The Straits Times Index (SGX: ^STI) has been on a tear this year.
The bellwether blue-chip stock index has chalked up a stunning 19.1% total return as of 7 November 2024.
Despite the bullishness, there have been several notable laggards within the index.
One of them is City Developments Limited (SGX: C09), or CDL.
The property development and investment firm saw its share price tumble by 21% year-to-date and is hovering near its 52-week low of S$5.03.
Can this blue-chip real estate giant enjoy a rebound anytime soon? Let’s find out.
Healthy Singapore property development sales
CDL released its third quarter of 2024 (3Q 2024) business update, and it was an encouraging one.
First off, for its Singapore property development division, the group and its joint venture (JV) associates sold 321 units with a total sales value of S$611.1 million.
This performance was significantly better than the previous corresponding period when 183 units worth S$325 million were sold.
In the first nine months of this year (9M 2024), sales amounted to 905 units valued at S$1.8 billion, an improvement from the 691 units worth S$1.4 billion in 9M 2023.
CDL attributed the higher sales to improved sentiment arising from interest rate moderations.
Its Tembusu Grand in Katong sold 91% of its units while its Bukit Timah development, The Myst, moved 73% of its units.
Recent launches have also done well.
Norwood Grand, which was launched in October and is located in Woodlands, managed to sell 84% of its units at an average selling price (ASP) of S$2,067 per square foot (psf).
November saw the launch of the 366-unit Union Square Residences, a luxury development with an ASP of S$3,200 psf.
Despite the higher price, CDL sold 26% of the units within this development.
The healthy sales momentum bodes well for CDL and the group plans to launch JV project The Orie in 1Q 2025.
It will be the first private residential launch in the vicinity of Lorong 1 Toa Payoh in over eight years, implying that high demand should be expected for this project.
China’s long-term potential
In China, construction for CDL’s new mixed-use development acquired in Suzhou is progressing well and the sales launch for the residential component should commence in late 2025.
Management demonstrated confidence in the Middle Kingdom’s long-term prospects with the group’s recent acquisition of a rare mixed-use development site in downtown Shanghai.
This site was purchased for RMB 8.9 billion with CDL’s equity interest being 51% (RMB 4.6 billion).
Its partner is Lianfa Group which will own the remaining 49%.
CDL sees this acquisition as a great opportunity to develop a project with low-density villas, luxury high-rise residential apartments, a boutique hotel, and ancillary retail spaces.
The purchase also reflects management’s confidence in China’s prospects despite the current weak consumer sentiment.
Healthy investment property portfolio
Meanwhile, CDL investment properties are also doing well.
The group’s Singapore office portfolio saw a high committed occupancy of 97.4%, surpassing the island’s office occupancy rate of 89%.
The better performance was attributed to an increase in occupancy at South Beach.
Its three other office assets – namely Republic Plaza, City House and King’s Centre, saw healthy positive rental reversion.
Over in retail, CDL’s portfolio enjoyed a 98.5% committed occupancy rate as of 30 September 2024, which was also higher than Singapore’s retail occupancy of 93.5%.
Robust leasing demand sustained the group’s retail portfolio performance for 9M 2024 with healthy operating metrics, increased shopper traffic, and improved retail sales.
Stable performance for hotel operations
Elsewhere, CDL’s Hotel division also put up a respectable performance.
For 9M 2024, room occupancy inched up 1.5 percentage points (ppt) to 73.8%. Average room rate also improved by 0.5% year on year to S$226.7.
As a result, revenue per available room (RevPAR) increased by 2.7% year on year to S$167.4.
The gross operating profit margin stayed constant at 33.9% for 9M 2024 against 33.5% in 9M 2023.
Refurbishments and an AEI
CDL is also hard at work on several refurbishments at several of its hotels along with an asset enhancement initiative (AEI) at City Square.
The Copthorne Orchid Hotel Penang is undergoing a S$29 million refurbishment to rebrand itself as M Social Resort Penang.
Over in the US, Millennium Downtown New York commenced a US$46 million renovation in 3Q 2024 which will be completed in 2Q 2025.
The UK’s Millennium Hotel London Knightsbridge will undergo a major renovation costing S$29 million with work set to begin in 1H 2025 and complete by 4Q 2025.
For City Square Mall, the second phase of its AEI should be completed by 1H 2025 with a pre-commitment rate higher than 70% for areas affected by the AEI.
Get Smart: Better days ahead
This business update shows that CDL is doing well on several fronts.
Its Singapore property launches are seeing brisk sales while its investment properties also enjoy high occupancy and positive rental reversions.
Hotel operations remain resilient with metrics such as RevPAR seeing year-on-year increases.
The property giant is also confident about the long-term prospects of China and has put its money where its mouth is.
With interest rates poised to head lower in the coming quarters, CDL could see further improvement in all its divisions.
Investors will need to have patience, but it appears that better days may be ahead for this blue-chip property company.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
