CityDev – Look for pullback to $7.63

After a decent run, we foresee some price weakness ahead for CityDev as suggested by the MACD Diff trend. On charts, CityDev has established a trading range between $7.63 and $8.63; the lower boundary also coincides with CityDev’s consensus RNAV of $7.60. We need to first see if $7.63 will hold; on the scenario that it fails, expect more downside on CityDev as gap covering will occur.

Trading Idea: 1Q09 results (net profit $83m) were below consensus of $100- 110m. CDL saw weaknesses in the hotel division (via M&C) and residential developments, which was partially offset by higher rental income from commercial properties. On valuation, stock has risen by more than 100% from March lows of $4.05 and appears overbought in the short term. Barring further uplift in prices in the physical market, we expect stock to pull back. We remain buyers of the stock below $7.60.

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