Investing.com - Goldman Sachs upgraded City Developments (SGX:C09) (OTC:CDEVY) from Sell to Buy with a price target of SGD9.78, up from SGD7.93. The stock currently trades at a P/E ratio of 11.89, and InvestingPro data suggests the company appears undervalued relative to its Fair Value estimate.
The firm said it expects earnings to improve significantly over FY26-27 on higher residential contribution. Goldman Sachs raised its average selling price and margin assumptions for select projects.
The upgrade follows City Developments’ underperformance of the Straits Times Index by 50% since Goldman Sachs’ February 14, 2023 downgrade. The firm cited weak earnings, high gearing and corporate governance concerns at that time.
Goldman Sachs noted the recent appointment of Kwek Leng Peck as Vice Chairman as City Developments embarks on a strategy review. The firm said management’s focus on divestment opportunities can help improve the company’s balance sheet position. The company currently carries a debt-to-equity ratio of 1.51, and an InvestingPro Tip highlights that it operates with a significant debt burden—though the stock has delivered a strong 61% return over the last year.
Goldman Sachs raised its FY26-27 earnings estimates by 3% and 8% respectively. The firm narrowed its discount to revalued net asset value from 45% to a historical mean of 33% on improvement in core profit after tax and minority interests and return on equity.
In other recent news, JPMorgan has made changes to its rating of City Developments. The firm initially upgraded the stock to Overweight from Neutral, citing optimism in the hotel sector and setting a new price target of SGD10.45. However, this was followed by a downgrade back to Neutral, with the price target adjusted to SGD8.70. The downgrade was attributed to macroeconomic risks, specifically the ongoing Iran conflict, which could complicate asset monetization efforts. These rating changes reflect a cautious stance from JPMorgan amid shifting market conditions. Investors are advised to consider these developments as they evaluate their positions in City Developments.
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