CDL’s net profit drops 32% to $132.1m

Lacklustre 3Q11 results, maintain NEUTRAL. CDL’s 3Q11 results were within
expectations. Revenue of S$805.8m grew +8.1%YoY. While there was higher
development revenue of S$321.8m (+37.0%) driven by maiden contributions of
development projects and one-time boost from sale of development land in KL (land
adjacent to Grand Millennium KL, RM215.1m) by M&C, this is partly mitigated by lower
rental income of S$67.8m (-28.8%) due to office asset disposals this year. With the
absence of one-time gains from private placement of CDL HT in 3Q10, higher salaries
and higher interest expense, net profit contracted -32.4%YoY to S$132.1m. We
maintain NEUTRAL and TP of S$9.52 pegged to 20% discount to RNAV.

Positive performance from M&C marginalized by exchange rates. Growth in Group
RevPAR (+7.8% YoY) was mainly driven by rise in room rates, while NZ experienced a
one-off boost in RevPAR of 13.4% YoY buoyed by the Rugby World Cup. However
post consolidation at CDL level, due to unfavourable GBP/SGD, hotel revenue was flat
for 3Q11 and PBT S$69.3m (-7.4%YoY) due to impairment loss of a US hotel.

South Beach update. Construction of major development project South Beach is
currently underway with piling at 80% completion, expected TOP 2015.

Cautious sentiment on residential sector; mass over high-end. While cautious on
slowdown in residential sales, CDL as a barometer for Singapore property continues its
focus riding on the mass segment. CDL is expected to preview The Palette (892 units,
initial pricing c.S$870 psf) near Pasir Ris MRT while holding back launch of high-end
project Nouvel 18. We think the market may have been a tad optimistic on CDL with the
recent strength in the mass segment, highlighting more than half of CDL’s residential
exposure to the high-end segment which is more susceptible to macro headwinds.