City Developments Ltd - OCBC Investment 2018-03-20: No Tapering Of Expectation

CITY DEVELOPMENTS LIMITED C09.SI

City Developments Ltd - No Tapering Of Expectation

City Developments Limited (CDL) announced last week that it is intending to launch its The Tapestry condominium project this coming Saturday on 24 Mar.
We visited the show flat preview over the weekend and noticed a large crowd. According to CDL, more than 5,000 people visited the show flat in the first weekend of the preview (10-11 Mar), with strong enquires received. This is not surprising, as The Tapestry is the first major private condominium launch of the year amid recovering sentiment in the residential sector.

As a recap, The Tapestry is a 861-unit project located along Tampines Street 86, with nearby amenities and transport networks including MRT stations (both the Tampines East-West Line and Downtown Line and Tampines West Downtown Line), Tampines bus interchange, newly-completed Our Tampines Hub and schools such as St. Hilda’s Primary School.
Drawing references from adjacent projects, we note that The Alps Residences, The Santorini and Q Bay Residences (all located along Tampines Street 86) achieved median selling prices of S$1,067, S$1,036 and S$1,102 psf for transactions which took place from Jan 2017 to Mar 2018.
We have assumed an average selling price of S$1,250 psf for The Tapestry in our model, and believe this premium is achievable, given improving market sentiment and CDL’s strong reputation for its quality projects.

Based on CDL’s closing price of S$13.25, the stock is trading at FY18F P/B ratio of 1.20x, which is in-line with its 10-year average of 1.18x. After fine-tuning our assumptions, our RNAV-derived fair value estimate remains at S$15.91.
CDL continues to be one of our top picks within the property sector, as we view it as a key proxy to the Singapore residential market recovery story.

Wong Teck Ching Andy CFA OCBC Investment | Joseph Ng OCBC Investment | http://www.iocbc.com/ 2018-03-20

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 15.910 Same 15.910