CITY DEVELOPMENTS LIMITED (SGX:C09)
City Developments - Challenging Environment To Persist
- Residential operations in Singapore remain the most resilient.
- Retail and hotels operations continue to face headwinds.
- Group liquidity position still sound.
1Q21 business update – residential segment the most resilient
- City Developments (SGX:C09) provided a business update for 1Q21, highlighting that although there were signs of improvement across its core business segments, the prolonged COVID-19 pandemic continues to impact its operations adversely.
- Its residential segment appears to be the most resilient. City Developments and its JVs and associates sold 319 residential units in Singapore with an aggregate value of S$513.6m in 1Q21, representing growth of 72% and 85% y-o-y, respectively. This was driven by sales at its Amber Park project, which moved around 100 units during the quarter. momentum would likely have continued in 2Q21, as City Developments has sold ~60% of its 540-unit Irwell Hill Residences project since its launch in Apr at an ASP of S$2,700 psf.
- City Developments also replenished its Singapore landbank with the award of a GLS site (JV with MCL Land) at Northumberland Road located near Farrer Park MRT at a winning tender of S$445.9m, or S$1,129 psf ppr. On the flip-side, the residential sector continues to be plagued by labour shortages due to the pandemic, which may result in construction delays.
Restrictions under Phase 2 (Heightened Alert) to impact Singapore commercial operations
- For City Developments’s office operations, committed occupancy in Singapore was 91.4%, a slight decline of 0.8 percentage points (ppt) q-o-q, although positive rental reversions were achieved. Tenants remain cautious on expansion and relocation plans, but in China, office leasing enquiries have picked up.
- City Developments’s retail portfolio performance remains challenging, but management was able to eke out a 5% y-o-y increase in gross turnover sales in Singapore, while committed occupancy was flat at 92.1% (-0.1 ppt q-o-q). Given the Phase 2 (Heightened Alert) situation in Singapore, City Developments had announced that it would be rolling out rental, operational and marketing support to tenants adversely impacted by the restrictive measures, with those mandated to close fully getting more support than others. Any rental concessions would typically be a percentage of their total monthly rent and also dependent on the period affected, which remains fluid at this point in time. We thus expect a deterioration in its retail performance in 2Q21.
Hotels business remains weak, while little new updates were provided on Sincere Property Group
- City Developments’s hotels operations remain the most challenged given continued restrictions on international travel. 1Q21 RevPAR dipped 28.3%, 41.1%, 87.0% and 52.7% y-o-y in Asia, New Zealand, Europe and US, respectively, with overall Group RevPAR falling 51.7% y-o-y to S$44.6. There were little new updates provided on Sincere Property Group, except that the entity continues to face liquidity challenges and focus will remain on driving rental collections and asset sales.
- Overall financial position for City Developments remains healthy, with cash and available undrawn committed bank facilities totalling S$5.5b and a net gearing ratio (including revaluation surplus from investment properties) of 65% (+3 ppt q-o-q).
- Our RNAV-derived fair value is maintained at S$9.12 for City Developments.
- See
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2021-05-20
SGX Stock
Analyst Report
9.120
SAME
9.120
