City Dev (S$7.20): Re-entering Australian market via Brisbane housing project
City Dev (CDL) is partnering leading Australian developers to jointly develop a prime residential land site in Brisbane’s South Bank precinct.
The 2,733sqm freehold site is located at Merivale Street, South Brisbane and will be developed into two 30-storey towers, housing a total of 472 apartments, with a gross development value of A$275m..
The project has good connectivity to Brisbane’s CBD and the future Queens Wharf integrated resort. Besides, it is also in close proximity to South Brisbane train station and major universities such as University of Queensland and Queensland University of Technology.
Among the joint developers Abacus Property and KPG Capital, Abacus and City Dev will inject equity funding of A$30m each via preferred equity interest.
Early works have commenced and pre-sales for both towers have received positive response. In addition, the project is also expected to benefit from a proposed A$5b infrastructure investment in South Brisbane.
Maybank-KE believes City Dev's current share price weakness is a reflection of the tepid Singapore office market, but the stock's low valuation is not warranted.
The counter is Maybank-KE's top sector pick, with a TP of $10.40, representing 44% potential upside, and currently trades at 0.8x P/B.