“Much of the results briefing centred on the company’s pace of divestments year-to-date in 2025 which has been better than we had expected,” Loh writes in his Aug 14 report.
At the briefing, CDL’s management stated that it will continue to “optimise its portfolio” locally and internationally and will look at assets where the group believes there is valuation dislocation in 2HFY2025.
The group added that it remains committed to recycling capital and that the move will be a “perpetual part of its business”, Loh notes.
More importantly, the proceeds of such divestments, will be shared with shareholders via a special dividend when CDL announces its FY2025 results in February 2026.
At the group’s 1HFY2025 results briefing on Aug 13, CDL CEO Sherman Kwek said the group “should be able to announce something [that’s] very well received by [CDL’s] shareholders”.
On patmi, Loh notes that the bottom line miss was caused by foreign exchange (forex) items as well as higher-than-expected interest costs.
Excluding forex, patmi would have been at $154.3 million, which would have resulted in “less of a miss”.
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With this, Loh has lowered his FY2025 earnings forecast by 48% to $194 million to account for forex losses and higher-than-expected interest expense.
In addition to his call upgrade, Loh has upped his target price estimate to $8.50 from $4.60 previously, based on a P/B of 0.8 times. The P/B multiple is slightly above CDL’s five-year average of 0.7 times and stands at a 33% discount to Loh’s assessed revalued net asset value (RNAV) of $12.70 per share.
In its results presentation, CDL shared that its RNAV, including the fair value of its hotel and investment property portfolio, was $19.77 per share.
Loh adds his previous “hold” call was premised on the Kwek family leadership tussle being a “drawn-out affair”, which may potentially negatively impact the direction of the company’s strategy and operations, governance and decision-making process and shareholder value.
Yet, at the 1HFY2025 results briefing and after the resignation of long-serving board member Phillip Yeo, “it appears that there has been a reconciliation between the family members,” Loh writes.
“With feathers now smoothed out, the focus is on executing CDL’s divestment strategy over the next six to 12 months,” he adds.
DBS Group Research analysts Tabitha Foo and Derek Tan have also increased their target price to $9 from $6.70 as CDL charts a “clearer path forward”.
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“We foresee multiple tailwinds for the group in the coming years, with strong earnings visibility driven by the largely pre-sold residential projects in Singapore and an attractive pipeline,” write Foo and Tan, who have maintained their “buy” call.
They also note that hospitality remains a “key growth engine” with chairman Kwek Leng Beng telling media that he hopes for the group to expand its portfolio to 500 hotels globally.
According to group chief operating officer (COO) Kwek Eik Sheng, the group’s journey too 500 includes management contracts and franchise opportunities.
“This approach is expected to enhance return on equity (ROE) while maintaining strategic flexibility and operational scalability,” say Foo and Tan.
The analysts also like that the group is looking to unlock additional debt headroom for deeper portfolio value, beginning with the divestment of its stake in South Beach.
The way they see it, the recent divestment marked a “major step” in CDL’s deleveraging plan, which indicates a “strategic reallocation of capital and optimisation of debt capacity”.
A stronger balance sheet will also enable the group to undertake the medium-term redevelopment of Delfi Orchard, which is expected to deliver “significant value uplift”. “More importantly, this reflects CDL’s strategic intent and continued commitment to extracting value from its portfolio”.
According to the DBS analysts, their target price was raised due to the subsiding overhang from the group’s previous management dispute. The new figure is based on a 50% discount to CDL’s RNAV, from a 60% discount previously.
PhillipCapital analyst Darren Chan has also maintained his "buy" call with a higher target price of $8.34 from $6.02 previously, even though CDL's 1HFY2025 patmi was below his expectations at 33% of his full-year forecast.
Yet, Chan likes the group's divestment plans, as he increases his FY2025 patmi estimate by 20% to account for the announced divestments that are expected to be completed in the second half of the year, including South Beach.
"Strong take-up rates of launched projects, together with the accelerated pace of capital recycling/divestments, may help narrow the RNAV discount," says Chan. "CDL declared a special interim dividend of 3 cents, with potential for a special dividend at FY2025 results, fueled by divestment proceeds."
Focus on capital recycling
Analysts from CGS International and Citi Research have maintained their “add” and “buy” calls after CDL’s renewed focus on capital recycling.
“We expect robust divestment gains (NAV-accretive) due to majority of assets held at legacy cost and proceeds to be channeled towards dividends, debt reduction, share buybacks and/or acquisitions,” says Citi analyst Brandon Lee.
At its briefing, the group said it expects its total divestments in FY2025 to be “quite a bit higher” than the $1.5 billion so far. CEO Kwek added that except Republic Plaza, which is “sacred” to the group, CDL is open to divesting assets in various asset classes across its existing geographies. This includes its private rented sector (PRS) assets in Japan worth about $688 million in Lee’s estimate, some commercial assets in China, which Lee believes includes three assets in Shanghai worth $300 million to $400 million, PRS assets in the UK estimated to be worth $846 million, purpose-built student accommodation (PBSA) assets in the UK worth around $474 million, development sites in London with a book value of $850 million, three offices in the UK worth around GBP1 billion ($1.74 billion) and hotels, which are “sitting on legacy cost”.
CEO Kwek also did not seem keen on listing a Singapore REIT due to challenges in building a domestic pipeline. He also cited having to acquire assets at low yields and the presence of larger existing players.
In his report Lee is also upbeat about CDL’s increased confidence and commitment to executing its growth, enhancement and transformation (GET) strategy, which was highlighted by its aim to provide a three-year target for divestments “and all” at its FY2025 results.
The group’s management also acknowledged that the time has come to address Millennium & Copthorne’s (M&C) business model, Lee adds.
The analyst, who has an unchanged target price of $9.01, notes that CDL remains “cheap” despite the 7% share price rally as at Aug 13. As at Lee’s report, CDL was trading at $6.35 per share, which represents a P/B of 0.67 times and 55% to its RNAV discount.
CGSI analyst Lock Mun Yee, who also maintained her target price of $8.97, likes CDL for its “inexpensive” valuation of 0.62 times its FY2025 P/B.
While CDL’s earnings per share (EPS) of 9.7 cents stood at just 37.9% of Lock’s FY2025 forecast, the analyst has raised her FY2025 EPS by 223% to factor in the divestment gain of $465 million from the South Beach transaction and faster-than-projected pace of sales at The Orie. Lock has also increased her FY2026 and FY2027 EPS by 5% and 4% respectively.
Finally, the research team at OCBC Investment Research has maintained its “hold” call with a higher fair value estimate of $6.87 from $6.01 previously. The higher estimate comes with a narrower RNAV discount to 50% from 54% as the team believes the overhang from the previous board dispute has been lifted. The team also sees signs of recovery in the core central region (CCR) segment of Singapore’s residential market and the group’s stronger balance sheet.
The team has, however, lowered its FY2025 and FY2026 patmi forecasts by 26% and 13% respectively given that CDL’s 1HFY2025 core patmi of $62.4 million accounted for 22% of its full-year forecast. The figure excludes net forex losses, fair value changes and divestment gains/losses.
The team also sees “likely divestment opportunities” from CDL’s UK land sites. While CEO Kwek indicated that the group would like to explore a UK REIT listing again, he didn’t give a timeline as he said it would be contingent on capital market conditions.
As at 4.10pm, shares in CDL are trading 4 cents higher or 0.59% up at $6.84.
