PhillipCapital analyst Darren Chan has maintained his “buy” call on City Developments Limited (CDL) even though the group’s patmi for the FY2024 ended Dec 31, 2024, formed only 70% of his full-year estimates.
The lower-than-expected bottom line was attributed to the timing of profit recognition under CDL’s property development segment and a 21% increase in interest expenses, says Chan. The analyst’s report, dated March 17, comes after CDL’s executive chairman Kwek Leng Beng dropped the legal charges against a group of board directors led by his son, group CEO Sherman Kwek. No further mention was made about the two-week-long saga.
Instead, Chan noted that CDL was on the “road to recovery” as he sees green shoots emerging within the Singapore property market, with high take-up rates for new launches.
“We are optimistic about the Zion Road project, even though buyers are mostly Singaporeans or PRs, as the 60% additional buyer’s stamp duty (ABSD) continues to deter foreigners,” he writes.
While the analyst has lowered his FY2025 patmi estimates by 38% to factor in higher interest costs and construction delays, he sees bright spots in CDL monetising its assets, establishing a fund management franchise and strengthening its recurring income streams.
Strong take-up rates of launched projects, as well as asset monetisation initiatives (AEIs) and redevelopments are also key earnings drivers for the group and may potentially support the recovery in its share price, Chan adds.
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The analyst also expects to see low- to mid-single-digit revenue per available room (RevPAR) growth in FY2025 across CDL’s hotel portfolio amid positive momentum within the hospitality sector.
In FY2024, CDL’s profit before tax (PBT) for its hospitality segment rose by 2.6% y-o-y due to a 2.6% increase in portfolio RevPAR of $172.50 and a 0.5% increase in its gross operating profit margin.
To Chan, the group’s planned divestments could also help lower its gearing.
With these factors in mind, the analyst has lowered his revalued net asset value (RNAV) target price to $6.02 from $6.87, which represents a 45% discount to his RNAV of $10.95.
Other analysts have downgraded their calls and target prices when the group first released its results on Feb 26, the same day the dispute first made headlines.
As at 11.03am, shares in CDL are trading flat at $5.05.
