Today, I received an anonymous analysis of the reasons why CDL lost $1 billion in market cap since it announced the outcome of its strategic review before the market opened on Monday, 28 September (it has fallen by nearly $1.1 billion at the time of writing this, since the close of trading last Friday). Given the lack of critical analysis in the mainstream media articles and the bullishness of analysts quoted in the media who are maintaining their buy calls, I thought I will publish this analysis in full for a different perspective. I was not at the briefing so I cannot confirm observations in the article that are based on the briefing. However, I largely agree with the analysis, and at the end, I provide some personal observations.
__________________________________________
When a blue-chip property giant loses S$1 billion in market value over just five trading days, it is rarely an accident of macroeconomic timing. For City Developments Limited (CDL), the brutal 13.5% sell-off following Group CEO Sherman Kwek’s highly anticipated September 28 strategic review was not a market overreaction. It was a decisive, unambiguous verdict from institutional investors who have run out of patience.
Management had promised a “shrink-to-greatness” value-unlocking event. Instead, the market was presented with a capital treadmill, a tone-deaf return to a traumatic market, and a glaring corporate governance vacuum.
Here are the real reasons the market aggressively priced out CDL’s premium.
1. The “Divestment” Illusion and the Capital Treadmill
The headline marketed to the press was a massive S$6 billion divestment program designed to unlock value. But investors quickly did the math: the divestment target was paired with a S$5 billion new investment target.
Over a three-year period, CDL is effectively releasing a net total of only S$1 billion in cash. For a conglomerate sitting on S$36 billion in assets, this is merely tinkering at the margins. Furthermore, management explicitly stated that S$3 billion of that new spend in Singapore is merely “business as usual” land tenders. The market wanted genuine deleveraging and structural capital returns. Instead, it learned that CDL is selling mature, income-generating assets simply to replenish expensive, high-risk development pipelines.
2. Ignoring the Sincere Trauma: A “Fresh Thrust” into China
In 2020, CDL’s ill-fated investment in China’s Sincere Property Group resulted in a staggering S$1.9 billion write-down—an event that deeply scarred institutional trust. A recent independent investor perception audit explicitly warned management to stop pursuing “growth for growth’s sake” and narrow its focus.
How did management respond? By allocating 30% of its S$5 billion new investment pool—S$1.5 billion—directly to China and Japan. When asked point-blank during the briefing if there was a fallback plan should the high-stakes Xintiandi luxury project in Shanghai falter in an already strained property market, the Group CEO bluntly responded: “No.” To investors, this signaled unhedged, high-risk capital allocation that directly defied market consensus.
3. The Refusal to Return Capital
Real estate developers across Asia trading at steep discounts to their book values have increasingly recognized the necessity of systematic share buybacks to reward shareholders. CDL completely shut the door on this.
During the briefing, management confirmed that divestment proceeds would be prioritized almost entirely for retiring debt. The commitment to shareholders was capped at an ordinary dividend payout of a “minimum 35% of reported PATMI.” With no special dividends or structural share buybacks on the table, investors realised that the upside of the S$6 billion asset sale would largely be retained inside the business, offering practically zero immediate earnings uplift.
4. The Governance Overhang and a Generational Skip
Strategic reviews cannot mask a fractured boardroom. Institutional investors are acutely aware of the ongoing internal strife, the controversial bypassing of the Nominating Committee, and whether the independent directors are truly independent. The “G” in CDL’s ESG profile has become a glaring liability.
This leadership vacuum was on full display during the briefing. When pressed on succession planning, Sherman Kwek deflected. Instead, he skipped a generation, invoking his grandfather—the founder of the Hong Leong Group, Kwek Hong Png—to anchor his legitimacy, referring to the company emotionally as “our house, our family.”
5. Invoking the Founder
While this generational nostalgia makes for a compelling personal narrative, the irony of using Kwek Hong Png’s name to defend this specific strategy is stark. The late founder was famously an accumulator of assets. He built the Hong Leong empire by shrewdly acquiring and holding prime real estate, not by churning capital through S$6 billion divestment plans simply to fund speculative overseas bets. Furthermore, Kwek Hong Png operated on the principle of looking after all his shareholders as if they were extended family members. It is difficult to reconcile that inclusive ethos with a management team that explicitly denies structural capital returns, like share buybacks, while watching long-term shareholders suffer a S$1 billion wipeout in five days.
6. The Absent Chairman and Boardroom Fissures
Sherman claimed during the briefing that the board was “united” and “aligned” on the GET+ strategy. If so, where was the Executive Chairman? Kwek Leng Beng’s glaring absence from the most critical strategic briefing in recent history speaks volumes. It strongly suggests that beneath the surface, the boardroom truce of 2025 is incredibly fragile and that deep management disagreements persist.
For instance, during the Q&A, management flatly shut down the idea of separating or listing the hotel operating platform (M&C OpCo), choosing to leave the capital-heavy structure intact. Yet, whispers persist that the Chairman and the old guards might favor a different, more value-accretive approach for M&C. The Chairman’s silence and physical absence leave the market guessing about who is truly in control of CDL’s destiny.
7. A S$3 Billion Deficit: Is it Time for New Leadership?
This brings us to the ultimate elephant in the room: Is Sherman Kwek the right CEO to lead CDL forward? The financial math of his tenure is unforgiving. Under his leadership, CDL suffered a nearly S$2 billion impairment from the Sincere Property Group disaster. Now, his GET+ strategic review has triggered an immediate S$1 billion destruction in market capitalization.
That is S$3 billion in shareholder wealth evaporated under one CEO’s watch. In almost any normal, non-family-controlled institutional setup, a S$3 billion deficit would trigger an immediate leadership transition.
The Path Forward: The Chairman Must Return
The S$1 billion wipeout is the steep price of a strategy that ignores market realities. If CDL wishes to close its persistent conglomerate discount, it must pivot from rhetoric to rigorous capital discipline.
The market has spoken, and it is clear that a slide deck alone cannot fix this. To stop the bleeding, Executive Chairman Kwek Leng Beng must step out from the shadows and personally intervene to stabilize the market. We need the Chairman to halt the risky overseas deployments, enforce a mandatory share buyback framework to provide a floor for the stock, and fundamentally clean up the corporate governance structures. Only by stepping in decisively can the Chairman restore the trust and value that his father, Kwek Hong Png, spent a lifetime building.
____________________________
My personal observations:
When I attended CDL’s AGM in April this year, I asked a number of questions. I subsequently published those questions and my reflections on the answers given. They can be accessed here and some of them are quite relevant to the strategic review:
CDL chose Teneo to undertake the strategic review without going through a RFP. Teneo was the same firm that did its investor perception study. I saw no reason why Teneo should be chosen without a RFP as they do not appear to me to have any special expertise in undertaking strategic reviews. My concerns when external firms are engaged for strategic reviews (or other engagements) is that their main purpose may be to give an external endorsement for what management wants. This is more so when there is no RFP and no special expertise. I was not convinced by the explanations given by the Group CEO. Given the way investors have reacted, one has to ask what good did the investor perception study and the strategic review undertaken by Teneo do.
I praised the company for its improved transparency of the KPIs for the LTIs for the Group CEO. However, it was only when I asked that I learnt that the 2022 and 2023 LTI grants had vested, and the NRC Chair declined to disclose the actual percentage of vesting which could range from 0% to 200%, citing that it was not industry practice in Singapore to do so. The remuneration consultants, AON, confirmed the NRC Chair’s view. I think the link between value creation and remuneration (both short-term and long-term) for the Group CEO continues to lack transparency. In other words, I am not convinced that the remuneration of the Group CEO will have a strong link to his ability to deliver on the new strategy.
But my greatest concerns are the following. First, it is far from clear to me that CDL has the right person as the Group CEO, given the big “Sincere” misstep and how investors have reacted to the strategic review. As the analyst said, if this is a non-family controlled company, we would likely be seeing a new Group CEO. Second, given that a majority of the directors are aligned to the Group CEO, I do not see an effective challenge function. How engaged was the board in reviewing the recommendations of the strategic review? Third, given that the board is now controlled by the “majority directors” who are aligned to the Group CEO, I think the remaining “minority directors” will likely not be recommended for re-election when it is due, and other “friendly” independent directors may be brought in. “G” is likely to continue to deteriorate at CDL.
