City Developments Limited (CDL) is set to divest a minimum of $600 million in assets during FY2025 as part of a strategy to manage its high net gearing, which stood at 117% as of FY2024. This decision comes in light of the company’s previous divestment efforts in 2024, which failed to meet the ambitious $1 billion target. The shortfall has prompted CDL to sharpen its focus on trimming unproductive and non-core assets in order to stabilize its financial position.
Since 2021, CDL has been active in acquiring assets, amassing approximately $7 billion, while only managing to divest $3 billion. This has created an imbalance in its acquisition-to-divestment ratio, contributing to the elevated gearing levels that now raise concerns among shareholders. In response to growing feedback from stakeholders advocating for more assertive divestment strategies, the company recognizes the necessity of balancing future acquisitions with essential divestments to enhance its financial stability.
The divestment initiative is not merely a reaction to external pressures but also reflects a strategic commitment to improving asset productivity. By targeting a minimum of $600 million in divestments, CDL aims to alleviate its financial leverage, with projections indicating that such future divestments could potentially reduce its gearing by approximately 6.5 percentage points. This reduction would signify a significant step toward enhancing the company’s financial management practices and ensuring a more sustainable operational framework.
In its pursuit of divestment, CDL is likely to concentrate on assets that do not align with its core business objectives or that have underperformed in terms of returns. Such a strategy aligns with industry best practices, where companies periodically assess their portfolios to identify and dispose of non-core holdings. By doing so, CDL can not only improve its financial metrics but also redirect resources toward more productive assets that align with its long-term strategic goals.
Additionally, the company’s management is expected to engage in thorough evaluations of its existing portfolio to identify opportunities for divestment. By implementing a more disciplined approach to managing its assets, CDL can respond effectively to the evolving market landscape while ensuring that it remains competitive in the increasingly dynamic real estate sector.
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News Source: Edgeprop
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