City Developments Ltd: Just halfway through the sprint
- CDL kicked off 2026 with strong momentum – up 12% YTD and nearly 30% in three months
- A near term tactical play on potential special dividend and valuation catch-up; • market concerns over gearing overstated, stable gearing at 0.7x not an issue
- Positive tailwinds ahead from lower rates, fading overhang of boardroom dispute, and ongoing review of strategy
- Maintain BUY and unchanged TP of SGD 11.80
Continued rebound in prices as market reallocates to developers. City Developments Limited (CDL, BUY, TP SGD 11.80) has started the year brightly in 2026 and is up 12% year-to-date (“YTD”) and close to 30% over the past 3-months. CDL’s share price performance has outpaced that of the other developers, which we believe is boosted by the prospects of an uplift in dividends come the announcement of FY25 results in end February. Recent conversations around CDL have been constructive, with investors showing strong interest and seeking clear catalysts that could drive share price higher.
In our recent sector outlook report, we highlighted that CDL, alongside our preferred pick UOL (BUY, TP SGD 11.00), continue to offer compelling value even after the strong rally in share prices. CDL trades at a still attractive 0.49x P/RNAV, below its 10-year historical average of c.0.55x, suggesting that there is still room to re-rate closer to our target price of SGD 11.80.
On a relative basis, for investors looking for proxies to ride on Singapore’s robust residential market, as well as the value-unlocking thematic within the sector, CDL is trading at an attractive discount to peer UOL, which is currently at 0.67x P/RNAV. Historically, both groups traded more closely. At present, however, UOL has pulled ahead and is trading at almost 20ppt above CDL. Hence, we see scope for CDL to close the valuation gap with UOL in the immediate term, particularly with potential “surprises” on the horizon. Should the relationship revert towards historical trends, there is strong reason for CDL to play valuation catch-up.
Catalysts to watch out for
Capital recycling activities to boost ROE towards 9%-10% and special dividend prospects. The group has been actively divesting and recycling assets through 2025, with contracted sales (excluding residential) amounting to close to SGD 2bn. The aim is to sharpen the group’s asset returns and improve return on equity (“ROE”), which we forecast to reach c.9-10% (FY25F: 9.7%). Over time, this should also help reduce its net gearing towards management’s medium-term target of 0.60x net debt to revalued NAV (“RNAV”), compared with a projected 0.70x as of end FY25.
We estimate overall realised divestment gains of SGD 600-650mn, of which SGD465mn comes from the divestment of its 50.1% stake in the South Beach integrated mixed-use development to its JV partner IOI Properties Group that was completed in 4Q25. The gains translate to a c.65-70 Scts per share uplift in NAV, part of which, we believe can be shared as special dividends. Considering the overall balance in capital needs (re-investments, deleveraging and rewarding shareholders) and to keep overall gearing stable, we believe that the group could pay up to 20 Scts per share in special dividends. On top of the final ordinary dividend of 8 Scts per share, this translates to a potential yield of c.3.1% (excluding the interim dividend of 3 Scts per share that has been paid).
List of major divestments in 2025 (non-exhaustive)
| Asset | Location | Asset Type | Consideration | Est. Gain |
| South Beach (mixed-use) | Singapore | Office / Retail / Hotel | SGD 1.3bn | SGD 465mn |
| 1250 Lakeside | Sunnyvale, USA | Multifamily Residential | USD 143.5mn (c.SGD 186.8mn) | Est. SGD 135mn – 185mn |
| Bespoke Hotel Osaka Shinsaibashi | Osaka, Japan | Hotel | JPY 14.0bn (c.SGD 117mn) | |
| Quayside Isle @ Sentosa Cove | Singapore | Retail | SGD 97.3mn | |
| Piccadilly Galleria (Retail Podium) | Singapore | Retail | SGD 65.5mn | |
| Total | Est. SGD 2.0bn | Est. 600mn – 650mn |
Source: Media, DBS Bank
Gearing movement post divestments
As a property developer, market concerns over its gearing could be overstated. As a developer, the group regularly participates in government land sales (“GLS”) and potentially enbloc projects to replenish its landbank. These investments are mainly debt-funded (i.e 60%-65% for land purchase, 100% for construction) and we understand that banks have consistently provided CDL with ample liquidity to fund these development projects. Based on our estimates, the group has invested more than SGD 1.2bn in GLS sites tendered in 2025 and will need to commit at least SGD 2.5bn in capital in the coming years, mainly as construction for the residential projects progress. This is in addition to two ongoing mixed-used development projects – Newport Residences and Union Square Residences, which came from the redevelopment of older commercial buildings on its books. We also anticipate the group will continue to add to its landbank as residential projects are launched over the course of the year, given that they have been pivoting back to their core competency of property development and actively participating in land replenishment.
Ongoing residential projects and upcoming projects to be launched in 2026
| Project | Status | CDL stake (%) | Land (SGD’mn) | Estimated breakeven (SGD’mn) | % Sold |
| Kassia | Launched in 2024 | 33.3% | - | - | 79% |
| Norwood Grand | Launched in 2024 | 100% | 295 | 1,706 | 87% |
| Union Square Residences | Launched in 2024 | 100% | - | - | 38% |
| The Orie | Launched in 2025 | 50% | 968 | 1,641 | 94% |
| Zyon Grand | Launched in 2025 | 50% | 1,107 | 1,994 | 86% |
| Newport Residences | Launch in 2026 | 100% | - | - | - |
| Lakeside Drive | Launch in 2026 | 100% | 608 | 1,139 | - |
| Woodlands Drive 17 (EC) | Launch in 2026 | 100% | 361 | 705 | - |
| Senja Close (EC) | Launch in 2026 | 100% | 253 | 508 | - |
| Total capital investment (Effective stake) | 2,555 | 5,876* |
*Estimated breakeven includes land price
Source: Media, DBS Bank
With the significant asset recycling activity in 2025 and taking into account reinvestments and GLS tender wins in Singapore, we project gearing to remain relatively stable at 0.70x net-debt-to-equity by end-2025. Given the group's sizable investment property portfolio, which generates steady recurring cashflows, the leverage ratio falls to c.0.45x on a net-debt-to-asset basis, which we view as fair.
In addition, stripping off the assumed development-related debt, we estimate that borrowings taken on the investment and hospitality divisions amount to c.SGD 9bn. Against an asset base (excluding development properties) of roughly SGD 20bn, this implies a debt-to-asset ratio of 0.45x, underscoring a relatively conservative balance sheet for the core recurring income businesses. Moreover, we note that CDL's commercial portfolio is carried at cost.
Other positives to be seen through 2026
We expect meaningful interest rate relief on the back of a lower funding environment and a favourable refinancing cycle. The average interest cost in 1H25 stood at 4.0%, and we forecast it to moderate towards c.3.5% by end-FY26. Based on our estimates, a 50bps reduction in the cost of debt would reduce interest obligations by nearly SGD 70bn, translating into a c.8% uplift to FY26F net profit.
We also believe that previous concerns over the 2025 boardroom dispute will continue to fade (albeit not fully gone), paving the way for a narrowing of the P/RNAV discount. The dispute materially weighed on investor sentiment at the time, but developments since then suggest the episode is largely “water under the bridge”. With the group executing well on asset recycling initiatives and reinvesting into growth opportunities, we see management focus firmly on delivering growth for shareholders and restoring investor confidence.
Lastly, a review of CDL’s strategy is underway. Management highlighted its intention to enhance disclosure quality, including setting 3-5 year performance guideposts to provide clearer visibility on the group’s outlook. We view this positively, as greater transparency should support improved accountability and allow investors to measure progress against medium-term targets.
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