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Brokers' take: Analysts keep 'buy' on CDL's plans for potential M&C bid

ANALYSTS are giving an early thumbs-up for City Developments' (CDL) potential privatisation of its London-listed hospitality arm.

Maybank Kim Eng maintained its "buy" recommendation for CDL and its target price of S$11.75, following news on a possible cash offer for London-listed Millennium & Copthorne Hotels (M&C).

OCBC Investment Research also maintained its "buy" call with a fair-value estimate of S$12.90.

CDL announced on Monday that it had negotiated a cash takeover price of 552.5 pence per M&C share, including a 7.5 pence per share special dividend, at which M&C's independent directors would support the offer. CDL currently owns about 65.2 per cent of M&C.

Maybank said that CDL could "potentially unlock value in the asset-rich company in the medium term.

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Buying out all of M&C's minority shareholders could cost CDL about S$1.1 billion, which should not be a problem for CDL's S$3.3 billion of cash and 0.18-times net gearing, Maybank Kim Eng said.

Factors which could negatively impact the sale include a sharp fall in home prices, poor execution of overseas projects and a sharp increase in interest rates, which could impact demand for properties.

OCBC noted that the offer priced seemed "attractive", and reckoned that "a full consolidation of M&C on these terms will be accretive for the group".

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