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RHB lowers CDL's TP to $8.80, says stock is 'still cheap' despite new cooling measures

The unlocking of CDL's portfolio value via an asset spinoff into funds or REITs, is one of the key catalysts identified by RHB.

RHB Bank Singapore analyst Vijay Natarajan has lowered his target price on City Developments Limited (CDL) C09 to $8.80 from $9.75 previously after CDL released its business update for the 1QFY2023 ended March 31 on May 19.

“CDL’s share price has corrected 16% year-to-date (ytd), weighed down by cooling measures,” the analyst notes in his May 19 report.

In its business update, CDL said that the latest round of cooling measures is expected to impact high-end and luxury projects in prime districts in the near-term although the mass and mid-tier segments are unlikely to see much impact.


While keeping his “buy” call, Natarajan believes that the impact to the group’s bottomline is “manageable” even after a moderated residential outlook.

[This is] as its inventory is substantially sold and the remaining landbank is mostly in mass/mid-tier segments,” says the analyst. As at April, CDL had sold about 88% of its launched inventory in Singapore.

“[CDL’s] global hospitality portfolio ([around] one-third of [CDL’s] revised net asset value or RNAV) should continue to see a good recovery,” he adds. Referring to CDL Hospitality Trusts’ (CDLHT) strong set of numbers for the 1QFY2023 ended March 31, Natarajan is expecting CDL to see a similar trading performance for its Millennium & Copthorne operations. He also remains positive on the hospitality segment’s outlook for the FY2023. CDLHT is CDL’s listed REIT subsidiary.

On environmental, social and governance (ESG), the analyst has changed his weightage, now assigning 50% to the “E” pillar followed by 25% each for the “S” and “G” pillars.

“As CDL’s score is three notches above the country median, we apply a 6% ESG premium to reach our new $8.80 target price,” he says.

Key catalysts to the rerating of CDL’s share price, according to Natarajan, are the unlocking of the group’s portfolio value via an asset spinoff into funds or REITs, divestments and possible mergers and acquisitions.

Shares in CDL closed 2 cents lower or 0.29% down at $6.89 on May 19.

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