City Developments Limited - OCBC Investment 2016-11-11: Balanced set of 3Q16 results

City Developments Limited - OCBC Investment 2016-11-11: Balanced set of 3Q16 results CITY DEVELOPMENTS LIMITED C09.SI

City Developments Limited - Balanced set of 3Q16 results

  • 3Q16 results in line.
  • Strong execution despite headwinds.
  • Firm balance sheet.

3Q16 PATMI up 60.1% YoY 

  • City Developments Ltd (CDL) announced that its 3Q16 PATMI increased 60.1% YoY to S$170.3m mainly due to stronger contributions from its property development segment and gains from the divestment of CDL’s interest in City eSolutions Ltd. 
  • In terms of the topline, revenues for the quarter rose 14.0% to S$922.8m similarly because of an improved performance from the property development segment, including a maiden contribution from the Gramercy Park project in Singapore and Hanover House in Reading, UK. 
  • Excluding one-time items, we judge this to be a fairly balanced set of results in line with our expectations.

Credible SG sales despite challenging conditions 

  • Year to date, the group has sold 482 home units in Singapore with total sales value of S$622.4m (versus 477 units worth S$502.2m in the same period last year) – a credible performance given challenging conditions in the residential market.
  • Management reports strong demand for the newly launched Forest Woods project, with over 70% of the 519-unit now already sold, while 38 units out of the 40 units launched at the 174-unit Gramercy Park has also been sold. 
  • In China, we saw strong sales at Hong Leong City Center in Suzhou, where maiden profits from Phase 1 are anticipated from 4Q16 onwards and we understand that the Phase 2 launch has received a positive response from buyers. 
  • The group also successfully executed its third set of Profit Participation Securities (PPS) for the Nouvel 18 development in Oct 2016 for a valuation of S$2,750 psf and has by now cumulated over S$3.5b in funds under management in the PPS platform. 
  • CDL continues to enjoy a strong balance sheet with a net gearing ratio of 27% and S$3b of cash, which provides the group with a sizeable war-chest for potential acquisitions ahead. 
  • Maintain BUY with an unchanged fair value estimate of S$9.89.

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