City Developments Limited

OCBC on 10 Sept 2012

A JV between CDL and Hong Leong Holdings put in the top bid (S$245m) for a government land site tender at Tai Thong Crescent. The tender attracted eight bidders and CDL’s bid was 11% above the 2nd highest. We believe the site, with a land area of 88.3k sq ft and maximum permissible GFA of 308.9k sq ft, would likely be developed into a mixed-use development of up to 19 storeys with ~265 residential units and 28 commercial units on the ground floor. The top bid translates to a land price of S$793 per sq ft GFA and an estimated project-wide breakeven ASP between S$1.2k – S$1.3k psf, which we believe is reasonable given the site location and attractive mix of use. Maintain BUY with a higher FV of S$13.18 (15% RNAV disc.), versus S$13.10 previously, as we account for the accretion from this acquisition and update valuations of listed holdings.

Top bid for Tai Thong Crescent site
City Developments Limited (CDL) was recently part of a JV, with Hong Leong Holdings, that put in a top bid of S$245m for a government land tender site at Tai Thong Crescent (Parcel C). The tender attracted eight bidders in total, and CDL came in 11% above the 2nd highest bid. The 99-year leasehold site has a land area of 88,268 sq ft with a maximum allowable GFA of 308,948 sq ft. It is likely to be developed into a mixed-use residential-commercial project with ~265 residential units with 28 commercial units on the ground floor.

Estimated breakeven ASPs at S$1.2k – S$1.3k psf
The top bid translates to a land price of S$793 per sq ft GFA. We estimate project-wide breakeven average selling prices (ASP) of S$1.2k – S$1.3k psf, which we see as fairly reasonable given the site location and attractive mix of use. In our view, CDL could achieve selling ASPs around S$1.4k – S$1.5k psf for the residential units and, for the commercial units, ASPs in the range of S$4k-5k psf.

Attractive location near Potong Pasir MRT
The site is attractively located near Potong Pasir MRT station and is well connected to major transportation arteries, such as Upper Serangoon Road, the Pan-Island Expressway (PIE), the Central Expressway (CTE) and the Kalland Paya-Lebar Expressway (KPE). It is also a short drive from the Kallang Riverside which is to be a vibrant lifestyle precinct by the waterfront. In addition, the site is also near well regarded schools such as Cedar Girls’ Primary and Secondary, St. Andrew’s, and Maris Stella.

Maintain BUY
We continue to view CDL favorably in terms of management execution, and see the latest tender win as further evidence of their effective land-banking strategy to sustain future earnings. Maintain BUY with a higher FV of S$13.18 (15% RNAV disc.), versus S$13.10 previously, as we account for the accretion from this acquisition and update valuations of listed holdings.