SIGN UP FOR $10 TO UNLOCK ALL ARTICLES! It’s like an intriguing plot straight out of Hong Kong’s TVB drama. The unfolding Sincere Property saga has rocked Singapore’s leading property giant, City Developments Limited (CDL), which announced an impairment loss of $1.78 billion due to investments in the Chinese property developer. The impairment contributed to the Group’s worst full-year financial performance in its operating history. Arising from this crisis, investors must be sweating on the kind of collateral damages that would be inflicted on CDL share price.
Investors first smelled blood for CDL share price in October 2020 when former director Kwek Leng Peck resigned after purported disagreements with the board over the Sincere investments. Consequently, the market reacted violently over Mr Kwek’s resignation, sending CDL share price spiralling out of control.
Following Mr Kwek’s resignation in October 2020, CDL share price fell from $7.70 to a low of $6.20. The correction represented almost 20% of CDL share price, so you can imagine the kind of seismic impact that Mr Kwek’s resignation inflicted on CDL share price. Since his departure, two more directors resigned over the fallout from the Sincere saga.
In retrospect, the recovery of CDL share price since November 2020 was largely due to the rollout of COVID-19 vaccination across global cities. The vaccine had sparked a bull run in the stock market which saw investors piling up on value stocks which had been walloped by the pandemic. CDL share price, which had been thrashed by pandemic throughout 2020, benefitted from the buoyant market sentiments at that point of time. Nonetheless, the Sincere saga appeared out of nowhere to ambush CDL share price. Could the Sincere crisis be the impetus for CDL to spin off its UK assets through REIT IPO?
On 11 March 2021, CDL issued a statement claiming that Sincere Statement “could mislead readers to believe that CDL should take primary responsibility for the current situation of Sincere Property”. In my view, it does not matter who is right or wrong in the war of words between the two firms. After all, unless you are an insider, nobody will know exactly what went on behind the scene. Of more pertinent for investors should be the outlook for CDL share price.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in CDL before. Whether CDL share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
CDL share price to recover with UK S-REIT IPO?
The Sincere saga complicates the outlook for CDL share price, which had been ravaged by the pandemic crisis throughout 2020. Despite the turbulences, I am of the view that the Group is in a position of strength to ride out the storm. In fact, the balance sheet remained strong because of the Group’s historical background.
Make no mistake, the Kwek family built their fortunes through Hong Leong Finance, which acquired City Developments in 1969. The finance firm provides financial support for CDL and helps to fuel the latter’s explosive growth through the decades.
As bizarre as it may sound, the on-going crisis could actually be a blessing in disguise for CDL share price as it [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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