SINGAPORE (May 12): Maybank Kim Eng is maintaining its “hold” call on City Developments with an unchanged target price of $9.80 as it sees limited upside after the strong rally year to date.
Investor sentiment was lifted by the surprise easing of cooling measures on March 10.
“While we believe the overall impact of the easing is small as key measures holding down demand remain, buoyant sentiment could see near-term upside to home prices and sales volumes,” says Derrick Heng in a Friday report.
To recap, CityDev reported 1Q17 net profit of $85 million which made up only 14% of Maybank’s full-year estimate. Maybank however expects future launches to lift earnings in the coming quarters.
“Management is using the weaker occupier market to spruce up its properties with asset enhancement initiatives (AEI) for Le Grove Serviced Apartments and some of its office buildings, including Republic Plaza,” says Heng.
CityDev is also seeing improving local home sales. The group sold 293 residential units in the local market worth $477 million during this quarter, a significant improvement from 1Q16, where they sold 145 units worth $146 million.
Notably, 90 out of the 174 units at Gramercy Park have been sold even when the developer raised prices for the second phase of the project, says Heng.
Elsewhere, New Futura is due for launch as planned while management is considering its options for South Beach Residences and may pursue a rental option instead.
Since the beginning of the year, CityDev has invested $770 million in five acquisitions and continues to seek out new acquisitions.
The stock is trading 24 cents lower at $10.61.
