CDL shares jump over 4% in early trading after Kwek Leng Beng drops lawsuit against son
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Mr Kwek Leng Beng (right) and his son Sherman Kwek at a CDL media briefing in February 2024.
PHOTO: ST FILE
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SINGAPORE – Shares of City Developments Limited (CDL) jumped more than 4 per cent in early trading on March 13, after tycoon Kwek Leng Beng said on the night of March 12 that he will drop the lawsuit against his son Sherman Kwek
The counter climbed 4.66 per cent to an intra-day high of $5.17 at 10.23am before ending trading at $5.09, up 15 cents or 3.04 per cent from the previous day’s close of $4.94. A total of 5.67 million shares worth $29 million were traded.
This restored the share price to where it was before the saga of a battle between the father and son over control of CDL also suspended then
The older Mr Kwek said he had filed court papers to address the “attempted coup” by his son, who is group chief executive.
CDL’s shares in the following days dropped to a low of $4.93 on March 11.
But in a surprise move on March 12, the older Mr Kwek said he had decided to drop the lawsuit, which was intended to stop his son and majority directors of CDL from implementing a number of board resolutions.
The lawsuit was also filed to restrain two newly appointed independent directors
He added that he will continue in his role as executive chairman, and his son will continue as group CEO.
But RHB analysts said this does not mean that the matter has been entirely closed.
They said: “While the reconciliatory move offers a small respite, it does not fully address the various corporate governance issues and board differences that were raised during the dispute.”
The older Mr Kwek had accused Mr Sherman Kwek and several directors of attempting to appoint two new independent directors without securing full board approval and bypassing the nomination committee.
The Securities Investors Association (Singapore), or Sias, had also posed questions on March 6 to CDL Dr Catherine Wu
Professor Mak Yuen Teen, director of the Centre for Investor Protection at NUS Business School, said: “Even if this does not blow up again in the near future, it does not address the underlying family governance and corporate governance issues that led to the scandal and does not mean that these issues will be properly addressed going forward.”
“Corporate governance and management issues – such as the competence of the group chief executive, which was raised by the executive chairman, and the effectiveness of the board in overseeing management – remain,” Prof Mak noted.
RHB vice-president of equity research Vijay Natarajan agreed and said that investors are likely to want their concerns to be fully resolved and to gain greater clarity on CDL’s plan to maximise shareholder returns.
“They would also like to see the additional safeguards and steps that will be put in place to avoid similar corporate governance and board-related issues from arising again in the future,” he added.
Mr Natarajan noted that the share price is likely to remain in the same range in the near term until investor concerns are addressed, and maintained a target price of $4.75.
Looking ahead, UOB Kay Hian head of research Adrian Loh said: “Investors do not like uncertainty, and I don’t think it will be easy for the stock to revalue towards its own published RNAV of over $19 per share.” RNAV refers to revalued net asset value, which is a valuation method meant for real estate companies.
Prof Mak noted: “We should not judge whether the actions are adequate based on short-term share price reaction. If the underlying family and corporate governance issues are not addressed, then the long-term performance and share price of the company may continue to suffer.”
