OCBC downgraded City Developments to Hold from Buy after the Singapore government imposed a fresh round of property cooling measures.
“We expect City Developments Limited (CDL) to be one of the worst hit among the developers under our coverage,” OCBC said in a note on Monday, adding it expected the developer’s local residential sales momentum and margins to be pressured.
“Our previous thesis of CDL being a key beneficiary to the Singapore residential market upcycle given its large land bank would now likely work against them after these new measures,” it said, noting the developer has around 3,500 units of unsold inventory, including its future launch pipeline.
OCBC said it would now apply a 40 percent discount to revalued net asset value (RNAV) to its valuation of the stock, up “significantly” from 5 percent previously. It cut its fair value to S$9.59 from S$15.78.
Despite the stock’s sharp 15.6 percent selloff on Friday, negative investor and buyer sentiments were likely to curtail any share price rebound in the near term, OCBC said.
The stock ended Monday up 1.69 percent at S$9.62.