City Developments - CGS-CIMB Research 2021-10-05: Positioning For The Future

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CITY DEVELOPMENTS LIMITED (SGX:C09)

City Developments - Positioning For The Future

• We hosted City Developments for an investors call. Topics included Singapore residential market, optimising property/portfolio returns and recurring income streams.
• Management reiterated its focus on executing a multi-dimensional growth strategy to future-proof City Developments’s business model.
• Reiterate ADD rating on City Developments with an unchanged target price.

Building a multi-dimensional business

• City Developments (SGX:C09)'s management reiterated its GET (Growth, Enhancement, and Transformation) strategy as part of its move to future-proof its business through a multi-dimensional model. This includes building a recurring income stream, optimising property returns through asset enhancements/redevelopments and transforming its business via strategic investments and fund management activities, while diversifying its development business beyond Singapore.

Diversifying development activities beyond Singapore

• We expect Singapore residential to continue to form the majority of development contribution in the near term. Together with the upcoming launch of the 696-unit CanningHill Piers, land parcels in Northumberland Road and Tengah Walk and residential component of Fuji Xerox redevelopment, we estimate City Developments has a development pipeline of ~2,000 units.
• With residential and land prices remaining elevated, management expects development margins to remain compressed in the near term.
• City Developments has also diversified its development activities into Australia, UK, Japan and Vietnam and we anticipate these overseas contributions to gradually pick up in the medium term.

M&C strategic review and building recurring fee income

• Apart from the strategic review of M&C’s hotel portfolio, currently underway, value unlocking through environment remains challenging, City Developments is seeing signs of recovery with a positive GOP achieved in Jun 2021.

Reiterate ADD rating on City Developments

• We maintain our RNAV-based gap between City Developments's share price and RNAV in the medium term.
• See
  • City Developments's Share Price,
  • City Developments's Target Price,
  • City Developments's Analyst Reports,
  • City Developments's Dividend History,
  • City Developments's Announcements,
  • City Developments's Latest News.
• Potential re-rating catalysts include a faster-than-expected recovery in the global hospitality sector and asset divestments.
• Downside risk: drag from slow macro outlook.
• See City Developments's ESG metrics in report attached below.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-10-05

SGX Stock Analyst Report ADD MAINTAIN ADD 8.970 SAME 8.970