Impressive sales achieved for the year to date. For the year to date, CDL has sold 1,031 residential units that amount to ~S$1.34b. Sales momentum picked up strongly during the last 2 months as CDL sold 494 units amounting to S$675m since July. This is expected to increase in the coming months with new project launches.
New launches in the pipeline. CDL is expected to launch the former Hong Leong Garden site, a 396-unit mass market project in West Coast area next month. With nearby projects achieving average selling prices (ASP) of ~S$750 psf in the secondary market, we expect CDL to launch this site at ASP of S$800-S$850 psf. We have now raised our ASP assumption for this project from S$700 psf to S$850 psf. The former Albany and Thomson Mansion sites located next to The Arte is expected to be launched in 4Q09. The Quayside Isle Collection could also be launched depending on market conditions and this project could potentially bring about a positive surprise to our earnings estimate as construction has already been started and CDL could book in more profits from the sales, based on the advance stage of construction.
Fair value raised to S$9.26; Upgrade to HOLD. Our RNAV estimate for CDL has now been raised to S$9.26 per share (previously S$8.20), reflecting the lower cost of capital used (6.57%), increase in market value of Millennium and Copthorne and increase in our estimated surplus from the South Beach project. We expect the completion schedule of the South Beach project to coincide with the expected recovery in the office sector in 2013. We continue to peg our fair value of CDL at par to our RNAV estimate. As such, our fair value has now been raised to S$9.26 (previously S$8.20) and we are now upgrading CDL from SELL to HOLD.
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