from SGD2,850), but sales brought forward to reflect its competitive pricing. This led to overall EPS cuts of < 2% for FY16-18. 
  • Nonetheless, we raise our RNAV-based TP by 3% to SGD9.43 for higher market value of its 65% stake in Millennium & Copthorne (Not Rated) of 450pence per share (from 365pence). 
  • While stock valuations remain undemanding at 0.9x P/BV and 24% RNAV discount, clear stock catalysts remains limited. 
  • Maintain HOLD.

Significance of Gramercy Park 

  • Management hosted a visit to Gramercy Park, a high-end project located along Grange Road, in the prime residential area near Orchard Road. This project accounts for 9% of our FY16-18 EPS and 5% of our asset valuation.
  • We believe this project is significant as it is a test of market appetite for luxury condominiums with larger sizes and absolute prices. Together with this project, we estimate that CityDev has three other luxury residential projects in the pipeline with a com bined value of SGD3.7b and a strong launch could be positive for stock sentiment.

Key takeaways 

  • Despite the lacklustre property market, there remains demand for high quality homes in the prime area as evidenced by the 36 units sold at Gramercy Park so far. At SGD2,600 psf, we believe the project’s pricing is competitive vs other recent launches in the vicinity. Nonetheless, we reckon sales velocity is unlikely to be as fast given its larger absolute price tag. We estimate that an investor in this project should be able to achieve gross/net yields of 2.2%/1.6%.
  • Successful navigation of Nouvel 18 a near term event to watch We retain our cautious view on CityDev and property developers.
  • Elevated land prices and slow home sales could cap further re-rating. In the near term, a successful sale of Nouvel 18 before its QC deadline in November could be a swing factor to our valuation. We have assumed a conservative SGD2,500 psf for this project in our forecasts.

Swing Factors


  • Monetisation of investment assets conservatively held at cost.
  • Renewed interest in Singapore’s high-end residential market.
  • Strong rebound in home sales.


  • Sharp fall in home prices, necessitating impairment charges.
  • Poor execution of overseas projects. Recent ventures into China, the UK and Japan have raised risk profile.
  • Sharp increase in interest rates could hit demand for properties and drive down asset prices.

Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-09-22
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 9.43 Up 9.170