SINGAPORE (Nov 13): City Developments has capitalised on strong home buying sentiment in Singapore with sales value tripling to $1.8 billion in 9M17.
Going forward, three projects are due for launches in 1H18 at New Futura, Tampines Ave 10 and South Beach Residences, according to Maybank KimEng.
“We fine-tune our model to push out the launch of New Future and incorporate the partial divestment of Eling Residences and Huang Huayuan,” says analyst Derrick Heng.
CityDev recently announced the divestment of partial stakes in two Chongqing projects, a 50% stake in Eling Residences and 70% stake in Huang Huayuan for RMB986 million ($202 million).
“We also update our RNAV estimates to reflect the latest market value of Millennium & Copthorne and fine-tune its carrying value. Accordingly, we raised our RNAV-based target price marginally to $13.80. Maintain ‘buy’,” adds Heng.
In a Monday report, Phillip Capital says CityDev remains one of the most well-stocked developer under its coverage to benefit from the upcycle in the Singapore residential and commercial property market.
Healthy demand and a recent pickup in interest in high end developments such as newly launched Martin Modern and CityDev’s Gramercy Park suggests healthy saleability for New Futura with new limited new supply in Core Central Region.
Analyst Tan Dehong says he is are similarly confident of takeup rates and ASPs for South Beach and Tampines Ave 10 site given exclusivity of South Beach site with unblocked panoramic views of Marina Bay and the city smaller units at Tampines site with affordable quantum.
Tan says he has seen similar suburban projects sell well at psfs higher than the forecast $1,100psf for Tampines. Healthy takeup rates and ASPs for these four launches next year and forward could be catalysts for share price and upward revision of target price, he adds.
In addition, the office outlook looks set to further recover in 2018 with improved corporate demand as evident across most office S-REITs and tapering new supply. This will likely mitigate the magnitude of negative reversions expected for the 27% leases (by NLA) expiring in 2018 for CityDev’s office portfolio.
Meanwhile, City Developments is still mulling over a potential offer for Millennium & Copthorne and will announce its firm intention by Dec 8 but the market appears to be pricing in a higher offer price with the stock trading above the potential offer price of 552.5 pence ($9.98) at 625 pence.
In 3Q17, M&C saw a broad-based recovery for Hotel Operations as global sentiment and tourism improves. M&C’s global RevPAR improved 1.4%, led by strong growth in Australasia, London and New York. Including the impact of acquisitions, closures and refurbishments, global RevPar improved 4% in constant currency, an improvement in the 2.3% drop for FY16.
“For now, pending closure of the deal, we maintain “accumulate” with a target of $12.10,” says Tan.
Shares in CityDev are down 7 cents at $12.13 or 1.1 time Maybank’s FY18 forecast book value.
