OCBC Investment Research
13 August 2025

City Developments Ltd: Robust Divestments, Dividend Potential, and ESG Leadership in Focus

Overview: A Leading Global Real Estate Player

City Developments Limited (CDL) stands as one of Singapore’s most prominent real estate developers, boasting a diversified portfolio across 163 locations in 29 countries. Listed on the Singapore Exchange, CDL’s operations span property development, hotel operations, and investment properties, with a consistent focus on portfolio enhancement and shareholder value creation. Its wholly-owned subsidiary Millennium & Copthorne Hotels Limited (M&C) operates 155 hotels globally, cementing CDL’s reach in key gateway cities.

Key Highlights from H1 2025: Earnings Growth and Special Dividend

• 1H25 Profit After Tax and Minority Interests (PATMI) increased 3.9% year-on-year to SGD91.2 million.
• Declared a special interim dividend per share (DPS) of 3 Singapore cents, up from 2 cents in the prior year.
• Contracted divestments have surpassed SGD1.5 billion year-to-date, with expectations of more to come.

CDL’s core business segments—property development, hotel operations, and investment properties—have delivered resilient performance, supported by robust capital recycling and proactive asset management. Recent new residential launches in Singapore achieved healthy sell-through rates, further underscoring operational momentum.

Investment Thesis: Opportunities and Watchpoints

While CDL’s portfolio reconstitution—such as divestment of assets at a premium and redevelopment of older commercial properties—has unlocked significant value, headwinds remain. The uncertain global economic outlook and the lingering effects of policy tightening may temper investor sentiment. Despite a recent boardroom dispute being resolved, investor attention will remain fixed on CDL’s execution and governance practices.

Financial Performance: 1H25 and Full-Year Projections

• 1H25 revenue rose 8.0% YoY to SGD1,687.9 million, led by the property development segment.
• Residential unit sales in Singapore surged to SGD2.2 billion in 1H25, up 90.4% YoY.
• Share of profits from associates and joint ventures soared 599.1% YoY to SGD126.1 million, driven by projects such as Copen Grand (fully sold executive condominium), CanningHill Piers, The Orie, and Tembusu Grand.
• Net foreign exchange losses of SGD63.1 million in 1H25 (versus net gains of SGD51.3 million in 1H24) weighed on bottom-line growth.
• Excluding FX, fair value changes, and divestment gains/losses, 1H25 core PATMI was SGD62.4 million (versus core net losses of SGD83.3 million in 1H24).
• 1H25 core PATMI accounted for 22.2% of FY25 forecast, below expectations.
• Management hints at the possibility of further positive dividend surprises for the full year, supported by active capital recycling and potential share buybacks.

Financial Summary Table

Divestment Activity: Capital Recycling Accelerates

CDL has executed over SGD1.5 billion in divestments year-to-date, notably its 50.1% stake in the South Beach mixed-use development to IOI Properties Group Berhad, valued at SGD2.75 billion (100% basis). Capital from these divestments has been rapidly redeployed into Singapore government land sales (GLS) sites, with SGD1.2 billion in tenders—one awarded and two executive condominium (EC) sites pending.
Management anticipates ending 2025 with more contracted divestments (excluding residential sales) than investments, providing headroom to boost shareholder returns through higher dividends. Further divestment opportunities, including potential UK land sales and a possible UK REIT listing, remain on the horizon, though timing is market-dependent.

Balance Sheet and Gearing: Room for Strengthening

• Net gearing stood at 70% (including revaluation surplus from investment properties), slightly above end-FY24’s 69%.
• Medium-term target gearing is high-50% to low-60% range.
• Average borrowing cost declined by 40bps half-on-half to 4.0%, with expectations to dip below 4% by end-FY25.

PATMI forecasts for FY25 and FY26 have been revised down by 26% and 13% respectively due to foreign exchange losses and lower-than-expected core profit. However, the revalued net asset value (RNAV) discount is narrowed from 54% to 50%, reflecting resolution of board issues and signs of recovery in Singapore’s core central region (CCR) residential segment. The fair value estimate is raised from SGD6.01 to SGD6.87.

ESG Leadership: Sustained High Ratings and Net Zero Ambitions

CDL consistently achieves top-tier ESG ratings, outpacing peers in managing risks and capitalizing on opportunities across its diversified real estate businesses. Initiatives include:

• First Southeast Asian real estate conglomerate to pledge net zero operational carbon by 2030, covering new and existing wholly-owned assets under direct management.
• Commitment to net zero whole life carbon emissions, maximum embodied carbon reduction in new developments by 2030, and all buildings to be net zero by 2050.
• Focus on reducing energy and water wastage, boosting appeal for sustainable tenants.

Potential Catalysts and Investment Risks

Potential Catalysts:

• Stronger-than-expected take-up rates for residential projects.
• Accelerated residential price growth in Singapore.
• Relaxation of property cooling measures.

Investment Risks:

• Macroeconomic slowdown affecting consumer and business sentiment.
• Weaker-than-expected residential project margins.
• Further government property tightening measures.

Peer Group Analysis: Comparative Valuations for Singapore Real Estate Majors

Company Segment Performance and Business Mix

By FY24 Revenue:

• Hotel Operations: 49.6%
• Property Development: 28.7%
• Investment Properties: 15.3%
• Others: 6.4%

By FY24 Operating Profit:

• Investment Properties: 43.9%
• Hotel Operations: 40.1%
• Property Development: 14.0%
• Others: 2.0%

Historical Performance: Revenue, Margins, and Profitability

Profitability and Credit Ratios

• Return on Equity (FY24): 2.16%
• Return on Assets (FY24): 0.85%
• Operating Margin (FY24): 20.96%
• Pretax Margin (FY24): 11.43%
• Net Income Margin (FY24): 5.83%
• Dividend Payout Ratio (FY24): 37.60%
• Total Debt/EBIT (FY24): 25.04
• Net Debt/Equity (FY24): 1.25

Conclusion: Outlook and Recommendation

With a robust capital recycling program, strong residential sales, and a clear commitment to ESG leadership, City Developments Ltd remains well-positioned within Singapore’s real estate sector. While ongoing macroeconomic uncertainties and policy risks warrant caution, the company’s proactive management and sound financial discipline offer potential upside. The fair value estimate is revised upward to SGD6.87, with a HOLD rating reflecting a balanced risk-return profile in the current environment.

Disclosures and Methodology

• BUY rating: Total expected returns (excluding dividends) in excess of 10%.
• HOLD rating: Total expected returns (excluding dividends) within +10% and -5%.
• SELL rating: Total expected returns (excluding dividends) less than -5%.
• For REITs and Business Trusts, total expected returns include dividends.
• For companies with market capitalization of S\$150m and below, thresholds are set at 30% for BUY/SELL ratings.