CITY Developments Ltd

AMFRASER on 15 Aug 2012

CITY Developments Ltd (CDL) reported a 42 per cent slump in net profit to $294 million for H1 FY12. Results were slightly below expectations. It met 46 per cent of consensus estimates but 56 per cent of our forecast for FY12 forecast. It can be attributed solely to a drop in divestment gains from non-core commercial properties

During H1 FY12, CDL sold 1,299 units with a sales value of $1.2 billion locally. Unit sales were up 61 per cent y-o-y and accounted for circa 10 per cent market share. However, we observed that sales value per square foot (psf) declined 5 per cent to $920, likely due to greater mass market unit sales. Progressive revenue recognition came from Volari, NV Residences, 368 Thomson, Cube 8, Hundred Trees, Tree House, The Glyndebourne and Buckley Classique.

Two projects are slated for launch in H2 FY12 forecast. The first is a 43-storey prime development consisting of 508 units at Alexandra Road within walking distance to Redhill MRT station. The second project, comprising 912 units, is located within the Pasir Ris Grove private residential enclave near to Pasir Ris MRT station. We expect both projects to do well.

There are only a handful of projects within this much-coveted District 3 and, as for the Pasir Ris project, CDL can tap on its prior experience having successfully launched three other projects with good take-up rates. Our ASP (average selling prices) assumptions for both projects are $1,600 psf and $1,000 psf respectively.

Subsidiary Millennium & Copthorne (M&C) reported a 6 per cent y-o-y drop in earnings to £58 million (S$113.7 million) for H1 FY12 due to absence of divestment gains. Revenue per available room rose 6 per cent y-o-y to £65 whilst portfolio occupancy rate remained flat at 70 per cent.

We have raised our RNAV estimate by 7 per cent to $14.06/share. Pricing it at parity to our RNAV estimate, we obtain a fair value of $14.06/share. Maintain "buy" recommendation.
BUY