City Developments, in a JV with Hong Leong and TID have emerged as the highest bidder for a site located at Lorong Lew Lian, near the Serangoon MRT station. CDL's bid of S$321m (S$710psf GFA) came ahead of 10 other bidders and was 2.5% above the second highest bidder, a UOL JV. The bid came in the middle of industry consultants expectations of S$590-S$800psf GFA. As a comparison, UOL's Botanique at Bartley site was acquired for S$648psf GFA in January 2014, while CDL's Jewel@Buangkok was won at S$508psf GFA in June 2012.
The site is attractively located within walking distance to the Nex mall, Serangoon Stadium and is near the Paya Lebar, Zhonghua and Yangzheng primary schools. With a maximum GFA of 452,138sqft, we estimate that it can yield c.600 units. We estimate a breakeven of cS$1,100psf, which implies an ASP of c.S$1,300psf, based on a 15% gross margin. As a comparison, Bartley Ridge has transacted at c. S$1,203psf, while Botanique at Bartley sold 38 units in September for S$1,293psf, while Jewel @ Buangkok last sold for S$1,198psf.
We estimate the project could provide a modest accretion of c.2cts to our RNAV of S$14.62. More Importantly the acquisition helps replenish CDL's land bank in the mid-end segment, having largely sold its non-luxury inventory. We maintain our Buy recommendation on City Developments, given undemanding valuations, trading at a 45% discount to RNAV, 1.2 standard deviations below its long term average. (Read Report)
Source : Deutsche Bank Markets Research