SINGAPORE (Aug 14): OCBC Investment Research has upgraded its call on City Developments (CityDev) to “buy” from “hold” with a higher fair value estimate of $12.39 from $10.50 previously, after updating its valuation model with its latest assumptions and firmer average selling prices (ASPs).

This comes after the developer last week announced earnings of $109.9 million for the quarter ended June, down 17.9% from $133.8 million in 2Q16 and in line with the research house’s estimates.

See: CityDev CEO Grant Kelley resigns; developer posts 18% drop in 2Q17 earnings to $110 mil

In a Monday report, lead analyst Eli Lee highlights that CityDev is well-positioned to benefit from the Singapore residential market upturn as indicated by its management, as the group sold 691 units in the first half of 2017 alone, more than double than that of the same period last year.  

The dip in CityDev’s earnings over the recent quarter was largely due to the absence of contributions from Lush Acres EC when profits were wholly-recognised on completion in 2Q16 – without which PATMI would have increased 43.4% on-year instead, adds Lee.

Looking ahead, the group is intending to launch New Futura and its new condominium projects in Tampines, Singapore and Teddington Riverside, UK, over the next 12 months.

“In China, the group continues to see healthy demand at the Hong Leong City Centre (HLCC), with 1,118 (81%) out of 1,374 units and 195 (45%) out of 430 units in Phase 1 and 2, respectively, sold to date,” notes the analyst.

“In addition, the group has also announced a A$35 million investment into the luxury senior housing sector in Australia and will collaborate with Waterbrook Lifestyle Resorts to develop a luxury five star retirement village in Bayview, Sydney. The 20k sqm freehold site, currently at the planning and design stage, will be named Waterbrook Bayview and is slated for completion in 2020.”

As at 12.57pm, shares in CityDev are trading 3.5% higher at $11.53.