City Developments - DBS Research 2017-02-24: Biding its time

City Developments - DBS Vickers 2017-02-24: Biding its time CITY DEVELOPMENTS LIMITED C09.SI

City Developments - Biding its time

  • 4Q16 net profit lower y-o-y due to one-off gains.
  • Strong pipeline of launch-ready projects in 2017.
  • BUY, TP raised to S$10.52 based on 15% discount to RNAV.

Attractive valuations; lifting target price to S$10.52. 

  • Despite the recent share price rally, we continue see positive catalysts coming from good sales momentum in 2017 filtering down to the group’s ready-to-launch and existing projects. 
  • We maintain our BUY call on City Developments (CDL) with a higher TP of S$10.52 based on a narrower 15% (20% previously) discount to our RNAV. 
  • Our target implies -0.5 standard deviation to its historical mean RNAV.

4Q16 earnings lower due to one-off gains . 

  • 4Q16 net profit fell 41% y-o-y to S$244m which was mainly due to one-off gains recorded from the divestment of three office properties to the profit participating security (PPS) structure last year. 
  • Topline was 36.5% higher y-o-y at S$1,166.9m. This was mainly from the stronger contribution from its property development division (Suzhou Hong Leong City Center phase 1 in China, and sales at its Singapore projects – Gramercy Park, Coco Palms, D’Nest and The Venue Residences and Shoppes).

Some light on 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 completed or are soon-to-be-completed, we expect international properties (UK and China) to drive property sales/revenue 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 our TP to S$10.52 (from S$9.90), pegged to a 15% discount to our revised RNAV of S$12.40. 
  • 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/ 2017-02-24
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 10.52 Up 9.900