City Developments Limited - OCBC Investment 2016-09-07: Investing in Chinese online platform

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CITY DEVELOPMENTS LIMITED C09.SI

City Developments Limited - Investing in Chinese online platform

• RMB100m for 20% stake in mamahome.
• Entry into rapidly growing sector.
• Potential for growth and synergies.

Investing RMB100m in mamahome 

• City Developments Ltd (CityDev) announced earlier this week that it will invest RMB100m (S$20.4m) for a 20% stake in mamahome, a Chinese online apartment rental platform, via its wholly-owned subsidiary CDL China Ltd. 
• The online apartment platform currently has more than 100k apartment listings in 20 Chinese cities, with more than 75% of the listed apartments located in key gateway cities such as Shanghai, Beijing and Guangzhou, and primarily caters to growing demand for mid- to long-term leasing from leisure travellers to business executives.
• The platform provides an online booking website, online management software and other services which includes housekeeping, renovation, 24- hour concierge and a call centre, and is a onestop solution for both apartment owners and rental customers. We understand that mamahome also manages its own brands of serviced apartments, Suisse Place, Locca and Login. 
• After this investment, mamahome will be held by 56% held by Shanghai Chongfu, 24% by E-house Capital and 20% by CityDev.

Immediate entry into a rapidly growing sector 

• CityDev’s management has indicated that they see this investment as a way to gain immediate entry into a fast-growing sector driven by business and leisure travel in the vast Chinese market. The platform has an asset-light model focused on internet expansion, and the group also expects some synergies such as using the platform for the leasing of the CityDev’s residential properties and serviced apartments.
• We are overall positive on this investment, given its relatively manageable quantum and that it gives the group exposure to a business segment with significant potential for growth and future synergies. While the investment is expected to contribute to recurring income over the long term, we see the impact on earnings to be likely limited over the near term. 
• Maintain BUY with an unchanged fair value estimate of S$9.89.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2016-09-07

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 9.890 Same 9.890