Third CDL director resigns; firm sets up group to focus on contentious Sincere investment

Singapore

ANOTHER director of City Developments Limited (CDL), Tan Yee Peng, has resigned, while the company said it has set up a special working group that will focus on improving Sincere Property Group's liquidity and profitability.

Options include a review of potential divestments of assets and the restructuring of existing liabilities of the China-based real estate group, CDL said on Monday.

In response to queries from The Business Times, Jefferies equity analyst Krishna Guha said that while the capital allocation decision "will have near to medium term challenges, the group is taking a long term view of prospects in China and diversification it brings to (the) existing portfolio".

The brokerage's "buy thesis" is based on valuation and CDL continues to trade at a significant discount to book.

Said Mr Guha: "Top down; continued low rates, ample liquidity and prevalent narrative about rotation to value/cyclical stocks augur well for the stock. Bottom-up; the group's repositioning of hotel and older commercial assets, selective divestments and capital recycling should grow NAV (net asset value)."

However, he also noted key risks pertaining to "ascertaining liquidity requirements of Sincere group and if it necessitates any capital call or higher gearing, impact on NAV from revaluation of investment/hotel assets and extent of recovery of global travel."

CDL's latest move comes after it previously appointed Deloitte & Touche Financial Advisory Services as its external financial adviser to review the group's investment in Sincere.

Ahead of Monday's announcement, CDL said in an earlier bourse filing the same day that independent non-executive director Ms Tan has stepped down, making her the third director of CDL that has stepped down in recent months in relation to its investment in Sincere.

Ms Tan had "disagreed with the board and management about the handling of the investment after the acquisition", said the filing.

Her resignation was effective Dec 30. Ms Tan, 47, was appointed to her position back in May 2014. She also served as chairman of CDL's board sustainability committee and a member of the audit & risk committee, nominating committee and board committee. According to CDL's website, Ms Tan has more than 18 years of accounting and auditing experience, and previously served as an audit partner with KPMG LLP from 2003 to 2010.

Her departure from CDL came shortly after independent non-executive director Koh Thiam Hock, 70, similarly resigned with immediate effect from Dec 28, after more than four years on the group's board. CDL said then that Mr Koh believed it was "most appropriate for him to now step down as a director" having shared his observations, concerns and suggestions on the group's investment in Sincere.

Last October, CDL's former non-executive and non-independent director Kwek Leng Peck quit after more than 30 years in the role, in one of the most stunning corporate developments in the group's history.

At the time, Mr Kwek, 64, cited disagreements with the board over CDL's investment in Sincere, as well as its continuing provision of financial support to the Chinese property group. He also had reservations with the group's approach in managing its London-based wholly-owned unit Millennium & Copthorne Hotels, which he concurrently resigned from as a director. He is the cousin of CDL executive chairman Kwek Leng Beng and the uncle of CDL's group chief executive and executive director Sherman Kwek, who is Mr Kwek Leng Beng's son.

CDL has appointed Philip Lee Jee Cheng to replace Ms Tan as independent non-executive director, after taking into consideration his credentials and experience, it said. Mr Lee, 60, will also take on the additional roles as member of the audit & risk committee, remuneration committee and nominating committee.

According to the group, Mr Lee has 35 years of experience in accounting and finance. He was admitted into the partnership of KPMG Singapore in 1995, where he served until his retirement in September 2018. Mr Lee was on the leadership team in KPMG Singapore and on the executive team at KPMG Asia Pacific. Other appointments he held at KPMG Singapore are head of real estate, head of an audit business unit and head of people.

His experience includes accounting and auditing, evaluation of controls and compliance, transaction services and assisting companies in preparing for and raising funds from capital markets, CDL noted on Monday. Currently, Mr Lee serves as a member of the governing council of Singapore Agro-Food Enterprises Federation.

"The board looks forward to Mr Lee's contribution of skills and diversity to the current core competencies of the board," CDL added.

Separately, CDL on Monday announced other changes to its board committees following Ms Tan's departure. Colin Ong has been appointed as a member of the nominating committee, while Sherman Kwek has been appointed as chairman of the board sustainability committee. Meanwhile, Daniel Marie Ghislain Desbaillets has been appointed as a member of the board sustainability committee and a member of the board committee.

In a bourse filing on Oct 21, CDL noted that its investments in Sincere totalled about S$1.9 billion. These include a 51 per cent joint-venture equity investment in Sincere amounting to 4.4 billion yuan (S$896.8 million). It had also subscribed for US$230 million worth of bonds issued by Sincere, and provided a working capital loan of 650 million yuan.

The investments also include a 1.5 billion yuan liquidity-support undertaking provided by CDL for Sincere's bonds that matured on Oct 26, as well as a 1.5 billion yuan corporate guarantee in relation to an external bank loan obtained by Sincere.

Following Mr Kwek's resignation last year, the group appointed Deloitte & Touche Financial Advisory Services to conduct a review into its investment in Sincere. Deloitte subsequently "ascertained that there are good assets that the group can extract further value (from)", CDL said.

CDL shares closed at S$7.80 on Monday, down S$0.17 or 2.1 per cent.