At least $600 million worth of assets will be divested in FY2025, says City Developments Limited (CDL) Sherman Kwek at the group's annual general meeting (AGM) on April 23.
According to Kwek, the group really needs to accelerate its divestments due to its "very high" gearing.
As at FY2024 ended Dec 31, 2024, CDL's net gearing stood at 117%, while its net gearing, including fair value on investment properties, stood at 69%. In FY2023, both figures stood at 103% and 61% respectively. In FY2024, the group's interest coverage ratio stood at 2.1 times, down from FY2023's 2.8 times. The average debt maturity stood at 2.3 years as at Dec 31, 2024.
The latest target comes in line with the value of assets sold in 2024, although it fell short of Kwek's initial target of $1 billion announced at CDL's FY2023 results briefing in February 2024. This was due to "various factors" that "hindered" the group's ability to conduct divestments successfully, he explained.
That said, Kwek noted that the number of acquisitions conducted and divestments wasn't exactly proportionate, as the acquisitions include the land sites CDL buys in Singapore. Divestments, on the other hand, don't include its Singapore properties.
While this makes the group look worse, Kwek stressed that it was better to be disciplined in its approach.
Since 2021 to date, the group has made some $7 billion in fresh acquisitions and only divested $3 billion. The $7 billion includes the successful land tenders in Singapore. Yet, of the $7 billion, roughly $3 billion comprised land tender acquisitions in Singapore.
"So in a way, it is not quite fair to compare this," says Kwek, although he acknowledged that again, it was "good discipline" not to include residential sales in CDL's divestment figures since these were assets the group is looking to sell off.
In response to shareholders' feedback that CDL should be making more divestments, Kwek says he agrees, but whether the group can hit a 1:1 ratio will depend on whether it's being "particularly acquisitive" that year or not.
At the same time, the group recognises that it should not sell assets just for the sake of recognising divestment targets and end up leaving a lot of money on the table, Kwek says.
Instead, the group will focus on driving its core portfolio and trim assets that are either unproductive, loss-making, or non-core.
Noting that its assets sit on its balance sheet at book cost, Kwek highlights that the group's portfolio is "sizeable" if everything is recorded at fair value.
He adds that the group's UK portfolio is "very resilient" with trophy properties and that it is primed to be included in a future platform, whether it's private or public.
In response to a shareholder's question, Kwek revealed that the group is currently looking at some "fairly large divestments". He added that a $1 billion divestment is nothing to sniff at despite its current interest expenses.
Assuming that the group doesn't make any acquisitions, a $1 billion divestment translates to a 6.5 percentage point drop in gearing, which is "very substantial", he says.
Shares in CDL closed 6 cents higher or 1.24% up at $4.90 on April 23.
