SINGAPORE (Aug 14): RHB continues to like CityDevelopments for its robust balance sheet and ability to deploy capital into new investments.

In a Friday report, RHB analyst Lock Mun Yee says CityDev’s balance sheet remains lowly geared at 0.16x as at 2Q17.

Management has indicated it would continue to deploy capital into Singapore as well as look for strategic opportunities overseas. It could look to unlock value of existing older assets such as Tanglin Shopping Centre, Katong Shopping Centre, the Delphi and Arcade.

CityDev has also made a maiden foray into the luxury senior housing sector in Australia via a collaboration with Waterbrook Lifestyle Resorts to develop a luxury retirement village in Sydney.

“Our FY17-19F EPS estimates unchanged but raise our RNAV to $15.67 as we adjust the investment property portfolio cap rates following the recent round of cap rate compression. Accordingly, our TP is raised to $12.54, premised on a 20% discount to RNAV,” says Lock.

The group has declared a special interim DPS of 4 cents.

Last week, CityDev reported 2Q17 and 1H17 net profits of $109.9 million and $195.3 million, both down 18% respectively.

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

The latter was slightly below CIMB’s expectations, making up about 35% of its FY17 forecast estimate. The lower y-o-y performance was due to a high residential base in 2Q16.

CIMB says CityDev’s residential sales volume looks to be picking up pace. 2Q residential PBT fell 21% y-o-y to $83.7 million, mainly due to a high base in 2Q16.

In 1H, the group sold 691 units worth $1.15 billion, higher than the 324 units worth $386 million in 1H16.

By the end of the quarter, Venue Residences was fully sold, while Gramercy Park was 63% sold. It plans to launch New Futura in 4Q17 and the recently acquired Tampines site in 1Q18.

In 2Q, rentals were dragged down by asset sales. PBT dipped 11% y-o-y due to an income vacuum with the sale of Exchange Tower in Bangkok and closure of Le Grove for renovation works.

However, the quarter also saw slower pace of overseas residential contributions now that the launch of the Belgravia and Knightsbridge projects in UK have been pushed back to 1Q18.

In China, Hong Leong City Centre Suzhou is 73% sold, while Eling Residences in Chongqing is progressing slowly. Huang Huayuan is scheduled for launch only in 2019.

As at 11.36am, shares in CityDev are up 31 cents at $11.45.