RHB Group Research analyst Vijay Natarajan has kept “buy” on City Developments Limited (CDL) after the property group announced the divestment of Millennium Hilton Seoul on Dec 13.

<hr/>See: <a href="https://www.theedgesingapore.com/news/property/cdl-divest-millennium-hilton-seoul-and-adjoining-land-126-bil-significant-premium-book" target="_blank">CDL to divest Millennium Hilton Seoul and adjoining land for $1.26 bil at 'significant premium to book value'</a><hr/>

The divestment gains stood slightly higher than the analyst’s expectations, he writes.

The sale marks the fourth and the largest hotel divestment by the group from its Millennium & Copthorne (M&C) portfolio since the latter’s privatization in 2019, notes Natarajan.

“We are positive on the divestment as it helps crystallise gains from some of its older hospitality assets amidst a challenging outlook, and recycle proceeds into its Singapore redevelopments,” he writes.

See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/capital/brokers-calls/cgs-cimb-ups-umss-revenue-forecasts-its-strong-order-book?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>CGS-CIMB ups UMS's revenue forecasts on its strong order book</a>

“We expect the group to continue to rationalise its hospitality portfolio by divesting two or three more assets in 2022,” he adds.

In a report dated Dec 14, Natarajan has also kept his target price of $9 on the counter.

To him, CDL has been making the “right moves” in the Singapore market. This is done “by extracting value via redevelopment of its older assets to boost its return on equity (ROE). These, along with a potential recovery in the hospitality sector, should put the stock back on the investors’ radar moving into 2022,” he says.

Following the completion of the divestment, Natarajan believes the proceeds are likely to be channelled for redevelopments in Singapore.

See also: <a class='gtm_see_also_2_inread' style='text-decoration: underline;' href='/capital/brokers-calls/are-analysts-still-hungry-kimly?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>Are analysts still hungry for Kimly?</a>

“We see good value proposition in CDL’s above value unlocking moves amidst current intense competition seen for land parcels in Singapore, and also helps reinforces its strong local brand presence,” he continues.

Natarajan’s report comes before the Singapore government announced, on Dec 15, that it would be implementing property cooling measures with immediate effect. The next morning, property counters listed on the Singapore Exchange (SGX) dived on the back of the measures.

See also: <a href="https://www.theedgesingapore.com/news/property/fresh-set-property-cooling-measures-immediate-effect" target="_blank">Fresh set of property cooling measures with immediate effect</a> and <a href="https://www.theedgesingapore.com/news/property/property-counters-sgx-see-red-cooling-measures-kick" target="_blank">Property counters on SGX see red as cooling measures kick in</a>

As at 3.20pm, shares in CDL are trading 18 cents lower or 2.55% down at $6.89.

CDL divestment of Seoul hotel seen as 'right move' by RHB

RHB positive on ThaiBev as its recovery party is underway

DBS upgrades SIA to 'buy' on 'colossal' pent up demand for travel

U.S. Stocks Extend Losses in Late Session Selloff: Markets Wrap

Can automation help your company fight the Great Resignation?

CDL divestment of Seoul hotel seen as 'right move' by RHB

Related Stories

Highlights

Tech stocks are in a bear market, but they aren't cheap

Related Stories

CGS-CIMB ups UMS's revenue forecasts on its strong order book

Analysts positive on Venture, PhillipCap upgrades rating, while DBS raises TP

Analysts expect to see q-o-q improvement in Wilmar's 2QFY2022 results following 'decent' 1QFY2022