• Impact of latest cooling measures manageable with most of its launches in the mid-tier and mass market segments. The Myst remains on track for launch in 2H23.
• Hospitality segment continues to benefit from travel recovery with RevPAR surging 65.4% YoY to S$131.2 in 1Q23, driven by increases in room rates and occupancy in Asia and Australia.
• Maintain ACCUMULATE with a lower RNAV-derived TP of $8.33, a 45% discount to RNAV of S$15.13. We view CDL as a proxy for the Singapore residential market and hospitality recovery. Asset monetisation, unlocking value through AEIs and redevelopments, and faster-than-expected recovery in the hospitality portfolio are potential catalysts for CDL, which could help narrow the discount between CDL’s share price and RNAV.

Investment Highlights

• Impact of cooling measures manageable. The recent cooling measures announced late April had the biggest impact on high-end developments in prime districts which see a higher demand from foreigners and investors. In light of this, CDL delayed the launch of Newport Residences, its only high-end project in the pipeline that was originally slated for preview on 29 April. However The Myst, a mid-tier development, remains on track for launch in 2H23 as it is targeted at local buyers who are minimally impacted by the latest cooling measures. The recent launch of Tembusu Grand, a 638-unit residential development in the heart of Katong, was well received with 357 units (56%) of the project sold at an average selling price of S$2,465psf. CDL has a launch pipeline of c.1,500 units in the next 2 years.

• Hospitality segment continues to benefit from travel recovery. Portfolio RevPAR surged 65.4% YoY to S$131.2 in 1Q23, fuelled by the strong recovery from Asia and Australia. It was driven by both a 27.1% increase in average room rates to S$195.8 and a 15.5% points (67% from 51.5%) increase in occupancy. We expect RevPAR to continue growing in FY23, albeit at a slower pace. In March, the group entered into an agreement to acquire the 416-room Sofitel Brisbane Central hotel for A$177.7mn, or A$427,000 per key. This 5-star hotel with the largest hotel conference facilities in the heart of Brisbane CBD will be the Group’s third hotel in Australia.

• Growing fund management AUM. The completion of the acquisition of St Katharine Docks in March 23 for £395mn brings CDL closer to its 2023 AUM target of US$5bn (currently at c.US$3.6bn after the acquisition). This adds to the Group’s portfolio of prime commercial assets in the UK, bringing its total valuation to over £1bn. Not only does this acquisition enhance CDL’s recurring income stream, it also complements its fund management strategy and provides the group with the option to inject its UK assets into listed or unlisted platforms at an opportune time.

• Building recurring income streams under the living sector. In the past year, CDL acquired 6 Purpose-Built Student Accommodation, or PBSA, assets in the UK; 2 Private Rented Sector, or PRS, sites in Australia, and 5 PRS projects in Japan. CDL’s PBSA assets in the UK, which comprise around 2,400 beds across five cities, have locked in strong committed occupancy of 98% for Academic Year 22/23. Leasing momentum is expected to remain going forward for the Group’s 10 PRS assets in Japan as it continues to perform and enjoy stable rent with an average occupancy of above 95%. Leasing is ongoing for The Junction, the Group’s first PRS development in Leeds, which obtained Practical Completion for three out of five blocks (307 out of 665 units).

Outlook

Prices of private residential properties continued to increase in 1Q23 by 3.3%, its 12th consecutive increase QoQ. Due to red-hot property prices, we expect more cooling measures to come. However, the recent cooling measures primarily target high-end/luxury properties with a greater proportion of foreign demand, rather than the mass and mid-tier segments that are predominantly sought by local buyers and SPRs. If this trend continues, CDL will be less impacted as its upcoming launches are mostly in the mid-tier segment (apart from Newport Residences).

Maintain ACCUMULATE with a lower RNAV TP of $8.33

We view CDL as proxy for the Singapore residential market and hospitality recovery. CDL is trading at an attractive 52% discount to our RNAV/share of S$15.13. Asset monetisation, unlocking value through AEIs and redevelopments, and faster-than-expected recovery in the hospitality portfolio are potential catalysts for CDL, which could help narrow the discount between CDL’s share price and RNAV.