• 4Q13 results in line
• Looking for international diversification
• Fair value lowered to S$9.17

Lower contributions from the property development segment

4Q13 PATMI decreased 11.4% YoY mostly due to lower contributions from the property development segment (as Hundred Trees and Tree House completed in 2013) and the absence of disposal gains recorded in 4Q12. On a full-year basis, FY13 PATMI cumulated to S$683.0m which was almost flat (up 0.7%) versus last year. Similarly, earnings per share came in 0.7% higher at 73.7 Scents per share; this constituted 111% and 104% of our FY13 forecast and consensus, respectively, and somewhat lumpy from faster than anticipated progressive recognition but judged to be within expectations. In terms of the topline, FY13 revenues decreased 5.7% to S$3,162.2m, again caused by weaker property development revenues dipping 15.3% YoY to S$1,198m. An ordinary final dividend of 8.0 S-cents per share was proposed.

Likely two new launches in 1H14

Over FY13, CityDev sold 3,210 residential units with a total value of S$3.32b and expects to launch two domestic residential projects in 1HFY14. In addition, the group’s hotel subsidiary, M&C, reported record revenues of £1.04b for FY 2013 and a 69% increase in PATMI to £228.5m. Global RevPar increased 3.4% to £69.58 while hotel revenue fell by 1.5% to £738.0 million due to room refurbishments.

Looking into expanding internationally

The group, however, anticipates headwinds in the domestic residential market – its core business segment – going ahead and aims to accelerate its diversification plans into overseas growth markets, such as US, Japan, Australia, China and London. To this end, they have installed a new CEO, Grant Kelley who was the head of Apollo Global Management’s Asia Pacific real estate business, to spearhead this strategic shift. Given the group’s strong balance sheet and the opportunities for acquisitions globally, we see this as a sound direction though we would look for more color and execution ahead as the group changes strategic gears. Maintain HOLD. Our fair value estimate dips to S$9.17 (30% RNAV disc), versus S$9.98 previously, mostly due to lower valuations of listed holdings and softer residential ASPs.

Source: OCBC Research - 28 Feb 2014