City Developments stocks took a hit of 28 cents, or 5.47%, with trading resuming after a halt on Feb 26. The company had cancelled a scheduled results briefing at the last minute, and shortly after, news of a disagreement between executive chairman Kwek Leng Beng and his son, group CEO Sherman Kwek, surfaced, causing a stir in the Singapore business community.
In response, CDL stated that it was not able to comment on the validity of the allegations, as they were currently being addressed in court proceedings. However, the company emphasized that its business operations remained unaffected and Sherman Kwek remained the Group CEO until the board made a decision to change company leadership.
The ongoing family dispute has caused analysts to downgrade their calls and adjust their target prices for the company. Adrian Loh from UOB Kay Hian downgraded the stock from “buy” to “hold” after the FY2024 numbers fell short of both his and consensus’ estimates. However, he points out that the company’s valuable assets may struggle to perform with the current tension in the boardroom. Loh’s revised target price of $4.60 is based on 2 standard deviations below its five-year average P/B of 0.72 times.
Meanwhile, Derek Tan and Tabitha Foo from DBS Group Research believe that CDL’s fundamentals remain intact, with key management still running the company. They also note that the company is trading at an attractive valuation of 0.5 times P/B and 0.3 times P/RNAV, below the lows seen during the Global Financial Crisis. However, they have reduced their target price from $10.50 to $6.70, based on a 60% discount to RNAV.
OCBC Investment Research maintains its “buy” call, but with a reduced fair value of $6.02, and expects uncertainties and potential overhang on the stock until the issue is resolved. Similarly, Citi Research’s Brandon Lee believes that the impact of this disagreement is difficult to quantify, but remains a potential share price overhang in the short term. Nonetheless, Lee maintains a “buy” call with a target price of $9.51.
JP Morgan analysts, Mervin Song and Terence M Khi, describe the situation at CDL as a “dynastic discord,” stemming from years of frustration and public disagreement among certain members of the Kwek family. While the analysts hope for a positive resolution and family reconciliation, they have reduced their target price from $6.05 to $4.85, based on a 60% discount to their RNAV estimate of $12.10 per share.