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Political Tensions Loosen; CDL And HBL Trading Ideas
Tradeable Ideas | 05 March 2014
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By: Raymond Leung
Articles (142) Profile
By: Nicholas Tan
Articles (71) Profile

Global stocks rebounded after Russian President Vladmir Putin remarks on optimism that the worst crisis between Russia and the West since the end of the Cold War is cooling.

Putin said that he will not be sending troops into Ukraine unless in extreme circumstances and has ordered troops engaged in military exercises that took place in western Russia to return back to their bases. However, he has also made his intentions clear that he will not be loosening its grip on Crimea and has shown no fear of prolonged strained ties with the West.

In China, the annual National People’s Congress meeting kick start today and last till 13 March. As part of President Xi Jinping’s widening campaign against graft, this year’s policy setting meeting will see China banning extravagant welcome ceremonies and luxurious meals.

Turning to the local stock market, we picked out two stocks City Development and Ho Bee Land as our focus for this issue’s ideas.

Citi Developments: Growth Capped By Cooling Measures?
Prominent Singapore property developer City Developments (CDL) announced their FY13 results last week. The company drew attention from various analysts following weak financials released by other major players in the industry.

Unlike most of its peers, CDL managed to maintain its profit level when compared against FY12 (FY12:$678 million; FY13:$683 million). Overall, CDL slightly fell short of most estimates from the street. Property development continues to be the main contributor for the group despite the challenging market conditions in Singapore.

The group is currently looking to diversify its operations overseas through acquiring overseas properties. In order to facilitate this change, the group hired Grant Kelly as its new chief executive officer.

In view of the poor local market conditions, Maybank Kim Eng has a “Sell” call on CDL. It cited that the group lacks growth as it remains Singapore-centric and needs time to build up its international business. Maybank Kim Eng expects the group to deplete its cheap landbank and experience some margin compression for the coming year.

However, DBS Vickers maintains its “Hold” call and raised its target price to $11.34. This gives CDL a potential upside of 21.4 percent. DBS Vickers noted that the firm was dragged down by the timing of residential profit recognition.

Profits from three fully sold executive condominiums will only be recognised upon completion of construction while other substantially sold projects will be recognised based on stages.

CDL is currently trading cum final dividend of $0.08.

Ho Bee Land: Boosted By Diversification
Mid-cap property developer Ho Bee Land (HBL) managed to prove itself against the major players through its strong financials. The group saw profit increase of 216 percent this year to $592 million when compared against a year earlier. This is a result of HBL’s long-term diversification strategy from property development to investment.

The increase in profit was mainly contributed by fair value increase of the newly completed office development, The Metropolis at One-North which gained $489.6 million through revaluation. HBL also gained $47.2 million from Chongbang Holdings which was disposed in early 2013.

Property development fell by 74.8 percent from $450.7 million in 2012 to $113.6 million. This is due to higher revenue recognition of residential projects in 2012. As the local property market faces strong headwinds, HBL expects lower contribution from this segment in the year ahead.

The group is liked by CIMB Research for its exposure to Singapore office space, The Metropolis, which clocked a significant revaluation gain in FY2013. However, analysts at CIMB Research believe there is more value to the property than its existing book.

HBL is currently trading cum dividend of $0.08 (final dividend: $0.05; special dividend: $0.03), giving it a dividend yield of 3.7 percent.

This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

City Developments  9.870 +0.03 +0.30%   
Business: Co is an international property & hotel conglomerate. [FY18 Turnover] Property development (48.4%), hotel operations (39.8%), rental properties (8.5%), others (3.3%).

Insight: May-19, 1Q19 decreased 29.5% to $746.2m compared t... Read More
Ho Bee Land  2.280 -0.01 -0.44%   
Business: Invests in & develops real estate properties in Singapore. [FY18 Turnover] Rental income (91.3%), sale of development properties (8.7%).

Insight: Apr-19, 1Q19 revenue rose 7.7% due to increased re... Read More

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