Cutting our forecasts. We reiterate our SELL recommendation on CDL ahead of its 1Q13 results to be released on 13 May, as we lower our FY13-15F full-year forecasts by -16%, -18% and -4% respectively, after adjusting our profit recognition model and reducing our forecasts for M&C’s earnings. We expect CDL to report a 1Q13 PATMI of ~SGD125m (+16% YoY; -37% QoQ), representing ~19% of our new full-year estimate of SGD641.8m.

Read-across from M&C’s results. M&C reported a worse-thanexpected 1Q13 PATMI of GBP13.0m (-29% YoY, -65% QoQ). Besides the planned partial closure of the Grand Hyatt Taipei for refurbishment, the operating environment remained challenging in Europe and especially in Singapore, where RevPAR fell by 9% YoY due to a soft corporate market and increased supply pressure. While RevPAR in London and New York trended up in the month of April, the downtrend continued for its hotels in Singapore (-9.3%) and the rest of Asia (- 10.8%). With hotel operations accounting for about a quarter of CDL’s Group EBIT, we believe there will be a drag on its earnings.

Strong 1Q sales won’t show up yet. CDL was a dominant force in the new home sales market in 1Q13, garnering ~24% market share after it sold over 1,300 units, mainly from the projects D’Nest, Bartley Ridge and Echelon. As these projects are still in the early stages of construction, they will contribute to earnings only from FY14.

New launches may not match earlier projects. For 2H13, CDL is expected to launch the 616-unit Jewel@Buangkok (est. ASP: SGD1,100 psf) and the mixed development at Tai Thong Crescent (est. ASP: SGD1,500 psf for resi), but we believe that it will be more challenging to achieve the strong sell-through rates of its earlier launches as the full effects of January’s cooling measures filter through.

Reiterate SELL. CDL’s valuations are rich in view of the headwinds, and we prefer its more diversified big-cap peers, CapitaLand and Keppel Land. Reiterate SELL, target price unchanged at SGD10.00, pegged to a 25% discount to RNAV.

Source: Maybank Kim Eng Research - 9 May 2013