City Developments faces internal conflict that has resulted in a legal battle, causing shares to drop by 5.47% upon resumption of trading today. The company’s shares were halted on Feb 26, when a results briefing was abruptly cancelled. This incident was followed by news of a disagreement between executive chairman Kwek Leng Beng and his son, group CEO Sherman Kwek.
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In response to these allegations, CDL stated, “The company will not comment on the validity of these allegations, as many of them are subject to court proceedings.” CDL emphasized that their business operations remain unaffected and Sherman Kwek will continue in his role as CEO until the board decides otherwise.
As a result of the ongoing dispute, analysts have downgraded their calls and lowered their target prices for CDL’s stock. UOB Kay Hian’s Adrian Loh downgraded the stock from “buy” to “hold” and reduced the target price from $7 to $4.60, citing missed FY2024 estimates and the negative impact of the leadership tussle. Similarly, DBS Group Research and OCBC Investment Research both maintain a “buy” call for CDL but have reduced their target prices to $6.70 and $6.02 respectively.
JP Morgan analysts Mervin Song and Terence M Khi describe the situation at CDL as a “dynastic discord” resulting from years of frustration, underperformance, and public disagreement within the Kwek family. They hope for a positive resolution and family reconciliation but have reduced their target price from $6.05 to $4.85.
Overall, analysts see potential for CDL’s share price to rebound if the boardroom conflict is resolved and there is a focus on driving shareholder returns and profitability. However, until the matter is resolved, there is uncertainty and potential overhang on the company’s share price.