City Dev

City Dev: 1Q13 net profit at $138m (-12% yoy) was inline with forecasts, but boosted by $25.8m in divestment gains from the sale of strata units at Citimac and Elite industrial buildings. Development pretax profit rose 4% to $91m (49% of group pre-tax profits) on the back of the TOP of NV Residences, and the maiden contribution of Bartley Residences which was offset by the absence of contribution from a warehouse at Tagore Avenue. Mgt commented that while investment sentiment for high-end segments remain subdued, demand for mass and mid market projects remain firm in Singapore, supported by abundant liquidity. The group plans to launch the Jewel@Buangkok (616 units), a Sengkang EC project (380 units), and the Tai Thong Crescent mixed devt (266 units +28 retail and F&B strata units) in the coming months. Meanwhile Nomura expects fully sold projects such as Cube 8, Tree House, 368 Thomson as well as Hundred Trees to be completed later this FY and profit booking to be back-loaded in the coming quarters. Pretax profit from hotel operations fell 35% to $26m as refurbishments at the Grand Hyatt Taipei and Millennium Minneapolis resulted in closures of rooms as well as seasonal factors and continued restraint in corporate travel in Singapore. Notably while RevPAR’s rose 7.4% in London and 5.0% in New York, they fell 9.3% in Singapore, and 10.3% in the rest of Asia in the first 4 weeks of the current quarter (Overall RevPAR was up 1.9%). Finally, rental properties PBT rose 65% to $59m on account of the divestment of strata industrial units. Of key focus would be mgt’s revelation that it is in the final stages of establishing a platform for property devt in London, and will initially allocate GBP200-300m for this purpose. CDL plans to leverage its local expertise, having being established in the city since 1993, and M&C owning 7 hotels (2,500 rooms) from Kensington to Mayfair. Nomura views the London initiative as potentially a game changer, and believes the potential is unlikely to escape the market. Suspects City Dev’s stock reaction could be positive despite the slightly below 1Q headline numbers. The house has a Neutral rating with TP $11.54. Deutsche maintains at Hold with TP $11.01. Credit Suisse maintains Outperform with TP $13.60, likes City Dev for its strong execution, with the stock trading at 1.4x P/B vs historical avg of 2x.