City Developments

OCBC on 11 May 2012

City Developments (CDL) announced 1Q12 PATMI of S$156.8m, down 44.5% YoY mostly due to the lack of gains from the disposal of The Corporate Office recognized in 1Q11. We judge 1Q12 PATMI, which constitutes 20% of our FY12 forecast, to be broadly in line with consensus and our expectations. Over 1Q12, CDL launched two developments – The Rainforest and Bartley Residences, which has sold 94% and 41% respectively, and we expect at least two more launches in the year ahead. We continue to see good numbers from the hotel segment, with 1Q12 RevPar at M&C, the hotel subsidiary of the group, up 6% YoY in constant currency terms. While management continues to execute strongly, we believe that the share prices are fully priced given uncertainty in the domestic residential market – its core business segment - and the possibility of more property curbs ahead. Maintain SELL with an unchanged fair value of S$8.92.

1Q12 results broadly within expectations
City Developments (CDL) announced 1Q12 PATMI of S$156.8m - down 44.5% YoY mostly due to the lack of gains from the disposal of The Corporate Office recognized in 1Q11. Excluding disposal gains, however, PATMI would have increased by 14.8%. We judge 1Q12 numbers, which constitutes 20% of our FY12 forecast, to be broadly in line with consensus and our expectations. Topline came in at S$846.7m - up 9.4% YoY – mainly due to maiden contributions from the Glyndebourne, 368 Thomson, Cube 8, Hundred Trees and Tree House.

Expect at least two more launches this year
Over 1Q12, CDL launched two developments – The 466-unit Rainforest and 702-unit Bartley Residences, which has sold 94% and 41% respectively. Other on-going projects continue to convert sales, with Blossom Residences and The Palette over 89% and 73% sold, respectively. Looking ahead, we expect CDL to launch the 70-unit UP@Robertson Quay, along the Singapore River, and HAUS@SERANGOON GARDEN which is a landed housing development comprising of 96 terrace houses at Serangoon way.

Steady performance seen at hotel segment
Strong numbers from the hotel segment continued with 1Q12 PBT up 30.4% YoY to S$40.3m. Overall RevPar at M&C, the hotel subsidiary, was up by 6% YoY (constant currency terms) in 1Q12. In particular, we saw good RevPar growth in key cities: Singapore (7.7%), London (7.0%) and New York (0.6%). We also saw an impressive 21.6% RevPar growth in the Rest of Asia segment, backed by double-digit growth in Kuala Lumpur, Jakarta, Beijing and Seoul. Refurbishment works at four premium hotels in Seoul, New York, Taipei and London remain on track, and the planned 325-room hotel site in Ginza, Japan, expected to complete by 2014, has began demolition works.

Maintain SELL
While management continues to execute strongly, we believe that the share prices are fully priced given uncertainty in the domestic residential market – its core business segment - and the possibility of more property curbs ahead. Maintain SELL at an unchanged fair value estimate of S$8.92.