OCBC upgrades CDL to 'buy' as H1 profit surges 231%

OCBC raised its rating on City Developments Limited (CDL) to 'buy' from 'hold' after the developer's first-half net profit more than tripled. Analysts are also watching for the outcome of CDL's strategic review, expected by end-September.

OCBC has upgraded City Developments Limited (CDL) to “buy” from “hold”, while trimming its fair value target slightly to S$10.35 from S$10.40. The move comes after CDL reported a 230.7 per cent year-on-year surge in net profit to S$301.6 million for the first six months of this year, with revenue climbing 61.1 per cent to S$2.72 billion.

Andy Wong, a senior equity research analyst at OCBC, said CDL’s recent share price decline had made the stock more attractive, and that investors are likely to watch for the results of the company’s strategic review. Other analysts also rate the stock a “buy”, with target prices ranging from S$11.32 to S$12.11.

The strong first-half performance was driven by CDL’s property development business, which benefited from robust demand in Singapore’s private residential market. Its hotel segment swung back into the black with a pre-tax profit of S$42 million, against an S$84.4 million loss a year earlier, thanks to higher revenue and a net foreign-exchange gain from the Singapore dollar’s strengthening. Hotel revenue rose 6.4 per cent while revenue per available room climbed 4.9 per cent to S$161.90. CDL shares jumped as much as 11 per cent on the morning the results were released.

Analysts are also positive ahead of the outcome of CDL’s strategic review, which is expected by the end of September after being delayed from its original June target. Group CEO Sherman Kwek said at a results briefing earlier this month that the review will outline the firm’s future growth strategy, capital allocation framework and implementation roadmap. PhillipCapital analyst Darren Chan told The Business Times that the review could create scope for a CDL rerating by speeding up asset recycling and deleveraging, and sees an opportunity for the developer to expand its fund management business and build recurring income alongside its development activities.

Sherman Kwek also said at the briefing that CDL intends to step up asset disposals in the second half of 2026, with the potential sale of around S$800 million worth of legacy assets in Britain. The moves come as he seeks to lower the company’s debt burden and rebuild investor confidence following his early 2025 public feud with his father, Kwek Leng Beng, CDL’s executive chairman. The pair has since agreed to put aside their differences. Leng Beng and his family ranked second on Forbes’ list of Singapore’s richest people last September, with an estimated combined net worth of US$14.3 billion.