(March 3): City Developments Ltd (CDL) lost its position as Singapore’s largest listed developer after its stock fell on Monday, underscoring investors’ concern about the family feud unfolding in public. 

Shares of the Singapore-based developer fell as much as 7% before paring some losses before noon. They are set to close at the lowest since 2009. 

Last week, CDL’s chairman and billionaire family patriarch Kwek Leng Beng sued his son and chief executive officer Sherman Kwek, along with other board directors, accusing them of leading a coup against him. 

The elder Kwek also said that he has sought to dismiss his son, but was blocked from doing so by the board.

The crisis engulfing the firm has shown little sign of abating, with dueling statements coming from both sides. The tussle has prompted downgrades from analysts including those at JPMorgan Chase & Co and UOB-Kay Hian Holdings Ltd. 

On Monday, the company said in a statement that Sherman, the younger scion of the family, will remain as the CEO, while business operations remain “fully functional and unaffected”.

The firm has lost about 60%, or nearly S$7 billion (US$5.2 billion or RM23.2 billion), in market value since the younger Kwek took the helm in 2018. The stock dip on Monday means its market capitalisation is now smaller than rival UOL Group Ltd, a developer backed by Singapore’s Wee clan.

The dispute is another major blow to CDL, following its setback in China a few years ago when the firm wrote down a billion-dollar investment. It casts a shadow on medium-term outlook, wrote RHB Bank Bhd analyst Vijay Natarajan in a note on Monday. He changed his rating on the stock to 'neutral' from 'buy'. “We believe the recent lapses will make it hard for long-only institutional investors to hold CDL as a part of their portfolio,” he said. 

The elder Kwek has alleged that his son and other members of the board breached corporate governance rules by hastily appointing two new directors outside of the typical nomination process.

Sherman and six other directors in turn denied any attempt at a coup, and accused his father of being influenced by Catherine Wu, an adviser to the board of the firm’s hotel subsidiary, whose conduct raises “a very serious issue of corporate governance”.

The legal feud is set to continue this week with a closed-door case conference scheduled for Tuesday. Both sides have claimed victory after an interim injunction application last week, which among other things, led to an undertaking from the two new directors not to exercise their powers until further court orders.

CDL, which was originally listed as the lead plaintiff along with the elder Kwek and other directors, was not involved in the interim injunction hearing due to “disputes as to the validity of the board resolution authorising the company to be an applicant”, according to an exchange filing from the firm on Monday.

Analysts including Citigroup Inc said that a positive resolution would be a major share price catalyst for the longer term, since the stock of the firm is undervalued.

Read also:
Singapore's CDL chairman Kwek accuses son of boardroom coup attempt

Uploaded by Tham Yek Lee