City Developments Limited (CDL) reported its 3Q18 results which were in-line with our expectations. Revenue jumped 17.7% YoY to S$1,016.9m due largely to higher contribution from its New Futura project.

PATMI increased at a smaller magnitude of 10.4% YoY to S$161.8m as a result of a lower gross profit margin, higher finance and tax expenses and weaker share of after-tax profit of joint ventures. For 9M18, CDL’s revenue jumped 37.3% to S$3,434.2m, while PATMI of S$446.6m represented growth of 25.4% and formed 80.7% of our FY18 forecast.

In Singapore, CDL and its JV associates sold 787 residential units with a combined sales value of S$1.56b for 9M18. The latter was down 11.6%. Notwithstanding the decline, CDL has continued to drive its sales momentum.

As at 4 Nov, 104 units of its New Futura project have been sold at an ASP above S$3,500 psf; 544 units (out of 600 released) of the Tapestry have been sold; 12 units (out of 50 released) of its South Beach Residences found buyers, including its super penthouse for S$26m.

CDL had also launched its Whistler Grand project on 3 Nov, and 160 out of the 240 units released were sold at ~S$1,380 psf. All-in, the latest round of property cooling measures in Singapore has clearly impacted the industry negatively, but we see some encouraging signs from CDL’s resilient ASPs.

Furthermore, its upcoming launches have already obtained Provisional Planning from URA and thus will not be subjected to the latest revision in guidelines on the minimum average unit sizes. Given CDL’s further share price weakness since our last update in Aug, we put our ‘Hold’ rating and S$9.81 fair value estimate under review..

Source: OCBC Research - 9 Nov 2018