City Developments - DBS Research 2016-11-11: Solitaire PPS Club member

City Developments - DBS Vickers 2016-11-11: Solitaire PPS Club member CITY DEVELOPMENTS LIMITED C09.SI

City Developments - Solitaire PPS Club member

  • 9M16 net profit grew 13% on one-off gains.
  • Property development continues to record strong growth offset by hotel operations.
  • South Beach to TOP by year-end.
  • Expect international properties to drive property sales/revenue in 2017/2018.

Attractive valuations. 

  • We continue to see good value at 0.8x FY17F P/NAV, at 1SD below historical average. Key catalysts are: 
    1. potential injection of assets into Profit Participation Securities (PPS), 
    2. improvement in hotel operations, and 
    3. accretive acquisitions/land banking.

9M16 net profit grew 13% on one-off gains. 

  • 9M16 net profit grew 13% y-o-y to S$409m (68% of consensus’ full-year estimates) driven by revenue growth of 12% y-o-y (largely contributions from property development), one-off gains from disposal of 53% stake in City E-Solutions (CES) and insurance claims. 
  • Property development continues to record strong growth coupled with a 24% y-o-y increase in 9M16 property sales value (number of units sold was stable y-o-y). 
  • Weak performance from the hotel properties continue to weigh down earnings.

Some light from overseas investments. 

  • CDL’s decision to diversify into the overseas property market amid a challenging outlook in the Singapore property market is finally coming to fruition. 
  • With most of its Singapore property projects having been completed or are soon-to-be-completed, we expect international properties (UK and China) to drive property sales/revenue recognition in 2017/2018. We believe this could partly offset the impact of a weak property market in Singapore.


  • We maintain our BUY call and raise TP to S$9.90 (from S$9.60), pegged to a 20% discount to our revised RNAV of S$11.90. 
  • Supported by a strong balance sheet and diversified earnings base, CDL should be able to navigate well around the current uncertain market conditions.

Key Risks to Our View

  • Decline in residential prices in Singapore. As a proxy to Singapore’s residential market, a deteriorating operating environment will cap share price performance.

Rachel TAN DBS Vickers | Derek TAN DBS Vickers | http://www.dbsvickers.com/ 2016-11-11
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 9.900 Same 9.900