SINGAPORE (May 15): OCBC Investment Research and Phillip Capital are maintaining their respective “buy” and “accumulate” calls on City Developments.
OCBC says CDL continues to be its top pick in the property sector, as the group looks poised to benefit from the firm uplift in the Singapore residential market where it has the largest land bank.
During 1Q18, CDL together with its JV associates sold 459 units in Singapore with an aggregate GFA of 415,892 sf and combined sales value of $792.6 million.
Total units sold and the combined sales value represented sturdy growth of 57% and 66% y-o-y, respectively. This was driven largely by Phase 1 of New Futura at Leonie Hill Road and The Tapestry at Tampines Avenue 10.
Looking ahead, CDL has a robust pipeline of launches amounting to 3,100 units, based on OCBC’s estimates.
For the remainder of this year, new launches include Phase 2 of New Futura, South Beach Residences, West Coast Vale and the former freehold Boulevard Hotel site. For 2019, expected launches include Handy Road in 1Q19, Sumang Walk EC in 2Q19 and Amber Park in 1H19.
“After adjustments, our RNAV-derived fair value estimate declines marginally from $15.91 to $15.78,” says analyst Andy Wong in a Monday report.
See also: City Developments posts 16.3% decline in 1Q earnings to $80 mil
In a Tuesday report, Phillip analyst Tan Dehong says the outlook for CDL’s residential segment is positive following the successful acquisitions of three sites in 1Q18.
“CDL remains one of our favoured proxies to the uptick in the Singapore residential market, following the successful land banking efforts,” says Tan, “Global tourism is on a gradual recovery track as evident from the sustained RevPAR recovery for the group in 1Q18.”
Responses to the two Phase 1 launches of New Futura and The Tapestry have been overwhelming with 97% and 80% sold within a few months from launch.
Selling prices were also encouraging with The Tapestry’s average selling prices of $1,310 representing a more than 20% premium over the median transacted prices of vicinity projects within the last year.
“We estimate margins for this project to be as high as 40% with the group’s favourable entry price in the land bid,” says Tan.
In 1Q18, CDL won three Government Land Sales sites totalling $1.2 billion, two of which had close winning margins of 0.7%-4.7% over the next highest bidder. The group will launch close to half of its pipeline in 2H18 and the rest in 1H19.
“We expect the group’s launches in 2H18 to generate healthy buying interest before bulk of the en bloc supply kicks in,” adds Tan.
“Maintain ‘accumulate’ with unchanged target price of $13.40 based on 15% discount to RNAV,” says Tan.
As at 11.59am, shares in CityDev are trading at 13 cents lower at $12.27 or 21 times OCBC FY18 earnings forecast.
