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CITY DEVELOPMENTS LTD


DOWNGRADE TO SELL
March 1, 2012 Price: SGD 11.13 Singapore [Real Estate Management & Development] Ticker: [CIT SP] Market Cap: USD 7,202.9 m Outstanding Shares: 909.2 m Six Month Avg. Daily Trading Vol. (USD m): 12.6 52 Week High/Low: SGD 11.80 / SGD 8.50
Asian Sales Charlie Gushee Head of Global Equity Sales cgushee@agco.com 212-453-3511 Erik Lam elam@agco.com 212-453-3570 Sandra Sondak ssondakm@agco.com 212-453-3509 Duke Shin dshin@agco.com 212-453-3528 Anshuman Ray aray@agco.com 212-453-3546 Sandeep Seth sseth@agco.com 212-453-3530 Ailsa Carpenter acarpenter@agco.com 212-453-3507 Chris Dodson Japanese Sales cdodson@agco.com 212-453-3541 Trading 212-557-4444 Garth Ballantyne Head of Trading gballantyne@agco.com Geoffrey Gimber ggimber@agco.com David Sweet dsweet@agco.com Selim Sari ssari@agco.com Mike LoPiano mlopiano@agco.com Peter Peters ppeters@agco.com John Geron U.S. Trading jgeron@agco.com Fixed Income Tim Slaughter Head of Fixed Income tslaugher@agco.com

SELL

City Developments (CDL) reported 4Q11 PATMI of S$163m, down 32% YoY, mostly due to the absence of gains recognized from strata unit sales at Chinatown Point (present in year-ago quarter). As a result, FY11 PATMI cumulated to S$799m which was mostly within our expectations. FY11 topline came in at S$3,280m again in line with our FY11 forecast (S$3,301m). Net gearing improved to 21% (versus 29% in FY10) with a healthy cash balance of S$2.6b as of FY11. Total final dividends of 13 S-cents (5 cents special, 8 cents ordinary) were proposed. In FY11, CDL sold a total of 1,818 units for S$1,755m versus 1,559 units for S$2,115m in FY10. Management indicated that they would launch Robertson Quay (70 units) in Mar/Apr 12 and the landed site at Serangoon Garden Way (96 units) in Apr 12. It would also continue to expand its Chinese presence by injecting S$500m into CDL China for further acquisitions, in addition to the S$300m allocated in Aug 10. The hotel segment put up healthy numbers with M&Cs global RevPar up 5.8% YoY (constant currency terms), driven mainly by an increase in average room rates. M&Cs FY11 PATMI came in at GBP161m, up 67.3%. We expect numbers from hotels to stay relatively firm, particularly in London where hospitality assets are likely to outperform with the upcoming Olympic Games. While managements execution continues to be spot on, the share price has appreciated 25% YTD and we believe the risk-reward proposition appears unfavorable currently. Our fundamental view remains unchanged that uncertainties in the domestic residential sector persist, which could bear on CDL given its significant landbank of 5.56m sq ft. Downgrade to SELL. However, we raise our fair value estimate to S$8.92 (35% discount to RNAV) from S$8.38 previously as we update our model for latest M&C valuations and FY11 financials.
YE DEC 2013E 2012E 2011 2010 Revenue (SGD m) 3,604 3,400 3,281 3,103 EBITDA (SGD m) ----Net Income (SGD m) 680 672 799 784 Adj. EPS (SGD) 0.75 0.74 0.88 0.85 EV/EBITDA (X) ----P/E (X) 14.9 15.1 12.7 13.1 Div. Yield (%) 1.60 1.60 1.60 0.70

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Singapore | Real Estate Management and Development

Asia Pacific Equity Research

CITY DEVELOPMENTS LTD | SELL


MARKET CAP: USD 8.1B AVG DAILY TURNOVER: USD 51M 1 Mar 2012 Company Update

DOWNGRADE TO SELL
4Q11 results in line Residential uncertainties persist Unfavorable risk-reward currently

SELL (downgrade)
Fair value add: 12m dividend forecast versus: Current price 12m total return forecast S$8.92 S$0.18 S$11.13 -18%

4Q11 results within expectations City Developments (CDL) reported 4Q11 PATMI of S$163m, down 32% YoY, mostly due to the absence of gains recognized from strata unit sales at Chinatown Point (present in year-ago quarter). As a result, FY11 PATMI cumulated to S$799m which was mostly within our expectations. FY11 topline came in at S$3,280m again in line with our FY11 forecast (S$3,301m). Net gearing improved to 21% (versus 29% in FY10) with a healthy cash balance of S$2.6b as of FY11. Total final dividends of 13 S-cents (5 cents special, 8 cents ordinary) were proposed. Healthy residential sales in FY11 In FY11, CDL sold a total of 1,818 units for S$1,755m versus 1,559 units for S$2,115m in FY10. Management indicated that they would launch Robertson Quay (70 units) in Mar/Apr 12 and the landed site at Serangoon Garden Way (96 units) in Apr 12. It would also continue to expand its Chinese presence by injecting S$500m into CDL China for further acquisitions, in addition to the S$300m allocated in Aug 10. Firm numbers for the hotel segment The hotel segment put up healthy numbers with M&Cs global RevPar up 5.8% YoY (constant currency terms), driven mainly by an increase in average room rates. M&Cs FY11 PATMI came in at GBP161m, up 67.3%. We expect numbers from hotels to stay relatively firm, particularly in London where hospitality assets are likely to outperform with the upcoming Olympic Games. Unfavorable risk-reward here downgrade to SELL While managements execution continues to be spot on, the share price has appreciated 25% YTD and we believe the risk-reward proposition appears unfavorable currently. Our fundamental view remains unchanged that uncertainties in the domestic residential sector persist, which could bear on CDL given its significant landbank of 5.56m sq ft. Downgrade to SELL. However, we raise our fair value estimate to S$8.92 (35% discount to RNAV) from S$8.38 previously as we update our model for latest M&C valuations and FY11 financials.

Analysts Eli Lee (Lead) +65 6531 98112 elilee@ocbc-research.com Kevin Tan +65 6531 9810 kevintan@ocbc-research.com

Key information Market cap. (m) Avg daily turnover (m) Avg daily vol. (m) 52-wk range (S$) Free float (%) Shares o/s. (m) Exchange BBRG ticker Reuters ticker ISIN code GICS Sector GICS Industry Top shareholder S$10,166 / USD8,126 S$64 / USD51 6.2 8.5 - 11.7995 68.0 909.3 SGX CIT SP CTDM.SI C09 Financials RE Mngt & Dev Aberdeen - 19.0% 1m 10 7 3m 16 4 12m 0 -1

Relative total return Company (%) STI-adjusted (%) Price performance chart
Shar e Pr i ce (S$ ) 12.28 11.16 10.04 8.93 7.81 6.70 Mar -11 Jun-11 Aug-11 `

Index Level 3400 3080 2760 2440 2120 1800 Nov-11 Feb-12

Fair Value
Sources: Bloomberg, OIR estimates

CIT SP

FSSTI

Key financial highlights Year ended 31 Dec (S$m) Revenue Cost of sales Gross profit Shareholders' profit EPS (S-cents) Cons. EPS (S-cents) PER (x) P/NAV (x) ROE (%) Net gearing (%) FY10 3,103.4 -1,450.7 1,652.7 784.0 84.8 na 13.1 1.6 12.5 29.2 FY11 3,280.5 -1,507.5 1,773.0 798.6 87.8 na 12.7 1.5 11.7 20.7 FY12F 3,400.3 -1,562.5 1,837.7 671.9 73.9 73.1 15.1 1.3 9.2 10.1 FY13F 3,604.3 -1,656.3 1,948.0 680.1 74.8 75.7 14.9 1.3 8.7 2.2

Industry-relative metrics
P er c ent i l e 0t h 25t h 50t h 75t h 100t h

M k t Cap B et a ROE PE PB

Company

I ndus t r y A v er age

Note: Industry universe defined as companies under identical GICS classification listed in the same exchange. Sources: Bloomberg, OIR estimates

Please refer to important disclosures at the back of this document.

MITA No. 019/06/2011

OCBC Investment Research Singapore Equities

Exhibit 1: Quarterly financial highlights 4Q10 (S$m) Revenue Cost of sales Gross profit Other operating income Administrative expenses Other operating expenses Profit from operations Finance income Finance costs Share of associate profits (after-tax) Share of JV profits (after-tax) PBT Income tax PAT MI PATMI Sources: Company financials 671.6 -294.2 377.4 218.5 -125.4 -194.0 276.5 5.6 -19.4 10.8 36.9 310.3 -53.2 257.1 16.1 241.0 4Q11 (S$m) 721.5 -263.4 458.1 9.8 -116.0 -120.9 231.0 8.1 -18.7 14.6 11.4 246.3 -43.6 202.7 39.5 163.2 % Chg (YoY) 7.4% -10.4% 21.4% -95.5% -7.5% -37.7% -16.5% 44.6% -3.8% 35.5% -69.2% -20.6% -18.1% -21.1% 145.2% -32.3% 3Q11 (S$m) 805.8 -358.2 447.6 0.6 -126.7 -92.2 229.4 6.3 -21.2 4.5 -1.4 217.5 -29.3 188.2 56.1 132.1 % Chg (QoQ) -10.5% -26.5% 2.3% nm -8.4% 31.1% 0.7% 28.5% -11.8% 227.0% nm 13.2% 48.5% 7.7% -29.5% 23.6%

OCBC Investment Research Singapore Equities

Company financial highlights

Income statement Year ended 31 Dec (S$m) Revenue Cost of sales Gross profit Administrative expenses Profit from operations Net finance costs Share of JV's profits Profit before income tax Profit for the period Shareholders' profit

FY10 3,103.4 -1,450.7 1,652.7 -484.0 990.1 -33.1 93.3 1,067.5 865.4 784.0

FY11 3,280.5 -1,507.5 1,773.0 -490.2 1,127.4 -52.9 30.2 1,136.4 961.7 798.6

FY12F 3,400.3 -1,562.5 1,837.7 -508.1 1,025.3 -55.5 20.5 1,079.0 863.2 671.9

FY13F 3,604.3 -1,656.3 1,948.0 -538.6 1,086.8 -58.3 4.5 1,126.3 901.0 680.1

Balance sheet Year ended 31 Dec (S$m) Cash and bank balances Property, plant and equipment Development properties Total assets Debt Current liabilities excluding debt Total liabilities Shareholders equity Total equity Total equity and liabilities

FY09 1,873.8 3,410.4 3,311.2 13,962.8 4,205.3 1,238.1 5,982.5 6,262.5 7,980.3 13,962.8

FY10 2,603.0 3,313.2 3,243.9 14,962.5 4,405.8 1,342.7 6,266.5 6,826.8 8,696.0 14,962.5

FY11F 2,970.7 3,904.1 3,081.7 15,650.0 3,912.5 1,420.6 5,876.9 7,335.0 9,773.1 15,650.0

FY12F 3,725.9 3,962.4 2,927.6 15,784.8 3,946.2 1,502.1 6,019.3 7,851.5 9,765.6 15,784.8

Cash flow statement Year ended 31 Dec (S$m) Operating profit b/f WC change Changes in working capital Income tax paid Operating cash flow Investing cash flow Financing cash flow Net change in cash Cash at beginning of the year Other adjustments Cash at end of the year

FY09 896.8 -278.9 -105.9 512.1 371.0 34.6 917.6 980.1 -23.9 1,873.8

FY10 1,053.7 91.5 -162.2 983.0 52.7 -419.5 616.1 1,873.0 -1.5 2,487.6

FY11F 1,211.3 899.4 -107.9 2,002.8 -130.4 -1,389.3 483.1 2,487.6 0.0 2,970.7

FY12F 1,277.2 184.7 -112.6 1,349.3 -124.9 -469.2 755.2 2,970.7 0.0 3,725.9

Year ended 31 Dec (S$m) EPS (S-cents) NAV per share (S-cents) PER (x) P/NAV (x) Gross profit margin (%) Net profit margin (%) Net gearing (%) Dividend yield (%) ROE (%) ROA (%) Sources: Company, OIR forecasts

FY09 84.8 688.7 13.1 1.6 53.3 27.9 29.2 0.7 12.5 6.2

FY10 87.8 750.8 12.7 1.5 54.0 29.3 20.7 1.6 11.7 6.4

FY11F 73.9 858.7 15.1 1.3 54.0 25.4 10.1 1.6 9.2 5.5

FY12F 74.8 845.7 14.9 1.3 54.0 25.0 2.2 1.6 8.7 5.7

Company financial highlights

OCBC Investment Research Singapore Equities

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RATINGS AND RECOMMENDATIONS: - OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented. - OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIRs BUY rating indicates a total return in excess of 10% given the current price; a HOLD trading indicates total returns within +/-10% range; a SELL rating indicates total returns less than -10%. - For companies with less than S$150m market capitalization, OIRs BUY rating indicates a total return in excess of 30%; a HOLD trading indicates total returns within a +/-30% range; a SELL rating indicates total returns less than -30%.

Co.Reg.no.: 198301152E Carmen Lee Head of Research For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

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