Another soft quarter. Excluding the SGD5.8m of investment gains, CDL’s 3Q13 core PATMI came in at SGD115.0m (+42% YoY; +56% QoQ). 9M13 core PATMI of SGD291.3m came in below at 53% of our full-year estimate, due mainly to the timing of profit recognition and continued weak hotel earnings. We lower our FY13 core PATMI forecast by 8.6% as we adjust our profit recognition model. Maintain SELL, with a revised TP of SGD9.00, pegged to a 30% discount to RNAV, adjusted for the market value of its stake in M&C.

Residential still a mixed bag. Residential was the biggest profit contributor in 3Q13, accounting for 50% of PBT, with a number of pre-sold projects yet to contribute to earnings. Recent launches, namely The Venue Residences and The Inflora at Flora Road, were met with mixed responses, achieving sell-through rates of 25% and >95% respectively, with pricing being a determinant of demand. Management is in no rush to launch South Beach Residences (ASP SGD3,000 psf), perhaps biding its time to gauge the response at the upcoming launch of DUO Residences nearby.

Asia continues to underperform for M&C. In 3Q13, Asian RevPAR for M&C fell by 4.2% YoY (on constant currency), led by a 7.1% decline in Singapore where rising labour cost remains a concern. U.S. was a bright spot, boosted by higher room rates at ONE UN New York. M&C has inked a Collective Sales Agreement for Tanglin Shopping Centre, in which it has a 34% interest. This will be the third time the property is put up for en-bloc sale (the previous attempt had a reserve price of SGD1.25b), valuing the property at SGD4,000 psf of allowable GFA. We believe the reserve price has to be lowered significantly to make it commercially viable for any prospective buyer.

Growth opportunities getting limited. With limited opportunities in Singapore due to high land costs, CDL has made its first acquisition in London, acquiring a multi-storey car park in Knightsbridge for GBP80m (~SGD160m) with the intention of redeveloping it into a luxury residential development. However, London land costs are also rising. In China, the Group is likely to focus on launching at least one project in 2014 before acquiring new sites, in our view.

Source: Maybank Kim Eng Research - 13 Nov 2013