On March 8, CDL initiated a share buyback programme for its ordinary shares. Since then, a total of 12.9 million shares (1.43% of issued shares) have been bought back for a total consideration of $76.4 million.
Subsequently in April, CDL announced an off-market equal access scheme to buy back up to 29 million preference shares (10% of total preference shares in issue) at the offer price of 78 cents in cash. Chan notes that the low trading volume of preference shares gives preference shareholders an exit opportunity to partially monetise their holdings.
Meanwhile, CDL’s hospitality segment continues to improve, with 1QFY2024 portfolio revenue per available room (RevPAR) up 5.3% y-o-y due to strong growth in Australasia and Singapore.
However, Chan also points out CDL’s higher gearing and lower interest cover. As at March 31, CDL’s net gearing on fair value on investment properties inched up to 63% compared to 61% as at December.
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“The interest coverage ratio fell to 1.2x in 1QFY2024 from 2.8x in FY2023. Nevertheless, CDL maintains a strong liquidity position with $2.4 billion in cash,” Chan says.
Moving forward, CDL is targeting $1 billion in divestments in 2024 to recycle capital. Successful divestments could translate into significant divestment gain as it carries assets at cost in its books — some of which have been held at book value for several decades, Chan highlights.
He also notes that the hospitality segment should continue to improve on the back of mega concerts and meetings, incentives, conferences and exhibitions events in Singapore, as well as the upcoming Paris 2024 Olympics.
Chan continues to view CDL as a proxy for the Singapore residential market and hospitality recovery. The stock is currently trading at an attractive 53% discount to PhillipCapital’s RNAV/share of $12.50.
As at 4.26pm, shares in CDL are trading 5 cents higher or 0.86% up at $5.90.
