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Broker's take: OCBC Investment Research upgrades CDL to 'buy', ups fair value estimate to S$10.73

BROKERAGE OCBC Investment Research has upgraded its call on mainboard-listed City Developments Limited (CDL) to "buy" and increased the fair value estimate from S$9.81 to S$10.73. The upgrade comes as negatives from property measures announced in July are priced in, with shares in the property developer now presenting value for investors. 

In a research note, OCBC Investment Research analyst Andy Wong noted that CDL's Q3 earnings posted last Thursday were in line with the brokerage's expectations.

Mr Wong said that while headwinds are likely persist for property developers in the near future, there are positives for CDL.

He cited CDL’s share buybacks which are supported by a strong balance sheet, average selling prices of properties which are tracking above the brokerage's expectations, diversification of its income streams with the acquisitions of two UK investment properties notwithstanding Brexit uncertainties, as positives.

Moreover, its upcoming launches have already obtained "provisional planning from Urban Redevelopment Authority and thus will not be subjected to the latest revision in guidelines on the minimum average unit sizes", the analyst added.

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Last week, a UOB Kay Hian report dated Nov 9 shared similar sentiment on CDL.

Its analysts Andrew Chow and Loke Peihao said: "CDL has done well in Singapore residential despite regulatory headwinds, and continues to make headway in building its recurring income base, such as its expansion into UK commercial assets."

UOB Kay Hian maintained its "buy" call and raised its target price for the stock from S$12.00 to S$12.12.

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