• 4Q19 revenue up 20%, lifted by all segments but FY19 revenue down 19% due to timing recognition of overseas and EC projects upon handover, recognised in FY18.
• Take-up rate of 37% for total units in new launches in SG, up 40% YoY.
• Maintain BUY with higher TP of S$11.89. Our RNAV-derived target price represents 0.98x FY20e P/NAV.

The Positives

+ Sold 1,554 units totalling S$3.3bn in sales in SG in FY19, accounting for 37% of total units in new projects. The 6 new launches in 2019 resulted in a 40% and 49% increase in the number of units sold by the group and its JV and associates in FY18 (1,113 units, sales value of S$2.2bn).

+ Focused on growing recurring revenue and geographical diversification. CDL’s recurring revenue increased by 22.3% due to the full year contributions from acquisitions, AEIs and the opening of HLCC’s mall and office components in FY18. In FY19, CDL acquired 4 rental apartment projects (S$69.3mn) in Osaka and Shanghai Hongqiao Sincere Centre Phase 2 (S$344mn). Investment properties grew by 13.9% from S$5,761mn to S$6,562mn as at end 2019, which will help to grow recurring income.

The Negatives

– Hotel segment in the red largely due to S$58.2mn in impairment losses and S$26mn privatisation cost and closure of hotels for refurbishment. This is the second consecutive year of impairment for the segment (FY18: S$94m). Revenue for the segment was up 4.6%/1.5% in 4Q19/FY19 due to the acquisition of W Singapore. The group has earmarked S$140mn in their 2020 Capex programme which will go towards refurbishments for selected hotel in New York, UK, Paris and Singapore which should help to lift RevPAR post completion.

Outlook

Renegotiation of the acquisition of 24% stake in Sincere Property Group which was announced in May 2019 due to changes in economic conditions since negotiation of the deal. CDL remains positive on its long-term view of China and remains keen on the investment.

CDL’s Fund Management AUM target of S$5bn by 2023 will help to grow recurring income. The group has plans to create a new REIT to hold its UK properties (Aldgate House and 125 Broad Street) and is one step closer to its’ fund management ambitions with the obtainment of Capital Market Services (CMS) License in 3Q19, allowing the group to set up a private fund and/or REIT.

Of the two assets located in the CBD that could qualify for the plot intensification incentives under the Master Plan, CDL is assessing the feasibility of redeveloping Fuji Xerox Towers, which could unlock up to 25% uplift in GFA and rejuvenate CDL’s portfolio.

Covid19’s impact was more pronounced in SG hotel operations, where occupancy is currently in the 40-50% region, and lower take-up of high-end residential projects by foreigner.

Maintain BUY with higher TP of S$11.89 (prev. S$11.82).

Our RNAV-derived target price represents 0.98x FY20e P/NAV. Rerating catalyst would be sustained sell-through rates and pick-up in the hotel business.

Source: Phillip Capital Research - 3 Mar 2020