SINGAPORE (Nov 7): DBS is reiterating its “buy” call on City Developments but with its target price of $12.63 “under review".
City Developments (City Dev) on Thursday announced that its China subsidiary – CDL China – has entered into a strategic partnership with China Vanke through a partial divestment of its Chongqing projects.
See: CityDev and Vanke to jointly develop and manage two Chongqing projects
The group has divested 70% and 50% of Chongqing Huang Huayuan and Eling Residences respectively for an aggregate consideration of RMB 986 million ($202 million).
This divestment is scheduled to be completed in Dec 2017.
The partnership will allow City Dev to tap on China Vanke’s expertise in managing the sales of completed unsold units at Eling Residences and the development of Huang Huayuan, which is currently under its design development stage.
In a Monday report, analyst Rachel Tan says, “Post the completion, City Dev is expected to recognise a gain from the divestment in 4Q17.”
Tan estimates that both the projects will cost up to RMB 1 billion ($206 million) and with its remaining stakes, City Dev could ride on potential future upside from both the projects with a new partner, new expertise and fresh ideas.
The analyst also notes that CityDev’s associate, First Sponsor, has previously partnered China Vanke through a similar structure. Hence, there could be future opportunities for collaborations and business expansions in China and Singapore.
As at 12.05pm, shares in City Dev are trading 2 cents lower at $12.42 or 19.1 times FY17 earnings with a dividend yield of 1.3%.
