City Developments Limited's (CDL) CEO Sherman Kwek is not ruling out the possibility of continuing share buybacks, considering that its current share price levels is at an over 70% discount to its true value.
As at the FY2024 ended Dec 31, 2024, CDL's net asset value (NAV) stood at $10.17 per share while its revalued NAV (RNAV) stood at $17.57 per share or $19.68 per share considering its fair value taken all valuation surpluses on portfolio.
At its closing price of $4.90 on April 23, CDL's shares are down 17.23% from the past year and down 4.3% year-to-date (ytd). The tumble was attributed to several factors including CDL's omission from MSCI's Global Standard Indexes in May 2024 and its internal tussle that started in late February this year.
In response to a shareholder on share buybacks, given the current level of CDL's shares, Kwek agreed with the idea of buybacks.
"It's really an opportune time for the board to discuss again whether it should initiate a buyback," says Kwek.
Stressing the group's shares that are trading at an over 70% discount, Kwek noted that buying back one's shares was "the best thing to do" and that he will "discuss [the matter] again with the board".
See also: CDL to undertake off-market purchase of preference shares; makes offer at 78 cents apiece
This isn't the first time Kwek floated the possibility of buybacks.
At CDL's results briefing for FY2023 in February 2024, Kwek shared that the group has mulled over the possibility "many times" and had set aside a "fairly sizeable quantum" to do so.
At the time, Kwek said that the purpose of the buyback is not to push up its share price but that "investing in your shares, which are deeply undervalued, is as good an investment as any other."
See also: Stoneweg European REIT commences share buyback programme, buys 50,000 units from market
"This is something we're still considering, but I can't say with certainty when or if we will do it," he added.
In March 2024, the group initiated a share buyback programme for its ordinary shares via open market purchases.
In its statement then, the group said that its shares were trading significantly below their intrinsic value despite their "strong fundamentals".
Days after, the group stepped up its share buybacks, as it spent nearly $13 million over three trading days.
Yet, three months after it initiated its buyback programme, CDL last bought back its shares from the market in June 2024.
At the end of the day, the group needs to "work hard" to close the gap between its share price and its RNAV, which goes back to executing its strategy well, says Kwek.
In 2018, CDL revealed its GET strategy, which stands for growth, enhancement and transformation. The strategy was made in a bid to "renew and reposition" its business, "sharpen [its] value proposition" and expand its asset portfolio.
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Going forward, the group will need to have discipline in its investments, portfolio reviews where the group may sharpen and, or diversify its assets, says Kwek. It will also focus on recurring income and capital recycling to mitigate the hefty interest expense.
He adds that if the group is able to divest more assets, shareholders will get to reap the rewards of these divestments via dividends, enhanced dividends and share buybacks.
To this end, the group's return to the MSCI is not something that Kwek will focus on right now, since that is based on rebalancing and the group's market cap. However, he notes that returning to the MSCI is a "chicken and egg issue" where the group needs to have more investors buying its shares, and it's not a direction that he is looking at for now.
Read more about what happened at CDL's 62nd AGM:
- CDL 'would like to explore' UK REIT IPO again: CEO Sherman Kwek
- CDL to divest assets worth at least $600 mil to lower 'very high' gearing: CEO Sherman Kwek
- Of doctors and snakes: Sparks fly at CDL AGM as board, shareholders cross-examine family feud
See also:
- CDL says board changes deviated from norms (April 8)
- CDL directors put stop to legal action, executive chairman Kwek Leng Beng and son Sherman Kwek to retain posts (March 12)
- SIAS asks CDL to clarify Dr Catherine Wu's role at M&C, process of board appointments, and shareholder safeguards (March 6)
- Dr Catherine Wu resigns; CDL CEO can 'no longer' make corp governance allegations and justify board coup: Kwek Leng Beng (March 4)
- CDL loses biggest developer spot to UOL as stock slides (March 3)
- CDL shares down more than 5% upon trading resumption (March 3)
- Urgency of court application stems from disruption of CDL's corporate structure; Phillip Yeo sees saga as distraction (Feb 28)
- Generational shift at City Developments (Feb 27)
- Primary reason behind CDL's dispute is related to M&C board advisor Dr Catherine Wu, says Sherman Kwek (Feb 27)
- CDL board fight cools with undertaking from two new IDs (Feb 26)
- Father and son battle it out in court for control for CDL (Feb 26)
- Sherman Kwek to remain as group CEO of CDL; finds episode 'incredibly disappointing' (Feb 26)
- CDL calls for trading halt, cancels FY2024 results briefing (Feb 26)
- City Developments' FY2024 patmi falls 36.6% as gearing rises to 117% (Feb 26)
- CDL divests assets worth more than $600 million in 2024 (Jan 16)
