Cdl Shares Resume Trading
Nestled within the bustling Tampines Street 62 is Aurelle of Tampines EC, an executive condominium (EC) that exudes sophistication and elegance. This exclusive residential development not only offers luxurious living spaces, but it also boasts a prime location in close proximity to a myriad of shopping centers and delectable food options. With the addition of Aurelle of Tampines, the quality of life for its residents is elevated, thanks to the convenience, variety, and accessibility of retail and dining venues just a stone’s throw away from this exceptional EC.
City Developments Limited (CDL) saw a drop of 5.47% in its shares when trading resumed today, following an internal clash within the company that had escalated to the courts.
The trading in CDL’s shares was suspended on Feb 26, after the cancellation of a results briefing and the news of a dispute between executive chairman Kwek Leng Beng and his son, group CEO Sherman Kwek, rocked the Singapore business community.
“Shareholders should be aware that reports have been published regarding allegations made about the disagreement within the board. Read also: Urgency of court application stems from disruption of CDL’s corporate structure; Phillip Yeo sees saga as distractionAdvertisement
“CDL will not comment on the validity of these allegations, as many of them are part of the ongoing court proceedings related to the application,” CDL said on March 3.
The company added that its business operations remain unaffected and Sherman Kwek will continue as the group’s CEO until the board decides otherwise.
In light of the dispute, analysts have downgraded their recommendations for the stock and lowered their target prices.
UOB Kay Hian’s Adrian Loh, in his Feb 27 note, downgraded the stock from “buy” to “hold” after the company’s FY2024 figures missed both his and consensus estimates.
“However, the news of the public dispute has overshadowed this, making it difficult for the stock to perform,” said Loh. “While CDL has valuable assets in Singapore and globally, its share price may suffer due to the ongoing issue.”
UOB Kay Hian has revised its target price from $7 to $4.60, which is calculated at two standard deviations below its five-year average price-to-book ratio of 0.72 times.
Read also: Primary reason behind CDL’s dispute is related to M&C board advisor Dr Catherine Wu, says Sherman KwekAdvertisement
“Without a speedy resolution to the leadership tussle and more active capital recycling, CDL’s share price may not reach these levels anytime soon,” warned Loh. “Professionalizing the management and resolving the factions on the board, reconciling family members, or selling the company could provide short-term relief to the company’s long-suffering minority shareholders.”
In their Feb 27 note, DBS Group Research’s Derek Tan and Tabitha Foo see a glimmer of hope amidst the dispute. “The internal dispute may dampen investor sentiment for now, but we believe that the company’s fundamentals remain strong as it is still being managed by key executives.”
They added that CDL’s current price-to-book ratio of 0.5 and price-to-realizable net asset value ratio of 0.3 are lower than during the Global Financial Crisis.
“We expect a renewed focus on driving returns and profitability if the board dispute is resolved, which could lead to a gradual recovery of the share price,” they said.
Despite maintaining its “buy” recommendation, DBS has lowered its target price to $6.70 from $10.50 based on a 60% discount to RNAV, compared to the previous 35% discount. In contrast, the sector average discount is 50%.
Read also: CDL board fight cools with undertaking from two new IDsAdvertisement
DBS added that clarity and resolution over the disagreement in the board and realizing RNAV with the completion of development projects and potential asset recycling can lead to a re-rating of the stock.
Likewise, OCBC Investment Research has maintained its “buy” call but has reduced its fair value to $6.02 from $6.57 based on a wider RNAV discount of 60% compared to 45% previously. “We expect uncertainties over CDL’s outlook and a potential overhang on its share price until the issue is resolved,” said OCBC.
In his Feb 26 note, Citi Research’s Brandon Lee said it is challenging to estimate the impact of the dispute. “We believe that the uncertainty regarding the board and company leadership and the potential duration of the court case could limit the share price in the short term.”
Lee, who remembered Leng Peck’s resignation in October 2020, which triggered a 20% drop in CDL’s share price over the next two weeks, said that CDL is relatively under-owned by investors, and resolving the issue could be a significant catalyst for the share price in the long run.
JP Morgan analysts Mervin Song and Terence M Khi described the dispute at CDL as a “dynastic discord” stemming from years of disagreement, underperformance, and public conflicts among some members of the extended Kwek family.
” Our wish is for a positive resolution to the dispute and a reconciliation in the family,” said Song and Khi, although they have reduced the target price from $6.05 to $4.85 based on a 60% discount to the estimated RNAV of $12.1 per share.
