Brokers' take

City Developments | Outperform

July 7 close: S$8.04

Target price: S$11.70

Credit Suisse, July 7

CITY Developments Ltd (CDL) has acquired Wing Tai's shareholding interest in Summervale Properties, the owner and developer of Nouvel 18, a prime residential development in Singapore, for S$411 million, bringing its stake in the project to 100 per cent. While Wing Tai's sale was likely motivated by qualifying certificate (QC) charges on the project which are due in end Nov-2016, we view the risk-reward on the purchase favourably for CDL. At estimated costs of S$2,342 per square foot (psf), using heavily discounted net effective prices at Ardmore Three of S$2,700 psf (versus S$3,000 on average in vicinity) would still allow CDL to make 15 per cent margins. Importantly, we believe a 100 per cent controlling stake in the project allows CDL greater flexibility and optionality heading into the QC deadline, …