Quick takes: What observers are saying about the CDL boardroom tussle

One observer says the group could have better corporate governance, while another says its core businesses will remain unaffected

A BATTLE for board control erupted within property giant City Developments Limited (CDL) on Wednesday (Feb 26), pitting father and son against each other in the Kwek-family controlled company.

Executive chairman Kwek Leng Beng issued a dramatic four-page statement to media on Wednesday morning, saying that he had filed court papers on Tuesday to deal with the “attempted coup” – by group chief executive and his son Sherman Kwek, Philip Lee, Wong Ai Ai and a group of directors acting with them – to allegedly consolidate control of the board and the group.

In response, Sherman Kwek issued a statement “on behalf of the majority of the CDL board of directors” in the afternoon expressing disappointment that “our chairman and a minority of the CDL board have decided to take these extreme actions” and that recent changes to the board have “never been about ousting our esteemed chairman”.

On Wednesday night, the elder Kwek issued another statement which stated that Sherman Kwek’s group has “undertaken not to take any further actions regarding their attempted changes to the board committees and management of certain CDL’s subsidiaries, until further notice of court”.

Here are some quick takes from observers on the battle.

Tan Teck Leng, deputy chief investment officer at Phillip Capital Management

While this episode certainly brings into question succession issues at the company, real estate is one of those industries where the key value of the company is anchored by its hard assets and this does not change.
The weakness in share prices of listed property developers over the past few years has been mostly across the board, not just at CDL.
When positive attention comes back to this industry, such as a realisation that new Singapore residential launches continue to sell well, or through such catalysts as a remaking of Orchard Road, surely this remains one of the proxies the market would return to.

Mak Yuen Teen, corporate governance advocate and accounting professor at the National University of Singapore Business School

While CDL is often touted as a beacon of sustainability, its corporate governance can definitely be better.
The way it went into China a few years ago and then wrote off a huge amount very quickly and the boardroom turmoil at that time indicates governance cracks.
It’s an important reminder that family businesses need to focus on corporate governance if they want to survive through many generations. And sustainability must be built on a foundation of good corporate governance.

Ken Foong, analyst at Bloomberg Intelligence

CDL’s 2025 core profit could rise due to its three main businesses: housing, hotels and investment properties.
Yet in the near term, a boardroom tussle between its chairman and his son, its CEO, may create an overhang.
Long-term growth could come from expansion in the living sector amid its resilient earnings profile.

DBS Group Research

Given this uncertainty (dispute between chairman and CEO), we expect near-term volatility in the share price. However, a resolution should provide much-needed clarity for investors.
Our base case remains unchanged – we believe the company’s core businesses (property development, hotels and investment properties) will remain unaffected, as they are hard assets generating revenue and cash flow, and are further supported by key management, including the chief operating officer, chief financial officer and group general manager.
We continue to monitor developments to assess the group’s longer-term capital allocation strategy, including mergers and acquisitions, land banking and divestments.