CITY DEVELOPMENTS LIMITED
C09.SI
City Developments - Time To Nibble In Again
- We upgrade City Developments (CDL) to BUY as we see opportunity for long-term investors to accumulate amid recent share price weakness (-7% over the last one month).
- CDL has once again demonstrated its ability to monetise its assets via a third PPS structure, extending its funds under management to SGD3.5bn.
- Furthermore, its lowly-geared balance sheet presents it with the ability to capitalise on acquisition opportunities.
- BUY with revised RNAV-based TP of SGD9.36 (from SGD9.04, 10% upside).
Acquisition beckons with lightened balance sheet.
- The company’s net gearing would improve to 19% (2015: 26%) post divestments, giving a healthy debt headroom of >SGD3bn (assuming comfortable gearing of 50%).
- We expect sizeable acquisitions in the near-term, capitalising on market weakness.
Third PPS done...
- City Developments (CDL) successfully monetised its Nouvel 18 development in October, selling its 100% stake to high net worth Singaporean investors for SGD978m (SGD2,750psf), booking net gain of SGD27m. The move was positive as it not only de-risked CDL’s balance sheet from carrying sluggish high-end inventory, but also helped avoid ~SGD229m in qualifying certificate (QC) charges.
...what’s next?
- We believe CDL can do similar profit participation securities (PPS) structures for its remaining high-end units, and in the longer term potentially monetise South Beach project, which has a GDV north of SGD3bn.
Encouraging sales at new launches.
- CDL’s new launch, Forest Woods (October) saw excellent take-up with 71% sold to date at ASP of SGD1,400psf. At Gramercy Park, it sold 38 of 40 launched units at SGD2,600psf.
- Hong Leong City Centre, Suzhou also saw strong demand, achieving CNY2.5b in sales value, providing strong earnings visibility for the coming quarters.
Vijay Natarajan
RHB Invest
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http://www.rhbinvest.com.sg/
2016-11-11
RHB Invest
SGX Stock
Analyst Report
9.36
Up
9.040
