City Developments: City Marathon, Not A Sprint

Thursday, May 28, 2009

1Q09 Below Expectations. City Dev’s 1Q09 net profit of S$83.1m was down 50% yoy, and formed c.17% of our and consensus forecasts. This was primarily due to lower contributions from both property development and hotel operations, though the former continued to be the key earnings driver for the Group, contributing c.58% of 1Q09 PBIT. Hotel operations fell behind rental properties in PBIT contribution, as global economic conditions had a greater impact on the global hospitality market than what the industry had expected.

Sentosa Halted, West Coast Pushed Up. While the Group had earlier indicated that Quayside at Sentosa could potentially be launched this year, it has now decided to postpone this – possibly until close to or after project completion. It will instead fast-track its project at the former Hong Leong Garden condo, leveraging on the current interest within the mass-market segment.

Downgrade to HOLD, TP Raised to S$8.09. CDL has shot up c.64% since we reiterated our Buy call in February. We revise our RNAV to S$8.09 (prev S$7.59), with our new TP of S$8.09 based on parity to RNAV. We downgrade the stock to a HOLD, recommending investors take profit with an eye to buy on dips.

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