City Developments Limited: Undervalued at S$5.1?

City Developments Limited (SGX:C09), a leading property development and investment firm, has seen its share price hover near its 52-week low of S$5.03. Despite the recent market volatility, analysts and investors are questioning whether the stock is undervalued at its current price of S$5.1. This article explores the intrinsic value of City Developments Limited and its potential undervaluation.

City Developments Limited's share price has been underperforming the Straits Times Index (SGX: ^STI) this year, with a 21% year-to-date decline. However, the company's fundamentals remain strong, with healthy Singapore property development sales and a stable investment property portfolio. In its third quarter of 2024 business update, City Developments reported that its Singapore property development division and joint venture (JV) associates sold 321 units with a total sales value of S$611.1 million, significantly better than the previous corresponding period.

Analysts have projected a fair value of S$6.48 for City Developments Limited based on a 2-stage free cash flow to equity model (Simply Wall St, 2024). This suggests that the stock may be undervalued by approximately 20% at its current price of S$5.1. However, it is essential to consider other factors, such as the company's earnings growth prospects and market sentiment, before making a decision.



City Developments Limited's earnings growth rate is projected to fall by 14% from the analyst price target of S$7.40. This decline in earnings growth may be a concern for investors, as it could indicate a slowdown in the company's growth prospects. Additionally, City Developments Limited's share price has been hovering near its 52-week low, indicating potential uncertainty in the market.

Despite these concerns, City Developments Limited's strong fundamentals and healthy sales momentum suggest that the stock may be undervalued at its current price. The company's investment property portfolio has maintained high committed occupancy rates, and its hotel division has seen a respectable performance. Furthermore, City Developments Limited is planning to launch new projects, such as The Orie in 1Q 2025, which could drive future growth.

In conclusion, City Developments Limited's share price of S$5.1 may be undervalued based on its projected intrinsic value of S$6.48. However, investors should also consider the company's earnings growth prospects and market sentiment before making a decision. While the stock may present an opportunity, the potential slowdown in earnings growth and market uncertainty should be taken into account. As always, it is essential to conduct thorough research and consult with a financial advisor before making any investment decisions.