Investment property and land write-downs not a concern. Unlike other developers, City Developments (CDL) is unaffected by concern over investment property write-downs as it carries these assets at historical cost less depreciation. Also, the impact from potential land write-downs is limited as the bulk of CDL's landbank was purchased at a low cost before the current cycle.

Limited impact from potential default under DPS. The Group has sold only one-third of the units of its pre-sold projects under the Deferred Payment Scheme (DPS). It does not extend DPS to sub-sales. There were no defaults in the recently-completed development The Sail @ Marina Bay Tower 2. Most of the Group's launched properties are expected to receive TOP in 2010-11.

Alternative source of financing provides flexibility in tough credit environment. CDL established a S$1b unsecured Islamic Trust Certificate Programme on 19 Nov 08. The S$1b Islamic Multi-Currency Medium Term Notes programme is Singapore's first corporate Islamic unsecured Sukuk-Ijarah financing arrangement. This will diversify the Group's stream of investors.

Beneficiary of supportive government policies. The Singapore government could introduce initiatives to support the property market in the upcoming budget. CDL is likely to benefit from such initiatives as it derives nearly 84% of its value from Singapore.

Maintain BUY, target price S$8.15. CDL is our top pick among large-cap property stocks. It is trading at an attractive 22% discount to our stress test scenario that assumes a 40% decline in residential and commercial property prices, a 10-30% decline in land values for landbank purchased in 2006-08 and a 50% default rate on residential projects sold in 2006-08. We maintain BUY with a target price of S$8.15 pegged at a 20% discount to 2009 RNAV of S$10.19.