Khairani Afifi Noordin Thu, May 26, 2022
Analysts at RHB Group Research and CGS-CIMB Research have kept their “buy” and “add” calls on City Developments (CDL), following the company’s positive recovery across all segments, with strong tailwinds from economic reopening.
RHB analyst Vijay Natarajan says a more solid earnings recovery is expected for the rest of the year from a rebound in the hospitality segment and strong sales momentum in its residential projects. “Despite macroeconomic uncertainty, the group remains a deep value play trading at more than 50% discount to its RNAV, which in our view, limits downside,” he adds.
Meanwhile, CGS-CIMB analyst Lock Mun Yee highlights that CDL continued to unlock value from its potfolio. In addition to Millenium Hilton Seoul and Tanglin Shopping Centre, the company is also unlocking value from the collective sale of Golden Mile Complex for a total of $700 million where it has a 6.3% share of total share value and 34.8% share of Strata Area of the property.
“CDL’s net gearing ratio (after fair value adjustment) was 53% at end-1QFY2022 with strong cash reserves of $3.1 billion. Management remains upbeat on outlook for its core segments for the rest of 2022,” says Lock.
She adds that CDL’s hotel operations posted a strong quarter, with portfolio RevPAR mode than doubling y-o-y to $89.6/room night in 1QFY2022. Gross operating profit margin increased 14.6% in the quarter versus 6.1% in 1QFY2021. London and New York posted the strongest RevPAR improvements of 1,091% and 126.8% y-o-y respectively.
“Plans are underway to rebrand the Millennium Downtown New York into an M Social in 2023. We believe that the hospitality segment should continue to trade well for the rest of 2022 with the rebound in global travel,” says Lock.
Natarajan concurs, adding that with major easing of Covid-19 restrictions, RHB expects CDL’s hotel portfolio to stage a strong recovery in 2HFY2022 and reach 70% to 80% of pre-Covid-19 levels by end-2022, with a full recovery anticipated by end-2023.
There are no changes to both Natarajan’s and Lock’s earnings estimates. Both analysts kept their target prices for CDL unchanged at $9.75 and $8.97 respectively.
As at 10.39am, shares in CDL are trading 6 cents higher or 0.74% up at $8.08.