Why CityDev won't be seeing a repeat of its 'stellar' performance next year

Fewer launches in store.

According to Maybank Kim Eng, in view of the likely slowdown in the Singapore residential property market and increase in interest rates, it believes it will be more difficult for CDL to repeat its strong sales performance in 2014.

Here's more:

Being a bellwether for the Singapore property market, the stock may remain an underperformer in 2014, particularly as its current valuations are relatively unattractive.

We maintain our SELL recommendation, with a reduced TP of SGD8.30, pegged to a steeper 35% discount to our RNAV of SGD12.77.
Fewer launches in store in 2014. After a series of successful launches in 2013, CDL has significantly drawn down on its landbank of affordable mass market sites. The next launch is likely the Commonwealth Avenue site it had acquired from the Government Land Sales programme in Feb 2013.

We estimate an ASP of SGD1,500 psf, which translates to a pre-tax margin of ~13% on an estimated breakeven of SGD1,300 psf. High-end projects such as New Futura and Gramercy Park (the former Lucky Tower) may continue to be shelved until market sentiment improves.

South Beach ASP may have to be moderated. Based on the sales of DUO Residences by M+S Pte Ltd in November at an ASP of ~SGD2,000 psf, we believe it will be a stretch to expect South Beach Residences to go for SGD3,000 psf.

We have lowered our ASP expectation for South Beach Residences to SGD2,500 psf instead, which still suggests a fairly healthy pre-tax margin of 30%.

Slower to diversify. We expect it will take some time before CDL’s overseas residential projects start to contribute to earnings. Currently, works have either not begun or are at the very preliminary stages for its projects in China.

Even when launch-ready, it remains to be seen if CDL can carve a niche for itself in thehighly competitive Chinese market. It is also still early days for its foray into London, having just made its first acquisition there in September.

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