Singapore Dynasty CDL Needs Turnaround Plan To Satisfy Investors


For Singapore’s richest real estate family, the turnaround of City Developments Ltd. has only just begun.

A failed Chinese investment forced the real estate developer to write down $ 1.3 billion, raising questions about the extent of the damage and the fallout for senior executives who backed the deal.

CDL, majority owned by the billionaire Kwek dynasty, seeks to draw a line on an episode that rocked the family business. He pledged to limit the further damage caused by the lack of money Chongqing sincere Yuanchuang Industrial Co., which is now faced with a bankruptcy petition, stating on Thursday that he had fencingd its current financial exposure.

“This episode served as a wake-up call for CDL,” said Justin Tang, head of Asian research at United First Partners in Singapore. “The current management may not be quick to recognize their mistakes, but then react quickly to stop the bleeding. “

Photographer: Ore Huiying / Bloomberg

The scandalized investment cast a shadow over the company and even triggered a family breakdown. Several board members, including a cousin of the family patriarch and company president, Kwek Leng Beng, resigned in disagreement over the deal. And CDL descendant Sherman Kwek has come under intense pressure to recoup the investment he promoted and which contributed to the first annual loss since the early 1970s.

Shares of CDL gained 2.2% at 2:14 p.m. in Singapore. The company’s stock has fallen more than 12% this year, behind rivals CapitaLand Ltd. and UOL Group Ltd.

Investors’ attention is now focused on the recovery plan. Analysts say CDL could raise funds from UK investments, examine the potential for divestment and recovery of its hotel portfolio and tap into Singapore’s booming residential market as it seeks to emerge from the scandal.

A CDL representative declined to comment.

Asset sales

A listing of a real estate investment trust with business assets in the UK which includes the housing of the London building HSBC Holdings Plc, can help CDL unlock capital that can be redeployed for other exciting opportunities, said Vijay Natarajan, analyst at the RHB Research Institute. A strategic review of its wholly-owned hotel arm, Millennium & Copthorne Hotels, could also lead to divestitures as the pandemic hits the tourism and hospitality sectors.

“There is recent evidence that major hotel assets are still selectively sought after by major long-term investors in key gateway markets. Investments.

And as countries like Singapore ramp up vaccination and seek to open up, CDL can draw on its hotel assets in the UK, Maldives, Germany and Italy. CDL hotels “will be positioned to take advantage of the trend,” with the United States and Europe also seeing a pickup in travel, said Rachel Tan, analyst at DBS Group Research.

Then there is the booming residential market that it can capitalize on. Singapore home prices and sales have has remained strong over the past year, driven by the ultra-rich and buyers looking to switch from public to private units. CDL launched Irwell Hill Residences in April, where more than 50% of units broke over opening weekend, and is expected to unveil another private housing project in the second half of next year.

City Developments Ltd. President Kwek Leng Beng attends earnings press conference

Photographer: Ore Huiying / Bloomberg

President Kwek has been trying to put the Chinese debacle behind him for months, declaring in February, when announcing CDL’s record annual loss, that he wanted to “forget all those old topics”.

“I want to move on to the next chapter to grow the business,” he said at the time. “I don’t want to keep talking about Sincere.”

Even if it seeks to move beyond the failure of the Chinese investment, CDL’s subsequent steps will be closely watched.

“Going forward, the market will obviously bring it closer and CDL needs to regain its confidence,” Tang said.

(Updates with actions in the sixth paragraph.)

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