[SINGAPORE] City Developments Ltd (CDL), which was recently embroiled in a family power struggle, has responded to questions from shareholders, spanning from its share price decline to its responses to the Securities Investors’ Association Singapore’s (Sias) queries.
This was in a bourse filing on Thursday (Apr 17) night, ahead of its annual general meeting on Apr 23.
A shareholder called the “chasm” between CDL’s estimated revalued net asset value of S$19.86 and its trading price – which came in at S$4.47 as at Apr 8 – “unacceptable”, adding that it was a reflection of the “profound failure” of CDL’s board to “crystallise value”.
They asked about the efforts to address the discount, and the asset realisation being done.
In its response, while CDL recognised the “disconnect” – given its “robust portfolio of assets totalling S$34 billion on its balance sheet” – it flagged “broader macroeconomic concerns” that have “weighed heavily on equity market sentiments and capital flows towards the real estate sector”.
These include the higher-for-longer interest rate environment, geopolitical uncertainties, and structural headwinds – such as April 2023’s property cooling measures, which came on top of earlier rounds in 2021 and 2018.
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The filing added: “CDL’s share price was also impacted by its removal from the MSCI Singapore Index on May, 31, 2024.”
Thus, the group’s share price was negatively affected, along with its “ability to execute its strategy within its targeted timelines”. It noted that this has led to a further widening of the valuation gap.
Sector-specific headwinds have also affected others, CDL said, noting declining share prices for various property developers.
It attributed the group’s “relatively larger decline in share price compared to other developers” whenever cooling measures are implemented to its sizeable inventory of land and for-sale residential units, “as it is often considered the barometer of Singapore’s residential market”.
It said that it has been focused on transforming its portfolio in the last decade, through geographical diversification, expansion into new asset classes, growing its fund management business and strengthening its position in Singapore’s residential market.
CDL also highlighted “several divestments” in the 2025 pipeline, adding that it “aims to balance agility with financial prudence by extracting value at the most opportune time to enable strong capital recycling”.
The response also recalled two share repurchase initiatives in 2024.
At the upcoming AGM, the board is seeking the mandate from shareholders for the issuance of ordinary shares and/or make or grant offers, agreements or options, in addition to the renewal of the group’s share purchase mandate.
Relatedly, CDL was asked about plans beyond its “insufficient ‘business-as-usual’ approach”, as well as alternatives to CEO Sherman Kwek’s growth, enhancement, and transformation strategy to unlock value for “trapped shareholders”.
The shareholder added that the strategy has “demonstrably failed to deliver meaningful results or arrest the share price decline”.
CDL said that it has been “extremely relevant” since its 2018 implementation, adding that time is needed for the full beneficial effects of elements of the strategy to be visible.
It added that “it is critical to accelerate divestment efforts to lower gearing and reduce interest expense”.
Addressing calls for a comprehensive strategic review, CDL said the board revises its business strategy twice a year. It also pointed to the challenging macroeconomic environment and emphasised its strong track record.
Lacking leadership
Given the failure to deliver value, a shareholder asked about skill sets and experience that the current board and senior management lack, as well as plans to rectify the deficiencies.
Similarly, another asked CDL to share its responses to Sias’ questions, regarding two newly appointed directors and cohesive leadership considering recent infighting.
CDL said that its board and key management personnel “currently have a good mix in terms of their diverse skill set, experience and knowledge”.
It reiterated that while the board can influence decisions and performance, these are also affected by external factors.
On the new directors, it repeated that while their nomination and appointment was not made via the then-nominating committee, it was submitted to the full board for consideration and approval.
“All the board members have agreed to put aside their differences for the greater good of CDL and its stakeholders,” it said, citing an earlier release.
“(The board) is committed to continue to focus on strengthening CDL’s business, in accordance with good corporate governance, now and in the future.”
CDL said that it thus does not see a need for any interim or temporary measures, with business operations “fully functional and unaffected”.
The counter closed at S$4.69 on Thursday, down S$0.10 or 2.2 per cent.
