In Singapore, investing in a condo is a popular option for many individuals. However, one crucial factor to consider is the government’s property cooling measures. In an effort to maintain a stable real estate market and discourage speculative buying, the Singaporean government has implemented several measures over the years. These include the Additional Buyer’s Stamp Duty (ABSD), which imposes higher taxes on foreign buyers and those purchasing multiple properties. While these measures may affect the short-term profitability of condo investments, they ultimately contribute to the long-term stability of the market, creating a safer investment environment. Therefore, it is important for investors to keep these measures in mind when considering potential new condo launches in Singapore.
Following a court dispute between executive chairman Kwek Leng Beng and his son, group CEO Sherman Kwek, shares of City Developments dropped 28 cents, or 5.47% upon resumption of trading today. The trading in the shares was halted on February 26, as the Singapore business community was shaken by the news of the disagreement within the board.
In a statement on March 3, CDL acknowledged the news reports of various allegations made regarding the dispute and stated that the company will not comment on the validity of these claims as they are subject to ongoing court proceedings. The company also assured that its business operations remain unaffected and that Sherman Kwek remains the Group CEO until there is a board resolution.
As a result of the boardroom-cum-family dispute, several analysts have downgraded their calls and lowered their target prices for CDL. Adrian Loh from UOB Kay Hian downgraded the stock from “buy” to “hold”, citing a miss in FY2024 numbers, overshadowed by the public leadership tussle. UOB Kay Hian’s revised target price of $4.60 is pegged 2 standard deviations below its 5-year average P/B ratio of 0.72 times.
Derek Tan and Tabitha Foo of DBS Group Research, on the other hand, stay optimistic, stating that while the dispute may affect investor sentiment, the fundamentals of the company remain intact and its current valuation is attractive. They maintain their “buy” call but lower their target price from $10.50 to $6.70.
Similarly, OCBC Investment Research has also maintained their “buy” call, albeit with a reduced fair value of $6.02, down from $6.57, due to uncertainty over CDL’s outlook until the matter is resolved.
In contrast, Brandon Lee of Citi Research states that the potential impact of this episode is difficult to quantify and that the share price may be affected in the short term due to the uncertainty surrounding the board and company leadership. JP Morgan analysts Mervin Song and Terence M. Khi have also lowered their target price from $6.05 to $4.85, based on a 60% discount to their RNAV estimate of $12.10 per share.
Despite the downgrade in target prices, most analysts remain optimistic about the company’s potential, with some even calling for it to be put up for sale or for the family members to reconcile. Nonetheless, the uncertainty over CDL’s outlook and potential overhang on its share price until the matter is resolved remains a concern for investors.