Why CityDev should worry over its shrinking overseas opportunities

London land costs are also rising.

Accordng to Maybank Kim Eng, with limited opportunities in Singapore due to high land costs, CityDev has made its first acquisition in London, acquiring a multi-storey car park in Knightsbridge for GBP80m (~SGD160m) with the intention of redeveloping it into a luxury residential development.

However, London land costs are also rising. In China, the Group is likely to focus on launching at least one project in 2014 before acquiring new sites, in our view.

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Overseas markets are also not plain-sailing. CDL has three projects in China, but none have been launched since the first acquisition in end-2010. Earthworks have commenced at the first site in Eling, Chongqing, which will be launch-ready in 2014.

The Suzhou mixed-use project is also launch-ready by 2014, while the Huang Huayuan site in Chongqing is likely to be ready only in 2015. Given its relatively small scale of operations in China, we think CDL is likely to focus on the execution of these three sites before acquiring new ones.

Meanwhile, policy headwinds remain, as evidenced from the recent tightening of measures in Tier-1 cities like Beijing, Shanghai and Shenzhen.

In London, CDL paid GBP80m for a multi-storey car park near Harrods at Knightsbridge. The property is just behind M&C’s Knightsbridge Hotel and the Group plans to redevelop it into a luxury residential development.

Without further details, we have not included this site into our valuations. Going forward, securing more prime sites in London will also be challenging, given a rising market, but the Group is actively pursuing several acquisition opportunities.