CDL initiates share buyback programme with purchase of 954,000 ordinary shares

CDL's flagship Republic Plaza (Photo: Samuel Isaac Chua/The Edge Singapore)

City Developments Limited (CDL) C09 0.00% has initiated a share buyback programme for its ordinary shares via open market purchases on March 8.

In a news release, CDL says its shares are currently trading significantly below their intrinsic value despite the company’s “strong fundamentals”.

The company notes that it posted record revenue of $4.9 billion in FY2023 and has a diverse global portfolio of $33 billion in assets comprising residences, offices, hotels, serviced apartments, student accommodation, retail malls and integrated developments.

On March 8, CDL purchased 954,000 ordinary shares — approximately 0.11% of CDL’s issued shares prior to the buyback — at an average price of $5.75, representing a discount of 43% to net asset value (NAV) per share of $10.12 and a discount of 70% to the revalued NAV (RNAV) per share of $19.461 as at Dec 31, 2023.

Group CEO Sherman Kwek says: “Global equities have been hit by macroeconomic headwinds, resulting in depressed valuations. Our share buyback programme demonstrates our confidence in CDL’s strong fundamentals and growth potential.”

“Our shares are trading at a 70% discount to our RNAV and by acquiring our shares at value-accretive prices, it presents an attractive opportunity to deploy our capital into our portfolio which we know best. This move signals our commitment to strengthen our alignment with our shareholders,” he adds.

In FY2023 ended Dec 31, 2023, CDL made $2.4 billion worth of acquisitions and investments across six countries, including the acquisitions of St Katharine Docks in central London in the UK, the Champions Way government land sales site in Singapore, as well as the private rented sector projects in Tokyo and Osaka in Japan.

The healthy appetite stems from CDL’s view there are many “price dislocations” it could take advantage of. According to Kwek, some of these sellers were really in a hurry to dispose of these assets.

The acquisitions lifted CDL’s RNAV by 1.4% y-o-y to $17.21 per share as of Dec 31, 2023. Including the revaluation surpluses from the hotel portfolio, CDL’s RNAV would have stood at $19.46 instead.

During CDL’s results briefing on Feb 28, Kwek announced a target to divest $1 billion worth of assets this year. “Many of our existing assets sit on our books at a low carrying cost. Therefore, I think we have a lot of ways to unlock, value and monetise,” he said.

Based on CDL’s share purchase mandate approved by shareholders at its 60th Annual General Meeting in April last year, CDL can purchase up to 10% of the total number of issued ordinary shares and preference shares as at April 26, 2023, subject to the annual review and mandate parameters.

This translates to 90,690,133 ordinary shares, excluding 2,400,000 treasury shares, and 33,087,425 preference shares.

CDL’s share buyback programme will be made in tranches over a period of time, subject to market conditions and depending on the prices at which the ordinary shares are purchased. The purchased ordinary shares will be held as treasury shares, and a portion of them may be deployed for the company’s long-term incentive plans.

In November 2023, the group launched an off-Market equal access offer to buy back up to 10% of the total preference shares issued, at an offer price of 78 cents per share. The offer was completed in December 2023 with the purchase of 33,087,425 preference shares.

The purchased preference shares have since been cancelled, reducing the group’s finance cost in relation to the coupon payment obligation for these preference shares.

Shares in CDL closed 7 cents higher or 1.23% up at $5.75 on March 8.