City Developments Limited – Buying back shares May 23, 2024 195

PSR Recommendation: BUY Status: Maintained
Last Close Price: 5.26 Target Price: 6.87
  • No financials were provided in this operational update. The launch of Lumina Grand was well received, with 381 units (74%) sold to date. Hotel operations continue to improve, with portfolio RevPAR growing 5.3% YoY to S$139.4.
  • Bought back 13mn shares (1.4% of issued shares) since 8 March 2024 for a total consideration of S$76.4mn. In April 2024, CDL announced an off-market equal access scheme to buy back up to 30mn preference shares (10% of total) at an offer price of $0.78.
  • Maintain BUY with an unchanged TP of S$6.87, a 45% discount to RNAV of S$12.50. We view CDL as a proxy for the Singapore residential market and hospitality recovery. Asset monetisation, unlocking value through AEIs and redevelopments, establishing a fund management franchise, and the continuous recovery in the hospitality portfolio are potential catalysts for CDL, which could help narrow the discount between CDL’s share price and RNAV.



The Positives

  • Strong sales under the property development segment. In 1Q24, the Group and its JV associates sold 429 units with a total sales value of S$737mn (1Q23: 88 units with a total sales value of S$213mn). Sales were driven by the launch of Lumina Grand, with 381 units (74%) sold to date. Tembusu Grand and The Myst continued to sell well, with 62% (4Q23: 60%) of its 638 units and 59% (4Q23: 51%) of its 408 units sold to date, respectively. The group plans to launch two projects in 2H24 – Union Square Residences (366 units) and a project at Champions Way (348 units). To replenish its development landbank, CDL secured a 164,451 sq ft GLS site with JV partner Mitsui Fudosan (Asia) Pte. Ltd. in April 24, for S$1.1bn or S$1,202 psf ppr. Located along Zion Road, this site is directly connected to Havelock MRT station. The plan is to develop the site into an integrated mixed-use project comprising two blocks (69 and 64 stories) with 740 residential units and a retail podium.


  • Initiated share buyback programme. On 8 March 24, CDL initiated a share buyback programme for its ordinary shares, and since then, a total of 12.9mn shares (1.43% of issued shares) have been bought back for a total consideration of S$76.4mn. The ordinary shares will be held as treasury shares and may be used for CDL’s long-term incentive plans. In April, CDL announced an off-market equal access scheme to buy back up to 29mn preference shares (10% of total preference shares in issue) at the offer price of $0.78 in cash. The low trading volume of preference shares gives preference shareholders an exit opportunity to partially monetise their holdings. All preference shares acquired by the company pursuant to the off-market equal access offer will be cancelled.


  • Hospitality segment continues to improve. 1Q24 portfolio RevPAR rose 5.3% YoY to S$139.4, due to strong growth in Australasia and Singapore. With higher room rates (+0.7% YoY), occupancy (+3.1%pts), and cost optimisation, 1Q24 GOP margins improved 1.7% points YoY to 26.7%. CDL will be refurbishing several hotels in FY24, and they include 1) Millennium Hotel London Knightsbridge, 2) M Social Phuket, 3) Millennium Downtown New York, and 4) The M Social Hotel Sunnyvale in California for a total cost of S$278mn. Additionally, CDL acquired the 268-room Hilton Paris Opera Hotel for €240mn (S$350mn) in May 24. This acquisition complements its expansion plans in Europe ahead of the upcoming Paris 2024 Olympics.


The Negatives

  • Higher gearing and lower interest cover. Net gearing on fair value on investment properties inched up to 63% (FY23: 61%). The interest coverage ratio fell to 1.2x in 1Q24 from 2.8x in FY23. Nevertheless, CDL maintains a strong liquidity position with S$2.4bn in cash.



CDL is targeting S$1bn in divestments in 2024 to recycle capital, and successful divestments could translate into significant divestment gains as it carries assets at cost in its books – some of which have been held at book value for several decades. The property cooling measures introduced in 2023 continue to stifle demand – foreign buyers have disappeared since the ABSD hike to 60%. The hospitality segment should continue to improve on the back of mega-concerts and MICE events in Singapore, as well as the upcoming Paris 2024 Olympics.


Maintain BUY with an unchanged RNAV TP of S$6.87

We view CDL as a proxy for the Singapore residential market and hospitality recovery. CDL is trading at an attractive 53% discount to our RNAV/share of S$12.50.

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About the author

Profile photo of Darren Chan

Darren Chan
Research Analyst

Darren has over three years of experience on the buy-side as a fund manager. During his time as fund manager, he has managed multiple funds and mandates including dividend income, growth, customised, Singapore focused and regionally focused funds. He graduated from the University of London with a First-Class Honours degree in Banking and Finance.

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