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Analysts Updates: City Dev Grows Asset Management Business
Aspire, Hot Picks | 24 December 2014
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By: Raymond Leung
Articles (142) Profile

Analysts updates on City Developments

City Development (CDL) announced its partnership with Blackstone and CIMB Bank (CIMB) to create an investment platform. This platform will primarily consist of CDL’s Quayside Collection properties in Sentosa Cove which includes W Hotel, Quayside Isle retail and the W Residences.

The platform’s main function is to assist CDL in effectively recycling its capital in these properties and allow Blackstone and CIMB to invest and collect returns from them. This platform will run on a partnership basis which will raise $1.5 billion through a mixture of debts and profit participating securities (PPS).

CDL will retain 37.5 percent stake in this partnership while Blackstone will be taking a 48.9 percent stake with the remaining 13.6 percent held by CIMB. The PPS will allow its partners to receive a fixed payout of 5 percent per year for five years in addition to the share of profit from these properties.

This deal will enable CDL to unlock some of its value from these properties and redeploy the capital to other opportunities globally while retaining some interest in the current properties. CDL has been actively seeking opportunities and expanding in other markets such as China, Japan and UK.

The net gearing of CDL is expected to improve as it realises about $330 million in gains from this deal. The net gearing is expected to fall from the current 36 percent to 25 percent.

This innovative way of freeing up capital will give CDL more options during capital recycling other than the traditional sale of properties or spinoff as a REIT. At the same time, it may be a potential opportunity for CDL to branch out into asset management.

Analysts from DBS Vickers Research upgraded the counter to “Buy” with a potential upside of 5.73 percent. Given the recent price slide to this counter, valuations are close to its historical low price. In addition, the opportunity for CDL to redeploy the cash to profit accretive investments and a potential special dividend can be a strong catalyst to the counter.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

City Developments  10.330 -0.06 -0.58%   
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

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