City Dev

City Dev: CS maintains O/p with $13.43 TP. House note that as one of the largest residential proxies, CDL’s share price fell 9% after the 7th set of measures announced 11 Jan. Believe the situation is not as bad as is perceived as management has shown strong execution capability, improving ROE despite falling gearing. Given the strong cash flows coming from profit recognition from strong sales in the last 3Y (Fig. 1), believe there could be room for more special dividends or a higher dividend payout policy. Note that Commercial asset (47% of RNAV) prices are likely to hold up supported by investment demand, low I/R and positive rent reversions, while house expect residential prices to remain flattish. Based on a 10% decline in ASPs, especially for launches, expect a negative 5-7% profit impact in FY13-14 as bulk of City’s near term earnings will be from projects sold in recent times. Continue to like CDL for its strong execution and maintain OUTPERFORM, with a revised target price of $13.43. The stock is on 1.48x P/B, vs its historical average of 1.95x.