CDL shares up more than 4% after Kwek Leng Beng drops lawsuit against son

SINGAPORE: Shares of City Developments (CDL) jumped on Thursday (Mar 13), a day after executive chairman Kwek Leng Beng said he was dropping the lawsuit against his son Sherman Kwek and a group of directors.

The counter shot up as much as 4.45 per cent to S$5.16 (US$3.87) in morning trade. It later gave up some gains to finish the day at S$5.09, up 3 per cent or S$0.15, with about 5.67 million shares worth S$29 million having changed hands.

It outperformed the broader Straits Times Index, which inched up 0.1 per cent.

In a statement issued late on Wednesday, the senior Kwek said he will discontinue the lawsuit filed in late February and continue his role as executive chairman. Mr Sherman Kwek will also continue as group CEO.

 All the current directors will remain on the CDL board, he added.

The senior Kwek also said all CDL board members have agreed to “put aside their differences” for the greater good of the company and its stakeholders.

The latest turn in events came two weeks after the family feud spilled into public view on Feb 26, when Mr Kwek Leng Beng accused his son of mounting a boardroom “coup”.

The dispute centred on the appointments of two new independent non-executive directors - Ms Jennifer Duong Young and Ms Wong Su-Yen - that the senior Kwek said were “hastily” made without going through CDL’s nomination committee.

Over the next few days, explosive statements emerged from both camps, raising concerns over the property giant’s corporate governance and business stability. 

The saga also prompted the Securities Investors Association (Singapore), or SIAS, to pose a slew of questions to the company over its board appointments and the role of a former advisor Dr Catherine Wu, who was named by Mr Sherman Kwek as the primary reason for the public fallout with his father.

INVESTOR CONCERNS REMAIN: ANALYSTS

Amid the power tussle, CDL called for a trading halt on Feb 26. Its shares fell more than 6 per cent to fresh 16-year lows upon resumption of trade on Mar 3, but recovered slightly over the week.

Brokerage and research houses have since slashed their target prices for the company’s shares. RHB, for example, downgraded the stock to neutral from buy, and cut its target price to S$4.75 from S$7.30.

RHB analysts said while the latest reconciliatory move offers small respite, it “does not fully address the various corporate governance issues and board differences that were raised during the dispute”.

Investors will still want to seek full resolution of these concerns, greater clarity on the company's plan to maximise shareholder returns, and additional safeguards to prevent similar corporate governance and board-related issues from arising again, the analysts wrote in a note on Thursday morning.

As a result of these investor concerns, RHB expects CDL's share price to “be rangebound in the near term”.