Brokers' take: RHB raises CDL target to S$9.75 on recovery prospects, cheap valuation

CITY Developments Limited : C09 0% (CDL) is likely set for a strong recovery as global Covid-19 restrictions ease, RHB said.

In a report on Wednesday (Apr 13), analyst Vijay Natarajan raised his target price on the property player to S$9.75 from S$9.25, while maintaining his "buy" call on the counter, to factor in a higher value for its hospitality portfolio as well as divestment gains.

While Natarajan noted that CDL's share price has rebounded year to date and outperformed the Straits Times Index, he said CDL's valuation is still cheap, with the stock trading at a 50 per cent discount to its revalued net asset value.

Shares of CDL were trading flat at S$8.20 at 3.12 pm on Wednesday.

The analyst expects CDL's hospitality portfolio to receive a boost from the return of global travel amid earlier-than-expected border openings across its key markets in the UK, Singapore and the US.

Revenue per available room of its hotel portfolio will likely rebound to 70 to 80 per cent of pre-Covid-19 levels by the end of 2022 and fully recover by the end of 2023, Natarajan said.

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CDL's upcoming residential launches in Singapore will likely also see good response and provide good earnings visibility over the 2 years, with support from strong local demand and limited inventory levels.

As for its investment portfolio, CDL's key Singapore commercial assets - Republic Plaza, City Square and South Beach - should receive a demand boost from easing Covid-19 restrictions, while its UK office portfolio remains resilient with a possibility of spinning off into a real estate investment trust later in 2022.

Additionally, Natarajan noted that CDL had recently made a series of strategic divestments, as well as pared down its stakes in CDL Hospitality Trusts, which should enhance its debt headroom for its ongoing redevelopments and replenish its Singapore residential land bank.

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