SINGAPORE (July 9): OCBC Investment Research is downgrading City Developments to “hold”, from “buy” previously, and slashing its fair value estimate by nearly 40% to $9.59.
This comes hot on the heels of surprise property cooling measures which were slapped on the Singapore residential market last week.
The government pushed through a 5 percentage point increase in stamp duty for some home buyers and tightened housing loans. The changes kicked into effect from July 6 – just hours after the announcement, which sent the market into a tizzy.
See: Singapore raises ABSD, tightens LTV after strong property price gains
“We expect City Developments Limited (CDL) to be one of the worst hit among the developers under our coverage,” says lead analyst Andy Wong Teck Ching in a Monday report.
“Based on our previous forecasts prior to the announcement of the cooling measures, CDL’s Singapore residential projects formed approximately 30% of our GAV (gross asset value) forecast,” Wong adds. “Following this latest round of stiff government cooling measures, we expect CDL’s local residential sales momentum and margins to come under pressure.”
After the cooling measures were announced, CDL’s share price tumbled 15.6% to $9.46 on July 6.
However, the way Wong sees it, the sharp correction does not open up a buying opportunity just yet.
“We believe the negative investor and buyer sentiments may curtain a meaningful rebound in its share price in the near future,” he says.
As at 11.27am, shares of CDL are trading 32 cents higher, or up 3.4%, at $9.78. This implies an estimated price-to-earnings ratio of 18.4 times and a dividend yield of 1.9% for FY18.
