City Developments Limited - OCBC Investment 2018-03-01: A Busy Year Ahead

CITY DEVELOPMENTS LIMITED C09.SI

City Developments Limited - A Busy Year Ahead

City Developments Limited (CDL) reported its 4Q17 results which met our expectations.
Revenue jumped 13.8% y-o-y to S$1,327.7m and this was driven by The Brownstone EC which obtained its TOP in Oct 2017. PATMI came in at S$186.7m, which was a decline of 23.4% y-o-y.

For FY17, CDL’s revenue was down marginally by 2.0% to S$3,828.6m, while PATMI of S$538.2m represented a dip of 17.6%, as its FY16 performance was boosted by a sizeable contribution from Hong Leong City Center in Suzhou. The latter formed 96.7% of our full-year forecast.
A final ordinary and special dividend of 8 S cents and 6 S cents per share was declared, respectively, and this culminated in total dividends of 18 S cents per share for FY17 (interim special DPS of 4 S cents), versus 16 S cents for FY16.
City Developments sold a robust 1,171 residential units in Singapore (including share of JV partners) in FY17, representing total sales value of S$1.93b.

City Developments shared that it has a long-term target of increasing its proportion of recurring EBITDA from 56% (FY17) to 65% to reduce the lumpiness of its income streams. This would be driven in part by its initiative to create a sustainable fund management platform, with a goal of attaining an AUM of US$5b by 2023 (excluding its current PPS).

Looking ahead, City Developments has a strong pipeline of ~2,750 units available for launch in Singapore. Its closest upcoming launch will be the 861-unit condominium The Tapestry in Mar.
Separately, City Developments also jointly submitted the top bid for a Sumang Walk site. The S$509.4m bid price translates into S$583.0 psf ppr, and was 4.8% higher than the second highest bidder. We estimate breakeven ASP of ~S$1k psf.
We believe City Developments’s intensive land bids would be supported by its healthy net gearing ratio of 9%. Management highlighted that it typically targets margins above 10% on costs for its development projects in Singapore, and maintained upbeat on the margins of its projects on hand.
Factoring in City Developments’s full-year results in our model, we revise our RNAV-derived fair value to S$15.91 (previously S$15.30).

Wong Teck Ching Andy CFA OCBC Investment | http://www.iocbc.com/ 2018-03-01

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 15.91 Up 15.300