• 1Q15 results in line
• Two launches in 2H15
• South Beach to contribute in FY15

1Q15 results in line with expectations

CityDev’s 1Q15 PATMI increased 2.8% YoY to S$123.0m mostly due to stronger results from its property development segment and hotel portfolio, partially offset by higher administrative expenses and operating expenses over the quarter. 1Q15 revenues came in at S$814.9m, up 11.0% YoY as the group saw increased contributions from the property development segment, including projects such as Coco Palms, D’Nest and Jewel@Buangkok, and the hotel segment which received a boost from new hotels acquired in 2014 and stronger numbers from refurbished assets. 1Q15 PATMI and revenues now make up 18.6% and 22.8% of our full year forecasts, respectively, and we judge this to be broadly in line with expectations. As at end 1Q15, the group’s net gearing remained at a healthy 27%.

South Beach coming online this year

Existing projects Coco Palms (944 units), Commonwealth Towers (845 units) and Jewel @ Buangkok (616 units) are currently 84%, 44% and 84% sold, respectively, and we expect to see the 638-unit EC at Canberra Drive and 174-unit Gramercy Park launched in 2H15. The South Beach mixed-used project achieved TOP in Feb 2015 and 88% of the 510k sq ft of office space available at the development has been committed. The Conservation Block, comprising 11k sq ft of retail space, is also leased and will open in 3Q15.

The 654-room hotel component is expected to commence operations in 4Q15. Hotel subsidiary M&C’s global RevPar increased 2.6% due to a 3.2% increase in average room rates, but partially offset by a 0.4% lower occupancy rate. Following the S$1.5b Profit Participation Securities (PPS) which monetized its Quayside Collection assets in Sentosa Cove last year, the group is exploring the potential of structuring more similar deals involving its portfolio assets. We update our valuation model with the latest data-points from the 1Q results, and our fair value estimate increases from S$9.37 to S$9.53. Upgrade to HOLD on valuation grounds.

Source: OCBC Research - 14 May 2015