CityDev in a sweet spot to capitalize on market turbulence, say analysts

Five years of active diversification is paying off.

While REITs and property developers struggle amid 2016’s rocky industry conditions, City Developments (CityDev) will be kicking back and taking advantage of market dislocations—circumstances in which stressful conditions lead to widespread asset mispricings.

According to a report by OCBC, the last five years of active diversification have made CityDev’s asset and income profiles significantly more robust.

As at end 2015, 45% of the group’s total assets fall in overseas markets, while 51% also fall into CityDev’s into the group’s recurring income segments. In terms of earnings before interest, tax, depreciation, and amortisation (EBITDA) breakdown, a notable 71% of 2015 EBITDA fall under recurring income segments as well.

OCBC asserts that the group is currently in a sweet spot, as it is well-positioned to deploy its healthy balance set in a rocky landscape of market dislocation and capitalize on opportunities. At the same time, CityDev will be able to maintain the investment discipline seen from management over the last string of acquisitions.

After accounting for fair value gains on investment properties, CDL’s net gearing ratio stands at a solid 19%, while its interest coverage ratio is 13x.

“We are positive on the fact that management continues to focus on recycling capital expediently through the successful launches of two sets of profit participation securities,” states OCBC.