• Raises FY17 DPS to 18 S cents
• S$1.9b in SG residential sales value
• US$5b AUM target by 2023

4Q17 Results Met Expectations

City Developments Limited (CDL) reported its 4Q17 results which met our expectations. Revenue jumped 13.8% YoY to S$1,327.7m and this was driven by The Brownstone EC which obtained its TOP in Oct 2017. PATMI came in at S$186.7m, which was a decline of 23.4% YoY. For FY17, CDL’s revenue was down marginally by 2.0% to S$3,828.6m, while PATMI of S$538.2m represented a dip of 17.6%, as its FY16 performance was boosted by a sizeable contribution from Hong Leong City Center in Suzhou. The latter formed 96.7% of our full-year forecast.

A final ordinary and special dividend of 8 S cents and 6 S cents per share was declared, respectively, and this culminated in total dividends of 18 S cents per share for FY17 (interim special DPS of 4 S cents), versus 16 S cents for FY16. CDL sold a robust 1,171 residential units in Singapore (including share of JV partners) in FY17, representing total sales value of S$1.93b.

New Fund Management Business Initiative

CDL shared that it has a long-term target of increasing its proportion of recurring EBITDA from 56% (FY17) to 65% to reduce the lumpiness of its income streams. This would be driven in part by its initiative to create a sustainable fund management platform, with a goal of attaining an AUM of US$5b by 2023 (excluding its current PPS).

Intensive Land Bids Supported by Strong Balance Sheet

Looking ahead, CDL has a strong pipeline of ~2,750 units available for launch in Singapore. Its closest upcoming launch will be the 861-unit condominium The Tapestry in Mar.

Separately, CDL also jointly submitted the top bid for a Sumang Walk site. The S$509.4m bid price translates into S$583.0 psf ppr, and was 4.8% higher than the second highest bidder. We estimate breakeven ASP of ~S$1k psf. We believe CDL’s intensive land bids would be supported by its healthy net gearing ratio of 9%.

Management highlighted that it typically targets margins above 10% on costs for its development projects in Singapore, and maintained upbeat on the margins of its projects on hand. Factoring in CDL’s full-year results in our model, we revise our RNAV-derived fair value to S$15.91 (previously S$15.30).

Source: OCBC Research - 1 Mar 2018