CITY DEVELOPMENTS LIMITED (SGX:C09)
City Developments - Resilient Operating Performance With A Better Outlook
- City Developments (SGX:C09) reported a resilient operating performance in 3Q21 with strong sequential momentum in its property development and hospitality businesses. However, slight speed bumps may appear in the form of resurgent COVID-19 infections especially in Europe. Strategically, given the jettisoning of its stake in Sincere in Sep 21, the outlook appears reasonably good heading into 2022.
- Maintain BUY.
City Dev's luxury residences driving strong sales.
- Over the weekend from 20-21 Nov 21, City Developments’s luxury development, Canninghill Piers (City Developments: 50%, CapitaLand Developments: 50%), sold 538 (77%) out of the 696 units available. This generated total gross revenue of around S$1.18b with average prices around the S$2,800psf range.
- In addition, its other luxury offerings such as Irwell Hill Residences and Amber Park and its mid-market Sengkang Grand Residences sold 74%, 84% and 91% respectively as of 16 Nov 21. This strong showing pushed year-to-date sales to 1,382 units with a total sales value of S$2.5b, surpassing 2020’s 1,318 units and S$1.8b sales value.
Encouraging signs for the hospitality business as borders reopen.
- With the exception of Singapore’s occupancy Travel Lane scheme going into the end of the year, we expect continued recovery to take hold in City Developments’s hotel operations.
The end of the Sincere misadventure.
- On 10 Sep 21, City Developments announced its divestment of its Tusincere Tech Park.
Investment properties continue to register high occupancies as economic activities resume.
- The outlook in Singapore looks promising with a tight office supply in the coming years as well as a gradual recovery in retail tenants’ footfall as social distancing measures ease. City Developments’s office portfolio as of 30 Sep 21 had a committed occupancy of 91.5%, exceeding the national average of 87.1%, while its retail portfolio had occupancy in excess of 93%, above the Singapore average of 91.9%.
- In China, City Developments commented that the office leasing market has proved to be generally stable, offset by the negative impact on its retail assets due to recent policy changes regarding private tutoring which forced some tenants to terminate their leases prematurely.
The wait continues for the potential IPO of CDL’s UK commercial assets via a REIT.
- City Developments’s plans to establish a Singapore-listed REIT for its UK commercial assets have been delayed due to current market conditions, and thus the IPO is likely to take place only in 2022.
Lowering earnings forecast for 2021-23.
- We have downgraded our earnings forecasts for City Developments would trade at a 2021F P/B of 0.86x, which we view as fair.
- See
- Catalysts:
- Continued economic recovery from COVID-19 especially resumption of leisure and business travel.
- IPO of UK commercial assets.
Adrian LOH
UOB Kay Hian Research
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https://research.uobkayhian.com/
2021-11-24
SGX Stock
Analyst Report
8.500
SAME
8.500
