[SINGAPORE] City Developments Ltd (CDL), which was recently embroiled in a family power struggle, has responded to a wide range of questions from shareholders spanning its share price decline to queries from the Securities Investors Association (Singapore), or Sias.
The property group tackled the concerns in a bourse filing on Thursday (Apr 17) night, ahead of its annual general meeting on Apr 23.
Describing the group’s share price-to-asset value gap as a “chasm”, a shareholder said it reflected the “profound failure” of CDL’s board to “crystallise value”. CDL’s estimated revalued net asset value (RNAV) stands at S$19.86 per share as of last Dec 31 while its stock closed at S$4.47 on Apr 8. The shareholder asked what was being done to address the discount to RNAV.
CDL said it recognised the “disconnect” – given its “robust portfolio of assets totalling S$34 billion on its balance sheet” – and cited factors weighing on its share price. These include “broader macroeconomic concerns” dampening both equity sentiment and “capital flows towards the real estate sector”.
The macro headwinds include the higher-for-longer interest rate environment, geopolitical uncertainties, and structural road bumps – such as April 2023’s property cooling measures, which came on top of earlier rounds in 2021 and 2018.
CDL’s removal from the MSCI Singapore Index on May, 31, 2024 also affected its share price, the company said. Consequently, it hobbled CDL’s “ability to execute its strategy within its targeted timelines”.
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It believed CDL’s share price takes a relatively bigger hit compared to its peers in the face of adverse developments for the sector because it is often considered the “barometer of Singapore’s residential market”, given its sizeable land bank and for-sale residential units.
Summarising the group’s efforts, CDL said 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.
It 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 statement also highlighted two share repurchase initiatives in 2024.
Lacking leadership
Given the company’s failure to deliver value, a shareholder questioned the skill sets and experience of the current board and senior management, as well as plans to rectify the deficiencies.
Another shareholder asked CDL to share its responses to Sias’ questions, regarding two newly-appointed directors and considering recent infighting.
In February, executive chairman Kwek Leng Beng announced that he had filed court actions against his son Sherman Kwek for an attempted boardroom coup, which triggered a series of dramatic claims and counterclaims.
A fortnight later, the senior Kwek said he will be discontinuing his lawsuit against Sherman and six other members of the board. “I will continue in my role as executive chairman and Sherman Kwek will continue as group chief executive officer,” he said in a Mar 12 statement.
In its Thursday statement CDL said 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 were not made via the then-nominating committee, they were 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 statement.
“(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 therefore does not see a need for any interim or temporary measures, with business operations “fully functional and unaffected”.
At the upcoming AGM, the board is seeking the mandate from shareholders for the issuance of ordinary shares and/or to make or grant offers, agreements or options, in addition to the renewal of the group’s share purchase mandate.
A question was also raised on the alternatives to CEO Kwek’s growth, enhancement, and transformation strategy to unlock value for “trapped shareholders”. The shareholder said the strategy has “demonstrably failed to deliver meaningful results or arrest the share price decline”.
CDL said the strategy has been “extremely relevant” since its 2018 implementation, adding that time is needed for the full benefits to be visible. “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.
The counter closed at S$4.69 on Thursday, up S$0.10 or 2.2 per cent.
