City Developments most vulnerable to policy risks

CDL plans to launch only three projects for the rest of the year.

Nomura notes that among the larger developers, CDL, given its 41.7% NAV representation in SG residential properties, will be most vulnerable to policy risks as well as an earlierthan-expected rise in interest rates.

Here's more from Nomura:

Sales at the Bartley Residences (99-yr, 702 units) also appear to be slowing after its debut in February, with 284 units (40.5%) sold as of end-April. Therefore, the current share-price correction is likely to continue as near term macro uncertainties play out, in our view.

That said, for the rest of this year, CDL plans to launch three other projects - South Beach (99-yr, 188 units), Haus at Serangoon Gardens (99-yr, 96 terrace houses) and Up at Robertson Quay (99-yr, 70 units). Considering the small number of units to be sold in these projects, we believe there is potential for both the take-up as well as unit prices to surprise the market on the upside.

We therefore would be looking for any buying opportunity for this stock as its share price correction continues. Based on the stock's trading history, the mean less 1SD discount to NAV is 29.5%, which would translate into a price level of SGD8.76 on our NAV estimate of SGD12.43 and a potential upside of 23.4% on our price target SGD10.81 (pegged to mid-cycle discount of 12.9%). As such, a further 14.8% correction in the stock could present a buying opportunity, in our view.