City Developments - Maybank Kim Eng 2018-08-08: Deferring Launch Plans

City Developments - Maybank Kim Eng Research 2018-08-08: Deferring Launch Plans CITY DEVELOPMENTS LIMITED SGX:C09

City Developments - Deferring Launch Plans

Limited downside; maintain HOLD

  • City Developments’ 1H18 EPS is in line, at 44% of our FY18E estimate. Nonetheless, we trim FY18E EPS by 5% to adjust for its deferred launch plans, while keeping FY19-20E numbers. Consequently, our RNAV dips to SGD13.88 from SGD13.91.
  • Our Target Price stays at SGD10.40, a 25% discount to RNAV. With the stock trading close to -1SD of its 10-year average RNAV discount, we believe the market has priced in potential residential-market weakness.
  • Maintain HOLD. Prefer UOL (SGX:U14) and CapitaLand (SGX:C31) for sector exposure.

~ SGinvestors.io ~ Where SG investors share

Raised interim DPS

  • City Developments’ 2Q18 profits were driven by New Futura & Gramercy Park in Singapore and contributions from Hong Leong City Center in Suzhou, completed in May.
  • Interim DPS has been raised by 2 cts to 6 cts, to reflect its better y-o-y profitability. With no commitments to a higher full year payout, we have conservatively kept our FY18E DPS at 18 cts.
  • City Developments and its JV partners have received several offers for Manulife Centre and Tampines Grande. These are office assets under its PPS 2 structure. It is in advanced negotiations on the sale of the former. Apart from participating as a cornerstone investor in the IPO of E-House (2048 HK), one of the largest real-estate brokers in China, City Developments has reached a strategic agreement with the company to market its properties in Singapore and London to Chinese buyers.

Responding to cooling measures

  • After the recent property-cooling measures, City Developments is reviewing the launch timing for its JV projects, South Beach Residences and Boulevard 88.
  • Plans for its mid-to-mass-market projects are unchanged, as these cater mostly to first-time home buyers, who should be less affected by the policy changes.

Targeting SGD900m of recurring EBITDA

  • City Developments has a 10-year recurring-EBITDA target of SGD900m. This is a 50% increase from current levels of SGD600m. Plans to hit USD12b AUM for its fund-management platform should account for one-third of the increase, with the balance to come from acquisitions and improved yields for its properties.
  • We believe stronger recurring income will enhance the stability of its earnings and offer scope for potentially higher payouts.

Swing Factors 


  • Monetisation of investment assets conservatively held at cost. 
  • Renewed interest in Singapore’s high-end residential market. 
  • Strong rebound in home sales. 


  • Sharp fall in home prices, necessitating impairment charges. 
  • Poor execution of overseas projects. Recent ventures into China, the UK and Japan have raised risk profile. 
  • Sharp increase in interest rates could hit demand for properties and drive down asset prices. 

Derrick Heng CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2018-08-08
SGX Stock Analyst Report HOLD Maintain HOLD 10.400 Same 10.400