Analysts from CGS-CIMB Research, OCBC Investment Research (OIR) and RHB Group Research have maintained their “buy” calls on City Developments Limited (CDL) after the property group posted a net loss of $1.92 billion in the FY2020 ended December, which came in lower than expectations across the board.

The loss is dragged by lower performance across the group’s business segments, impairment losses for its hotels and investment properties, allowance for foreseeable losses for development projects, and most notably, a $1.78 billion impairment loss on CDL’s joint venture (JV) investment in Sincere Property Group.

At the same time, the analysts from CGS-CIMB, OCBC and RHB have reduced their target price estimates to $8.97 (from $10.10), $9.12 (from $9.65) and $8.70 (from $9.50) respectively, to factor in the group’s write-down in Sincere.

For CGS-CIMB analyst Lock Mun Yee, she has also lowered her earnings per share (EPS) estimates for FY2021 by 21.6% due to lower expectations on the group’s hotel segment recovery.


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That said, she has upped her EPS estimates for FY2022 by 3.6% due to better pick-up in hotel operations.

“At the current share price, the market has largely factored in the impact of the drag from its China investment. A potential re-rating catalyst is a faster-than-expected recovery in the global hospitality sector. Downside risk: drag from slow macro outlook,” she says, adding that the group’s higher net debt to equity post write-down has not been factored in her current revalued net asset value (RNAV) estimate.

For OCBC’s research team, the “kitchen sinking exercise” amid the weak set of results has set expectations for FY2021 at a “much lower base”.

It adds that investors should “look forward to a recovery underpinned by a macroeconomic rebound”.

For the team, potential catalysts include stronger-than-expected take-up rates for its residential projects, a larger increase in residential prices in Singapore and the unwinding of cooling measures.

That said, risks include weaker-than-expected margins on its residential projects, further rounds of cooling measures, and a slowdown in macroeconomic conditions.

RHB’s Vijay Natarajan remains upbeat on CDL as downside risk to CDL’s share price is “minimal” with the bulk of investments in Sincere being written down.

To Natarajan, CDL’s valuations are cheap as the stock is still trading below -1 standard deviation (s.d.) levels of the price-to-book value (P/BV) and P/RNAV 10-year average.


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The way he sees it, CDL’s property segment due to the buoyant residential markets has cushioned the negative impact on its hospitality portfolio due to the pandemic.

“Residential market in Singapore and China remained largely resilient with CDL achieving sales of 1,318 units ($1.85 billion in value) and 441 units ($284 million in value) respectively. CDL is expected to launch Irwell Hill Residences and Liang Court Redevelopment (50% stake) in Singapore for which we expect a strong demand,” he says.

However, Natarajan has lowered his net profit estimates for the FY2021 and FY2022 by 15% to 23% due to slower recovery on the global hospitality portfolio and a delay in project completions.

As at 12.35pm, shares in CDL are trading 12 cents lower or 1.6% down at $7.45.