Shares of City Developments, a real estate company, saw a significant decline of 5.47% or 28 cents when trading resumed today after a hiatus caused by an internal dispute that has made its way to the courts. On February 26, trading in the company’s shares was stopped and a scheduled results briefing was cancelled, after news of a conflict between executive chairman Kwek Leng Beng and his son, group CEO Sherman Kwek, was made public. The company released a statement on March 3, saying that it would refrain from commenting on the allegations and would not take a stance on their validity, as they are currently under court proceedings. CDL maintained that its operations continue as usual, and Sherman Kwek remains the group CEO until the board makes a decision to change leadership. Despite this, analysts have lowered their recommendations and target prices for the stock. UOB Kay Hian’s Adrian Loh downgraded his rating to “hold” from “buy” in a note on February 27, stating that the company’s FY2024 figures missed both his and consensus’ estimates. He also added that the dispute between the company’s leadership will hinder the stock’s performance, despite its valuable assets in Singapore and globally. Loh revised his target price to $4.60, which is calculated based on two standard deviations below its five-year average price-to-book (P/B) of 0.72 times. In their February 27 note, DBS Group Research’s Derek Tan and Tabitha Foo see some hope amidst the turmoil. They stated that while investor sentiment may be dampened in the short term, the company’s fundamentals remain stable, as key management continues to run it. The duo highlighted that CDL is currently trading at an attractive valuation of 0.5 times P/B and 0.3 times P/RNAV, both of which are lower than during the Global Financial Crisis. Tan and Foo also added that once the board dispute is resolved, shareholder returns and profitability can be prioritized, leading to a gradual recovery in the stock’s value. Despite cutting their target price from $10.50 to $6.70, they maintained a “buy” recommendation, based on a 60% discount to RNAV, which is an increase from their previous valuation multiple of 35% discount. OCBC Investment Research also maintained a “buy” recommendation, with a lowered fair value of $6.02, down from $6.57, based on an RNAV discount of 60%, which is wider than their previous 45% discount. They expressed that the company’s stock will face uncertainty until the disagreement is resolved, which may impact its value. They shared that in the past, when director Leng Peck resigned in October 2020, the stock dropped by 20% within the following two weeks. However, they are hopeful for a positive resolution and a potential share price increase in the long run, seeing how the stock is under-owned by investors. On February 26, in a note by Citi Research’s Brandon Lee, he stated that the impact of this internal conflict is difficult to predict. Lee feels that the issue of an unclear board and company leadership, coupled with a potential lengthy court case, will be a hindrance to the stock’s performance. However, he pointed out that CDL is highly undervalued and under-owned, which could serve as a positive catalyst once the disagreement is resolved. Lee, who recommended a “buy” rating and a $9.51 target price, based his valuation on the stock trading at less than a third of its book value. In their February 26 note, JP Morgan analysts Mervin Song and Terence M Khi called the turn of events a “dynastic discord”, resulting from years of disappointment, underperformance, and public disagreement among certain members of the extended Kwek family. They expressed their hope for a positive resolution and reconciliation among the family members. Despite reducing their target price from $6.05 to $4.85, they have a “buy” recommendation, which is based on a 60% discount to their estimated RNAV of $12.10 per share.
When it comes to investing in Singapore, it is crucial for international investors to be familiar with the various regulations and limitations surrounding property ownership. In general, foreigners are permitted to acquire condos in Singapore with relatively few restrictions compared to landed properties, which have more rigid ownership requirements. However, foreign buyers are still subject to the Additional Buyer’s Stamp Duty (ABSD), currently set at 20% for their first property purchase. Despite the added expenses, the consistent stability and potential for growth in the Singapore real estate market continue to make it an attractive option for foreign investment. Consider looking into Singapore condos for your next investment opportunity.