Cedar Woods Properties Limited

CWP Details

Change of Director’s Interest: Cedar Woods Properties Limited (ASX: CWP) is a property company with a portfolio diversified by geography, price point and product type. On 22 December 2021, one of the company’s Directors, William G Hames, acquired 6,903 ordinary shares of the company at a price of $5.4 per share via on-market trade.

Extension of Corporate Finance Facility: On 16 December 2021, CWP notified that it has increased its corporate finance facility limit by $95 million to $300 million and extended the three-year component of the facility to January 2025. The company also informed about the extension of five-year component of the facility to January 2027.

2021 AGM Highlights: On 3^rd November 2021, CWP held its 2021 Annual General Meeting (AGM), wherein, the management highlighted that during FY21, the company settled over 1,000 apartments, townhouses, land lots & strata offices. Some of the other key highlights of FY21 are as follows:

• Improved Profitability: For FY21, the company reported a net profit after tax of $32.8 million, up 61% on the previous year.
• Dividend Update: For FY21, the company has paid fully franked dividends of 26.5 cents, up 39% on the previous year.
• Q1FY22 Update: For Q1FY21, the company reported presales of $460 million, up 39% on prior corresponding period (pcp).

NPAT Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the risks related to supply constraints and cost pressures, which could impact the company’s financial results. Further, the company is also exposed to the risks related to the COVID-19 restrictions, as it could delay the company’s projects.

Outlook: The expansion and extension of the company’s corporate facility is expected to support the company’s expanded operations and growth plans. In FY22, the company expects strong earnings growth, underpinned by decent demand across the company's geographies & product types.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last six months, the stock has been corrected by ~18.33 % and is trading lower than the average 52-week price level band of $5.04 - $7.70, offering a decent opportunity for accumulation. The stock has been valued using P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to peers, considering the uncertainties surrounding COVID-19 restrictions, supply constraints and cost pressures. For the valuation, peers such as Sunland Group Ltd (ASX: SDG), Goodman Group (ASX: GMG), Vicinity Centres (ASX: VCX), etc. Considering the company’s expanded operations, growth plans, expected earnings growth, current trading level, indicative upside in valuation, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing price of $5.460, up by ~0.924% as on 29 December 2021.

CWP Daily Technical Chart, Data Source: REFINITIV

Spirit Technology Solutions Ltd

ST1 Details

2021 AGM Highlights: Spirit Technology Solutions Ltd (ASX: ST1) is involved in providing telecommunication services, cloud services, managed IT services and cyber security services. On 29 November 2021, ST1 held its 2021 Annual General Meeting (AGM), wherein, the management highlighted during FY21, the company identified and completed 6 strategic acquisitions, in line with its goal of being a “one stop shop” for the modern-day business. Some of the key highlights of 2021 AGM are as follows:

• Improved FY21 Results: During FY21, the company’s revenue and other income increased by 200% and underlying EBITDA increased by 209% over the previous year.
• Trading Update: In Q1FY22, ST1 reported revenues of $30.9 million, up 98% on the previous year and positive underlying EBITDA of $2.0 million.

Revenue Trend (Source: Analysis by Kalkine Group)

Divestment of Consumer Assets: On 29 October 2021, ST1 completed the sale of its non-core consumer residential Internet business to the Melbourne based broadband and telecommunications provider DGtek Pty Ltd (DGtek) for a transaction value of $5.1 million.

Key Risks: The company is exposed to the risks related to macro factors such as wage inflation and labour shortages. The company is also exposed to risks related to costs pressures and supply side challenges, which could impact hardware deployments in large IT projects.

Outlook: Looking ahead, the company expects to witness continued consolidation in the fragmented IT & Telco markets, as structural change takes hold. The sale of the company’s non-core consumer business will allow it to focus on its strategy in the business market segment given the structural IT&T changes occurring with the way people work.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last six months, the stock has corrected by ~11.53% and is trading lower than the average 52-week price level band of $0.210-$0.450. The stock has been valued using P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers, considering the risks related to wage inflation and labour shortages. For the valuation peers such as TPG Telecom Ltd (ASX: TPG), Spark New Zealand Ltd (ASX: SPK), and Uniti Group Ltd (ASX: UWL), have been considered. Considering the company’s decent performance in FY21, expected benefits from the strategic acquisitions, modest outlook, current trading level, valuation and key associated risks, we give a “Speculative Buy” rating on the stock at the closing price of $0.23 as on 29 December 2021.

ST1 Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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