• 1Q18 PATMI fell 16.3% YoY
• Strong sales momentum
• Robust pipeline

1Q18 Results Missed Expectations

City Developments Limited (CDL) reported its 1Q18 results which missed ours and the street’s expectations. Revenue jumped 35.0% YoY to S$1,057.8m but gross profit slipped 1.1% to S$363.1m due to contribution from lower margin projects such as The Criterion EC (TOP in Feb 2018). Despite robust sales from its high-end New Futura project, the profits will only be booked in later quarters upon legal completion of the transactions.

PATMI for 1Q18 fell 16.3% YoY to S$80.0m due to lower gross profit and higher finance costs, effective tax rate and minority interests. This formed 12.6% and 12.3% of ours and Bloomberg consensus’ FY18 forecasts, respectively.

Sales Value in Singapore Jumped 66% YoY

During 1Q18, CDL together with its JV associates sold 459 units in Singapore with an aggregate GFA of 415,892 sq ft and combined sales value of S$792.6m. Total units sold and the combined sales value represented sturdy growth of 57% and 66% YoY, respectively.

This was driven largely by Phase 1 of New Futura at Leonie Hill Road (97% of the 64 units launched were sold at an ASP of over S$3,350 psf) and The Tapestry at Tampines Avenue 10 (80% of the 500 units launched were sold at an ASP of ~S$1,360).

Looking ahead, CDL has a robust pipeline of launches amounting to ~3.1k units, based on our estimates. For the remainder of this year, new launches include Phase 2 of New Futura (2Q18), South Beach Residences (3Q18), West Coast Vale (4Q18) and the former freehold Boulevard Hotel site (2H18).

For 2019, expected launches include Handy Road in 1Q19, Sumang Walk EC in 2Q19 and Amber Park in 1H19.

Key Proxy to Residential Market Upcycle

After adjustments, our RNAV-derived fair value estimate declines marginally from S$15.91 to S$15.78. CDL continues to be one of our top picks within the property sector, as the group looks poised to benefit from the firm uplift in the Singapore residential market with the largest land bank in Singapore catering to all segments such as EC, mass, mid and high-end.

Source: OCBC Research - 14 May 2018