CDL shares pare losses after hitting 16-year lows on first day of trading resumption amid power tussle

SINGAPORE: Shares of City Developments Limited (CDL) fell on Monday (Mar 3), following a three-day halt sparked by an ongoing tussle between father and son for control of the property giant.

The counter plunged more than 6 per cent to S$4.79 at the market open, hitting a fresh low since March 2009. But it managed to claw back losses and eventually ended the trading day at S$5.00, down 2.3 per cent or S$0.12 from its previous traded price of S$5.12.

It was among the most actively traded counters, with 14 million shares worth S$69.1 million traded.

CDL, Singapore's largest listed property developer that is controlled by the Kwek family, had called for a trading halt on Feb 26 after a public fallout between executive chairman Kwek Leng Beng and his son, group CEO Sherman Kwek, over the composition and constitution of the company's board and the board committees.

Over the course of three days, father and son made several explosive statements, each laying out their account of the events that led to the fallout including accusations of an attempted “coup”, governance lapses and the “enormous influence” wielded by Catherine Wu, a long-time adviser to patriarch Kwek Leng Beng.

A closed-door High Court hearing was also held on Feb 26 to hear Mr Kwek Leng Beng’s lawsuit against his son and several board directors.

In a bourse filing, the company said the court hearing “proceeded without the company as an applicant” due to disputes within the board on authorising the company to be an applicant in the lawsuit.

The court on Feb 26 made no substantive order and directed Mr Sherman Kwek and his directors to refrain from taking further action relating to its two subsidiaries, Singapura Developments and Millennium & Copthorne Hotels (M&C), the filing added.

This is based on undertakings by Mr Sherman Kwek and some directors to take no action regarding their attempted changes to the board committees, as well as for the two new independent directors appointed - Ms Jennifer Duong Young and Ms Wong Su-Yen - to not exercise any powers in their role until further notice by the Singapore court.

Pointing to the recent news reports where various allegations have been made, the company said it “will not comment on the validity of these allegations, as many of these allegations are the subject of the court proceedings which are ongoing”.

CDL’s business operations remain fully functional and unaffected, it said, adding that it is "business as usual".

"Mr Sherman Kwek remains the group chief executive officer until such time as there is a board resolution to change company leadership," it said.

CDL added that it will update its shareholders of "any material developments".

Both sides are set for a closed-door case conference on Tuesday morning.

Mr Kwek Leng Beng is supported by board directors Philip Yeo, Colin Ong and Chong Yoon Chou. They are represented by lawyers from LVM Law Chambers, a law firm led by Senior Counsel Lok Vi Ming.

The other camp comprises Mr Sherman Kwek, alongside directors Philip Lee, Wong Su-Yen, Jennifer Duong Young, Carolina Chan, Daniel Marie Ghislain Desbaillets and Wong Ai Ai. They are represented by a Lee & Lee team led by Julian Tay.

ANALYSTS SEE "OVERHANG" ON SHARE PRICE

Amid the public spat that has divided the company's leadership team, at least one brokerage house has downgraded its call on CDL shares, while two others reduced their target prices.

Analysts see the ongoing family feud, which became public and escalated into a legal battle this week, as potentially causing an “overhang” on CDL’s shares.

UOB Kay Hian said it has downgraded the CDL’s shares from “buy” to “hold” due to the “very public leadership fracture”, alongside a drastic cut in target price from S$7 to S$4.60.

The company’s latest earnings report, which was released on Wednesday as the family feud broke out into the open, also fell short of analysts' estimates, said the brokerage’s research head Adrian Loh. For 2024, CDL posted a 37 per cent plunge in annual net profit to S$201.3 million.

“While the company has extremely valuable assets in Singapore and globally, we believe the stock will likely find it difficult to perform given this overhang,” Mr Loh said.

OCBC Investment Research also expects uncertainties over the company’s outlook and a “potential overhang on its share price” until the father-son feud is resolved.

Other potential dampeners include a cloudy global economic outlook and the continued impact of earlier property cooling measures in Singapore.

The research house held on to its “buy” call on CDL but lowered its fair value estimate to S$6.02 to S$6.57.

Likewise, DBS Group Research cut its target price to S$6.70, from S$10.50 previously, while maintaining a “buy” call.

Analysts Derek Tan and Tabitha Foo noted that the boardroom dispute has cast a cloud over the company’s strategic direction and will likely cause share price volatility in the near term.

That said, the DBS analysts noted that CDL’s “fundamentals remain intact” with key management, like its chief operating officer and chief financial officer, still running the company.

They expect the company’s core businesses, such as property development, hotels, and investment properties which are “hard assets generating revenue and cash flow”, to remain unaffected. 

Should the dispute be resolved, the company will see a “renewed focus on driving shareholder returns and profitability” which will in turn support a “gradual recovery” in share price, the DBS analysts said in a note on Feb 27.