May 12, 2017

City Developments (CDL)’s share price has surged +31% YTD, outpacing the STI by 18% and is hovering close to our TP. While we continue to remain positive on its operations, we believe its share price has factored in near-term positives from the pick-up in sales volume and its acquisition potential.

CDL’s Singapore project residential sales more than doubled YoY as sales value more than tripled to SGD477.1m (1Q16: SGD145.8m). Momentum is expected to remain strong in the coming quarters, with improved buying sentiment while prices are likely to remain flat on back of higher supply. CDL expects to launch the New Futura and South Beach Residences projects in 2H17.

CDL topped eight other bidders in May 2017, to acquire a residential land parcel in Tampines Avenue 10, with a bid of SGD370.1m or SGD 565.4psfppr. Although slightly bullish when compared to selling prices in nearby launches, it is well-timed in our view, with overall sales volumes picking up and a likely bottoming of Singapore residential prices e-o-y.

CDL has also been active in the overseas market, particularly in the UK and China, where it YTD pumped in ~SGD400m across the two markets, acquiring residential, commercial and hotel properties. With net gearing still remaining low at 16%, we expect management to continue on its acquisition spree.

In 1Q17, CDL’s listed hotel subsidiary, Millennium & Copthorne (M&C) (65% stake) registered a 4.6% increase in overall RevPAR (constant currency terms). EBITDA contribution however was impacted due to forex impact (weak GBP) and a weaker performance in New York and Singapore. We expect its overall hotel performance to stabilise and improve later this year, with the completion of asset enhancements across its various hotels and the improving global economic outlook.

TAKE PROFIT, with an unchanged TP of SGD11.30 pegged to a 20% discount to our RNAV of SGD14.12. A good re-entry point would be below SGD10.50. –RHB

City Developments closed at: S$10.58