(NEUTRAL, S$9.90, TP S$9.52)
CDL posted firm 2Q11 results within expectations, with healthy take up for its recent launches. We like CDL’s recent successful land accumulation, healthy balance sheet at 0.22 gearing (excluding reval) as well as M&C’s strong operating performance. While we agree with CDL’s latest conservative stance on land banking on the backdrop of negative policy headwinds; with a lack of near term catalysts we resume coverage of CDL at Neutral, TPS$9.52 based on 20% discount to RNAV.
Firm set of results for 2Q11. CDL’s 2Q11 and 1H11 results were within expectations, with 2Q11 revenue flat at S$979.4m while net profit is at S$220.9m (+17.0%YoY); 1H11 revenue amounted to S$1,753.1m (+3.9%YoY) and net profit to S$503.2m (+44.8%YoY). This set of firm results was supported by steady development revenue contributions and boosted by one-time gains of S$243.6m contributed by the sale of The Corporate Office and a strata unit in GB Building in 1Q11, as well as the sale of the Corporate Building in 2Q11.
Good sales performance, all eyes on 2H11. Residential development sales were healthy with 809 units sold (+4.7% YoY). We believe the lower sales value for 1H11 at S$793.9m (-16.2% YoY) was largely due to sales achieved mainly from H20 Residences in the mass market segment. Moving forward, CDL is targeting to launch sales of c.500 units with the likes of Nouvel 18, Lucky Tower, Choa Chu Kang EC site as well as Pasir Ris Parcel 4 in 2H11.
Cautious stance, backed by ample landbank. We note CDL’s cautious stance at bidding conservatively for the recent GLS tender for the Potong Pasir site at 27% below the top bid. his supports our belief that CDL is likely to adopt a cautious stance and selective towards landbank accumulation, backed by an ample residential landbank (56% of total 6.8m sf) and a ready pipeline of residential projects for launch.
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