No earnings surprise. CDL reported a 52.8% YoY increase in its 4Q12 earnings to SGD249.3m, bringing FY12 PATMI to SGD678.4m. Excluding divestment gains and a reversal of tax charges in 4Q12, core PATMI was largely in line with expectations. With no apparent positives on the horizon to justify current valuations, we maintain our SELL recommendation. Total dividends of 13 cts/share have been proposed.

Development profits continue to underpin earnings. Property development accounted for 49% of CDL’s FY12 PBT, with most of its ongoing launches at least 80%-sold. For the whole year, CDL (and its partners) sold 2,395 residential units at a total value of SGD2.8b, which translates to a market share of ~9% by number of units sold. Profits have yet to be recognized from projects such as The Palette, HAUS@Serangoon Garden, UP@Robertson Quay and Echelon.

Hotel headwinds still apparent. CDL’s hotel operations under M&C accounted for 26% of CDL’s PBT. Excluding one-off gains, M&C’s FY12 PBT declined by 8% YoY, mainly due to the closure of Grand Hyatt Taipei for refurbishment works, as well as decelerating RevPAR growth. Early indications suggest that the operating environment remains challenging in its key gateway cities. In fact, RevPAR for the first six weeks of 2013 declined in Singapore, London and New York by 10.2%, 9.6% and 1.6% respectively.

Management reviewing plans for high-end projects. For 1H13, CDL may launch 300 units each at D’Nest at Pasir Ris, Bartley Ridge (opposite the now sold-out Bartley Residences) and at the Buangkok Drive site. Management alluded that it is reviewing its plans for its highend projects, such as the Residences at W Singapore. South Beach Residences appears unlikely to be launched this year.

Maintain SELL. Despite creditable execution, we see little upside for the stock as policy risks persist. Valuations remain unattractive compared with its big-cap peers, and we maintain our SELL recommendation. Target price has been trimmed to SGD10.00, pegged to a 25% discount to RNAV.

Source: Maybank Kim Eng Research - 01 Mar 2013