Like other developers, City Dev has done well in recent months - after selling 537 new homes in the first half for $665 mln (or $1.24 mln average), the group sold 494 units in the last 7 weeks for $675 mln ($1.37 mln), bringing the total sold in the year to date, to 1,031, valued at $1.34 bln ($1.3 mln). This would include the 329-unit joint-venture project The Gale, which is >90% sold, and the 85-unit Volari @ Balmoral, which is almost sold out.
In the remaining months of the year, City Dev plans to launch the 396-unit Hong Leong Garden in the west coast, and the 162-unit Albany, which is next to the almost sold-out Arte at Thomson, but on a superior site.
On the holiday Sentosa island, City Dev is expected to launch The Quayside Isle Collection to coincide the opening of the Sentosa IR early next year. Construction has already started, suggesting meaningful recognition of profit soon after the launch, much as what City Dev had done with Arte (ie construction began before the launch), which made its maiden contribution to the bottom-linein Q2.
On the South Beach development, having secured refinancing in June, including additional $195 mln from City Dev and $205 mln from a new partner (privately-owned Nam Fung of Hong Kong), the consortium is presently moving towards “refining the design plans and value engineering” before construction commences, and targeting to complete by the deadline in 2016.
City Dev’s balance sheet remains one of the strongest in the sector (excluding the cash-rich Wheelock), with gross gearing of 72%. Interest cover is a strong 10.1x, albeit lower than 11.7x a year ago.
Being the largest local developer (with land bank yielding 7.5 mln sf of gross floor area), City Dev remains one of the best proxies to the sector. While it has done well since March ’09, and appears to be encountering technical resistance at the $10 level, we remain comfortable with City Dev, taking a medium-term view.
Maintain BUY.
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