City Developments

UOBKayhian on 15 Aug 2014

FY14F PE (x): 15.6
FY15F PE (x): 12.2

Results below expectations. City Developments (CDL) reported a 2Q14 net profit of S$137.9m, down 33% yoy, bringing 1H14 PATMI to S$257.5m, down 25%. Property development 1H14 PBT was up 18.1% yoy due to maiden contributions from JV projects including Bartley Ridge, The Inflora and Echelon, as well as a higher contribution from Bartley Residences. Hotel PBT fell 9.1% yoy due to social and political uncertainties in parts of Asia, despite a 6% rise in revenue on the strengthening of the pound. Rental properties PBT also fell 67% yoy to S$71m due to absence of divestment gains from investment properties. The results are below our expectations (41% of full-year forecast) mainly due to lower-than-expected earnings recognition from hotel operations and property development. Maintain HOLD with an unchanged target of S$10.84, pegged at a 20% discount to our RNAV of S$13.55/share. Entry price is S$9.35.