City Developments Limited (CDL) reported its 2Q18 results which beat our expectations. Revenue jumped 59.2% YoY to S$1,359.5m. This was driven mainly by three projects, namely New Futura and Gramercy Park in Singapore, and Hong Leong City Center (HLCC) in Suzhou, China.

For HLCC, profits were recognised in entirety for the 58% of units which were handed over to buyers in 2Q18. Correspondingly, PATMI rose 79.5% YoY to S$204.8m.

On a 1H18 basis, CDL’s revenue improved 47.6% to S$2,417.4m, while PATMI increased 35.8% to S$284.8m. Both topline and bottomline accounted for 60% of our FY18 forecast.

Looking ahead, CDL still has a pipeline of over 2,600 units available for launch in Singapore, but it highlighted that ~58% of its launch pipeline is in the EC and Mass Market segments, which is primarily targeted at HDB upgraders and first time buyers.

Nevertheless, we believe buyer sentiment in the Singapore residential space will be subdued and this would like impact the pace of sales going forward.

We will provide more details after the analyst briefing later. We currently have a HOLD rating and fair value estimate of S$9.59 on CDL.

Source: OCBC Research - 8 Aug 2018