• We hosted City Developments for an investors call. Topics included Singapore residential market, optimising property/portfolio returns and recurring income streams.
• Management reiterated its focus on executing a multi-dimensional growth strategy to future-proof City Developments’s business model.
• Reiterate ADD rating on City Developments with an unchanged target price.

Building a Multi-dimensional Business

• City Developments (SGX:C09)'s management reiterated its GET (Growth, Enhancement, and Transformation) strategy as part of its move to future-proof its business through a multi-dimensional model. This includes building a recurring income stream, optimising property returns through asset enhancements/redevelopments and transforming its business via strategic investments and fund management activities, while diversifying its development business beyond Singapore.

Diversifying Development Activities Beyond Singapore

• We expect Singapore residential to continue to form the majority of development contribution in the near term. Together with the upcoming launch of the 696-unit CanningHill Piers, land parcels in Northumberland Road and Tengah Walk and residential component of Fuji Xerox redevelopment, we estimate City Developments has a development pipeline of ~2,000 units.
• With residential and land prices remaining elevated, management expects development margins to remain compressed in the near term.
• City Developments has also diversified its development activities into Australia, UK, Japan and Vietnam and we anticipate these overseas contributions to gradually pick up in the medium term.

M&C Strategic Review and Building Recurring Fee Income

• Apart from the strategic review of M&C’s hotel portfolio, currently underway, value unlocking through environment remains challenging, City Developments is seeing signs of recovery with a positive GOP achieved in Jun 2021.

Reiterate ADD Rating on City Developments

• We maintain our RNAV-based gap between City Developments's share price and RNAV in the medium term.
• Potential re-rating catalysts include a faster-than-expected recovery in the global hospitality sector and asset divestments.
• Downside risk: drag from slow macro outlook.
• See City Developments's ESG metrics in report attached below.

Source: CGS-CIMB Research - 5 Oct 2021