SINGAPORE (Jan 15): OCBC Investment Research is reiterating its “buy” call on City Developments (CDL) with a higher fair value estimate of $15.30 from $13.50 previously, after updating its valuation model for firmer average selling price (ASP) assumptions and lowering its discount to RNAV from 20% to 10%.
This comes on the back of stronger market conditions, with the Urban Redevelopment Authority’s (URA) price index continuing to rise in 4Q17 and overall prices increasing 1% versus a 3.1% decline last year.
In a Monday report, lead analyst Andy Wong says he believes the latest data reflects a constructive fundamental picture.
The analyst expects home prices to rally 3-8% in 2018, to be supported by a recovery in housing rents which are forecasted to increase 5-10%; a neutral legislative stance from the authorities; and a buoyant en-bloc market.
In particular, he sees the Singapore residential sector to be in the early stages of a sustained upturn, with CDL as a major proxy to the domestic housing market given its significant domestic land bank, and believes the group is set to benefit from stronger sales at their launch pipeline, including New Futura and its 861-unit condominium project at Tampines Avenue 10.
“We believe the group’s revised GBP 6.20 per share offer for its listed hotel subsidiary M&C, if successful, will be a potential positive catalyst for its share price,” he adds.
See: CDL says M&C Hotels buyout offer documents sent out; First close date set at Jan 23
As at 12:05pm, shares in CDL are trading 18 cents higher at $13.22, or 19.5 times FY18 earnings.
