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PLAY OF THE WEEK – CDL attracts heavy buying after clinching iconic site

CLINCHING the historic Beach Road military camp site helped ignite fresh buying interest in property giant City Developments (CDL).

The site, which cost the CDL-led consortium $1.69 billion, is just a stone’s throw from the upcoming Marina Bay Sands integrated resort and the Formula One street circuit.

Observers believe the acquisition will enhance CDL’s already high-quality portfolio, which includes top-notch commercial buildings and condos like Republic Plaza and The Sail@Marina Bay.

CDL yesterday surged 50 cents to $15.40 on a heavy volume of 5.8 million shares. It hit an intra-day high of $15.60. Its total gain for the week was 40 cents.

Kim Eng Research analyst Wilson Liew said the iconic Beach Road site is slated to include premium offices, two luxury hotels, exclusive residences and retail space with a total gross floor area of 1.58 million sq ft.

‘Assuming a breakdown of 40 per cent for office use, 30 per cent for hotel use, 15 per cent for residential use and 15 per cent for retail use, we estimate the total development cost at around $2.6 billion, should add 25 cents per share to revalued net asset value (RNAV),’ he said.

Mr Liew raised his target price for CDL to $18, based on a 20 per cent premium to his RNAV of $15.66.

The heavy buying of CDL shares also reflected investors’ conviction that demand would stay buoyant in the red-hot residential market.

On Thursday, BNP Paribas noted that developers had maintained their selling prices ‘and have no intention of lowering them at this juncture’.

This was despite a slowdown in property sales last month, which could have been due to buyers here also taking a ‘wait-and-see’ attitude, as the United States mortgage crisis deepened.

On the secondary resale market, the wide disparity between sellers’ asking prices and buyers’ offer prices is narrowing, suggesting that demand in the property market is sustainable.

‘Singapore developers are currently trading at around 6 per cent to 37 per cent below the peak share price prior to the market correction in late July, which presents an attractive discount, especially as property market fundamentals have not changed much over the period.’

BNP Paribas also expects developers with a big exposure to the Singapore mass market, such as CDL, to benefit from opportunities for collective sales still available on the city’s fringes and in suburban areas where land is still affordable.


Source: The Straits Times 15 Sept 07

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