Our target price for CDL at S$9.01 is set at a 40% discount to our RNAV of S$15.01 (vs. CDL's reported S$19.86 including revaluation surpluses of its investment properties and hotels), near where it traded at during the past few residential downcycles triggered by cooling measures. Our key assumptions include: (1) residential: 1-3% annual rise in SG prices in FY25E-27E; (2) office: flat cap rate changes and -3/-3/+2% in SG Grade A rents in FY25E/26E/27E; (3) hospitality: flat cap rate changes and 2/3/3% rise in FY25E/26E/27E RevPAR; and (4) retail: flat cap rate changes and 0.5-2% rise in SG rents per year. We use RNAV to value the stock as it is the most common valuation methodology used for developers listed in Singapore.

The key downside risks to our investment thesis that could impede the stock from reaching our target price on CDL are: 1) Weak take-up for residential launches; 2) Introduction of additional cooling measures; 3) Sharp economic slowdown, which would result in lower residential selling prices and subdued demand; 4) Over-expansion in overseas geographies; and 5) Execution issues in turning around the M&C platform.