• No financials were provided in this operational update. The launch of Lumina Grand was well received, with 381 units (74%) sold to date. Hotel operations continue to improve, with portfolio RevPAR growing 5.3% YoY to S$139.4.
• Bought back 13mn shares (1.4% of issued shares) since 8 March 2024 for a total consideration of S$76.4mn. In April 2024, CDL announced an off-market equal access scheme to buy back up to 30mn preference shares (10% of total) at an offer price of $0.78.
• Maintain BUY with an unchanged TP of S$6.87, a 45% discount to RNAV of S$12.50. We view CDL as a proxy for the Singapore residential market and hospitality recovery. Asset monetisation, unlocking value through AEIs and redevelopments, establishing a fund management franchise, and the continuous recovery in the hospitality portfolio are potential catalysts for CDL, which could help narrow the discount between CDL’s share price and RNAV.

The Positives

• Strong sales under the property development segment. In 1Q24, the Group and its JV associates sold 429 units with a total sales value of S$737mn (1Q23: 88 units with a total sales value of S$213mn). Sales were driven by the launch of Lumina Grand, with 381 units (74%) sold to date. Tembusu Grand and The Myst continued to sell well, with 62% (4Q23: 60%) of its 638 units and 59% (4Q23: 51%) of its 408 units sold to date, respectively. The group plans to launch two projects in 2H24 – Union Square Residences (366 units) and a project at Champions Way (348 units). To replenish its development landbank, CDL secured a 164,451 sq ft GLS site with JV partner Mitsui Fudosan (Asia) Pte. Ltd. in April 24, for S$1.1bn or S$1,202 psf ppr. Located along Zion Road, this site is directly connected to Havelock MRT station. The plan is to develop the site into an integrated mixed-use project comprising two blocks (69 and 64 stories) with 740 residential units and a retail podium.

• Initiated share buyback programme. On 8 March 24, CDL initiated a share buyback programme for its ordinary shares, and since then, a total of 12.9mn shares (1.43% of issued shares) have been bought back for a total consideration of S$76.4mn. The ordinary shares will be held as treasury shares and may be used for CDL’s long-term incentive plans. In April, CDL announced an off-market equal access scheme to buy back up to 29mn preference shares (10% of total preference shares in issue) at the offer price of $0.78 in cash. The low trading volume of preference shares gives preference shareholders an exit opportunity to partially monetise their holdings. All preference shares acquired by the company pursuant to the off-market equal access offer will be cancelled.

• Hospitality segment continues to improve. 1Q24 portfolio RevPAR rose 5.3% YoY to S$139.4, due to strong growth in Australasia and Singapore. With higher room rates (+0.7% YoY), occupancy (+3.1%pts), and cost optimisation, 1Q24 GOP margins improved 1.7% points YoY to 26.7%. CDL will be refurbishing several hotels in FY24, and they include 1) Millennium Hotel London Knightsbridge, 2) M Social Phuket, 3) Millennium Downtown New York, and 4) The M Social Hotel Sunnyvale in California for a total cost of S$278mn. Additionally, CDL acquired the 268-room Hilton Paris Opera Hotel for €240mn (S$350mn) in May 24. This acquisition complements its expansion plans in Europe ahead of the upcoming Paris 2024 Olympics.

The Negatives

• Higher gearing and lower interest cover. Net gearing on fair value on investment properties inched up to 63% (FY23: 61%). The interest coverage ratio fell to 1.2x in 1Q24 from 2.8x in FY23. Nevertheless, CDL maintains a strong liquidity position with S$2.4bn in cash.

Outlook

CDL is targeting S$1bn in divestments in 2024 to recycle capital, and successful divestments could translate into significant divestment gains as it carries assets at cost in its books – some of which have been held at book value for several decades. The property cooling measures introduced in 2023 continue to stifle demand – foreign buyers have disappeared since the ABSD hike to 60%. The hospitality segment should continue to improve on the back of mega-concerts and MICE events in Singapore, as well as the upcoming Paris 2024 Olympics.

Maintain BUY with an unchanged RNAV TP of S$6.87

We view CDL as a proxy for the Singapore residential market and hospitality recovery. CDL is trading at an attractive 53% discount to our RNAV/share of S$12.50.

Source: Phillip Capital Research - 23 May 2024