Earlier in March, I wrote about City Development Ltd (CDL) shares trading at a bargain. Back then, it was cheap, unloved and got hit by an internal family fight.
Since then, shares have gone up 36% in just a couple of months – sitting ~S$6.75 per share. That’s a big jump.
Big question here: with CDL shares going up, can this stock surge continue? Or is it time to sell? Let’s dive in!
Disclaimer: I don’t own any CDL shares.
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CDL’s healthy 1H2025 financial results
CDL’s revenues surged ~S$1.7 billion for 1H2025, a 24% increase y/y. What’s more is its Singapore residential sales performance rose 90% in sales value to S$2.2 billion. Meanwhile, net profit grew ~3.9% y/y to S$91 million.
It fully sold its joint venture Executive Condominium (EC) project, Copen Grand, followed by other projects including The Myst, Norwood Grand, and other joint venture developments.
All in all, not too bad.
You see, CDL’s assets are solid. The major developer has investment properties, development projects, hotels, and joint ventures including offices, retail malls and residences across Singapore, UK and other development markets.
The value of these assets is real.
Earlier, I’ve pointed out CDL’s net asset value (NAV) was severely understated.
Net asset value, or book value is taking the total assets minus off intangibles and liabilities.
If you controlled CDL and sold the entire business away – hotels, residential projects, malls, offices and so on – and paid off all its bank debt, bonds, suppliers and other obligations, you’d be roughly left with its net asset value.
Management has stated in their FY2024 financial results presentation: “If they accounted for fair value gains on investment properties and revalued the hotel portfolio, its true NAV could be as high as $19.86 per share.”
Now, CDL shares are what I typically call: “deep-value” plays – or what hedge funds call a special situation.
In this case, the event is CDL’s internal family fight, which could force a company into a strategy shake-up.
However, CDL is an Asian family-controlled business. And fortunately, Asian family-controlled businesses are unlikely to make irrational decisions that would destroy shareholders’ value.
This is especially when a large part of its wealth is right to the company.
Just based on this critical view point and the company’s high-quality assets, each time CDL shares trade at a bargain, investors would swoop in to scoop up shares.
Now, these are times when CDL’s value is recognized, and its shares move back to its historical average P/B valuation – just like 2015, 2018, 2020 and 2022.
As I’ve said, I don’t believe this cycle should be different.
This is where it gets tricky. CDL shares at S$6+ per share are still trading below NAV, but not at the screaming bargain level we saw earlier at S$4+ per share. And earlier in March, CDL shares were a big giveaway.
From the way I look at this, CDL shares now trade at ~0.7x P/B ratio. This isn’t far off from its average P/B ratio.
Which also means, you’ve a thinner margin of safety. You get less upside if things continue to go right, and a lot more downside if things go wrong.
In deep value, knowing sentiments is incredibly important. You want to pick up shares of companies that look like road kill – cheap, hated and unpopular.
When sentiments change and the company looks more polished up a bit, that’s when you sell.
Would I buy CDL for dividends?
Today, CDL trades at an average 1% dividend yield, hardly inspiring for the dividends investor. What’s more, it paid a consistent S$0.08 dividend per share.
The good thing about CDL’s dividends is it gives a sweet bonus while waiting for its shares to revalue back to its true net asset value.
My final thoughts
At S$6 billion market cap, CDL is one of Singapore’s iconic blue-chip property developers. At one point, because of its family’s internal family feud, CDL was a blue-chip that was trading at “dirt-cheap” prices.
CDL shares are trading close to its historical average P/B ratio valuation. This means, you don’t get the “risk-less” profits when it was trading at ~S$4+ per share. In other words, there’s not much margin of safety on the stock today.
Can CDL shares continue to rally? Well, I won’t be surprised if its shares continue to go up. Right now, the property market is hot.
What’s more, CDL’s capital recycling efforts have bode well for the company.
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
