It’s been an unusual year for investors.
Inflation and surging interest rates have dampened demand for the REIT sector, pushing unit prices of numerous REITs to 52-week lows.
Yet, there is a bunch of stocks that have performed well despite these headwinds.
Last week, we featured the five best-performing blue-chip stocks for this year and City Developments Limited (SGX: C09), or CDL, was one of them.
The property giant’s share price has risen 19% year to date amid optimism about its business prospects.
The question on investors’ lips is – can CDL continue its impressive run next year?
To answer this, we dug deep into the group’s latest fiscal 2022’s third quarter (3Q2022) business update to find out.
Successful Singapore condominium launches
CDL saw healthy sales of its development properties for the first nine months of 2022 (9M2022), with 802 units worth S$1.9 billion sold.
The group’s recent launch of its Copen Grand executive condominium (EC) has helped to boost the sale of units to 1,417 by 30 November as the project received a very strong response.
Within just two months, sales value jumped by 47% to hit S$2.8 billion.
Management expects the property market to remain resilient despite the government’s recent cooling measures as there is a low stock of new properties out in the market.
Coupled with Singapore’s political stability and strength as a financial hub, these attributes should continue to buoy demand for quality development properties.
CDL has replenished its development pipeline by successfully securing 178,936 square feet of EC Government Land Sales in Bukit Batok in September.
Investors can look forward to a new EC project comprising 10 blocks with a total of 512 units.
A better outlook for investment properties
Moving on to the group’s investment properties, its Singapore office portfolio is enjoying healthy committed occupancy of 94.3%.
Its Singapore retail portfolio, which comprises South Beach, City Square Mall and Palais Renaissance, saw a high committed occupancy of 95.3%.
With the gradual reopening of the economy, tenant sales for 3Q2022 have already exceeded pre-COVID levels.
For its China operations, the group can look forward to the easing of the country’s strict COVID-zero policy for better operating and financial numbers.
Meanwhile, CDL is providing continued financial support to commercial tenants to assist them through this difficult period.
Despite the challenges, management has a positive long-term view of the China property market and is scouting for suitable development sites to boost its land bank there.
CDL’s private rented sector (PRS) portfolios in both the UK and Japan are also doing well.
In the UK, people are turning to renting rather than buying as affordability issues continue to depress consumer demand for purchasing properties.
As a result, CDL’s 665-unit PRS development in Leeds should see healthy enquiries.
Its Japan portfolio, located in Osaka and Yokohama, should also enjoy healthy demand as more people return to the workplace and Japan eases restrictions on foreign nationals entering the country.
Significant improvement in hotel operations
CDL’s hotel division has also enjoyed a fillip with the resumption of air travel amid a surge of bookings for vacations due to pent-up demand.
In 3Q2022 alone, room occupancy rose to 71% for the group, a sharp improvement from the 55.9% registered a year ago.
The average room rate has climbed by 46.4% year on year to S$228 while revenue per available room (RevPAR) has soared 88.9% year on year to S$161.9.
With China hopefully opening up its borders soon as its COVID-zero policy eases, there is room for CDL to enjoy a sustained boost for its occupancy and RevPAR next year.
An acquisition of resilient assets
To further boost its portfolio of resilient assets and in line with its GET (growth, enhancement and transformation) strategy, CDL announced last week that it acquired five purpose-built student accommodation (PBSA) assets in the UK.
The total consideration was £215 million and comprises 1,863 beds.
The five assets, located in Birmingham, Canterbury, Coventry, Leeds, and Southampton, boast a high average committed occupancy rate of over 98% and are less than three years old.
With this acquisition, CDL has expanded its PBSA portfolio significantly from just one asset with 505 beds to six assets totalling 2,368 beds.
PBSA assets are resilient to recessions are students return to campus and CDL has acquired the assets in cities with high demand but limited supply, thus ensuring robust and sustained demand.
Get Smart: Firing on all cylinders
CDL appears to be firing on all its cylinders.
With a healthy development pipeline and an improvement in prospects for its investment properties and hotel division, the group should enjoy a good performance in 2023.
Coupled with its recent acquisition, CDL seems poised for better days ahead.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
