City Developments Limited (SGX: C09), or CDL, used to be Singapore’s largest listed developer.
However, a boardroom tussle which broke out in late February caused shares of CDL to plunge to a 16-year low of S$4.76.
With this decline, UOL Group (SGX: U14) has now overtaken CDL as Singapore’s largest listed developer.
Can CDL retake its crown as Singapore’s largest developer? What will it take for the property giant to regain its former glory?
Continued infighting
CDL’s boardroom troubles persist after last month’s shock announcement.
Kwek Leng Beng, CDL’s executive chairman, sought an injunction in the High Court on 25 February to prevent two new directors, Jennifer Duong Young and Wong Su-Yen, from exercising their powers.
He is also seeking to overturn the directors’ resolution to terminate the advisory agreement of long-term advisor Dr Catherine Wu with a unit of CDL, Millennium & Copthorne Hotels (M&C).
The dispute has split the board into two camps, with the plaintiffs being Kwek Leng Beng, CDL, and directors Philip Yeo, Colin Ong, and Chong Yoon Chou.
This group is being represented by lawyers from LVM Law Chambers.
The defendants include CEO Sherman Kwek, Wong Su-Yen, Young, Carol Fong, Daniel Desbaillets, Wong Ai Ai, and Philip Lee Jee Cheng.
Sherman hired Senior Counsel Davinder Singh to represent him.
A hearing has been fixed for 11 April to hear evidence from both parties.
There may be another hearing fixed for 25 April if cross-examination is required.
In a surprise twist, Catherine Wu resigned from her unpaid role at M&C.
A downbeat set of earnings
Although the board members, executive chairman and CEO are at loggerheads, CDL maintains that it is “business as usual”.
The blue-chip property group recently released a downbeat set of earnings for 2024.
Revenue tumbled 33.8% year on year to S$3.3 billion as CDL’s property development division logged substantially lower contributions in 2024.
Singapore logged a good performance. driven by the sale of 1,489 units including executive condominiums, with a total sales value of S$2.97 billion.
This compares favourably with 2023’s total of 730 units sold for a total sales value of S$1.5 billion.
Higher finance costs, along with construction delays for certain projects, also impacted the group’s profit.
CDL’s net profit plunged 36.6% year on year to S$201.3 million.
Despite the lower profits, the group’s revalued net asset value (RNAV) increased by 2.1% year on year to S$17.57 per share.
At the closing price of S$5.10, this means that CDL is trading at a 70% discount to its RNAV.
A total of S$0.10 in dividends was proposed, comprising S$0.08 per share of ordinary dividend and a S$0.02 special dividend.
This dividend was lower than the prior year’s S$0.12.
“GET” strategy in place.
CDL continues to implement its “GET” strategy comprising Growth, Enhancement, and Transformation.
The property group made a total of S$2.2 billion in acquisitions and investments for 2024 in countries such as Singapore, Japan, China, the UK, France, and New Zealand.
A total of four Singapore residential projects comprising 1,502 units was launched last year, and the pipeline for 2025 includes around 950 units at upcoming launches at Zion Road and Newport Residences.
On the divestment front, the group conducted more than S$600 million of divestments in 2024, helping to optimise its portfolio and unlock value for shareholders.
In terms of enhancements, CDL has an ongoing asset enhancement initiative (AEI)) for City Square Mall.
This is a phased S$50 million AEI slated to be completed in the first half of 2025.
CDL also has several ongoing asset redevelopments.
One of them is Union Square, a mixed-use development comprising office, retail, residential apartments and a co-living component.
Once the redevelopment is completed in 2029, the property will enjoy a gross floor area (GFA) uplift of 67% to 735,000 square feet.
Another redevelopment is at Newport Plaza, a 45-storey freehold mixed-use development.
The target completion is in 2027 and the property will see a 25% GFA uplift to 655,000 square feet.
Management’s priorities for 2025 are to focus on capital recycling initiatives and portfolio optimisation.
These will allow the group to strengthen its return on equity (ROE) and be able to pay out sustainable dividends.
Get Smart: Sentiment will remain weak
CDL’s property development arm is causing volatility in its revenue and earnings.
However, the property giant’s investment properties are generating stable, recurring revenue that saw an 11.1% year-on-year increase for 2024.
Its “GET” strategy is also helping to optimise its portfolio and unlock value for shareholders through opportunistic divestments.
In short, the business looks to be doing decently but is dragged down by the boardroom squabbles.
Hence, sentiment towards CDL should remain weak in the near term.
Investors should keep an eye out for news on the dates for the next High Court hearing to assess the ongoing situation.
Turmoil is never good for any company, but if CDL manages to resolve these conflicts by then, its shares could look like a striking bargain.
If you’re nervous, confused, or worried about buying your first stock, then our latest beginner’s guide to investing can help. It’s easy to read yet packed with valuable insights. Download it for free today, and buy your first stock in the next few hours. Click here to get started.
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclosure: Royston Yang does not own shares in any of the companies mentioned.
