Cedar Woods Properties Limited

CWP Details

Final Dividend Declared: Cedar Woods Properties Limited (ASX: CWP) engages in investing and developing properties that include residential, commercial, and retail projects in Western Australia, South Australia, Victoria, and Queensland. Recently, the company has declared a fully franked final dividend of $0.135 with the record date of 30 September 2021, and the pay date will be 29 October 2021.

Change in Director’s Interest: The company’s director Robert Brown has disposed of 109,000 ordinary shares of the company. In contrast, Nathan John Blackburne has acquired 14,845 ordinary shares vested under the FY2019 long term incentive plan and 16,232 ordinary shares by exercise of Zero-Price options issued under the FY20 Deferred STI Plan.

FY21 Financial Performance:

• The company has recorded an improved total asset (book value) of $651.8 million as of 30 June 2021, compared to $644.1 million in the previous year.
• The company has reported revenue growth of 15% to $299.75 million in FY21 against $260.66 million in FY20, reflecting changes in product mix and some improvement in net prices.
• CWP incurred a net profit of $32.83 million in FY21, up by 61.1% from $20.38 million in FY20, reflecting due to disciplined capital management and continued focus on its strategic priority of financial strength
• At the end of 30 June 2021, the cash position of the company stood at $5.38 million.

Key Metrics (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- Due to the widespread lockdowns and travel restrictions, the demand for housing has been impacted.
• Liquidity Risk- The company requires sufficient liquidity to meet the financial obligation, operational activity, and mitigate the working capital risks.

Outlook:

• The company is expecting a strong presales position of $478 million in FY22 and continue to target earnings growth, supported by a pipeline of more than 9,600 undeveloped lots/dwellings across four states.
• The new projects include Mason Quarter, Fraser Rise and Aster apartments in Victoria, Monarch apartments in South Australia, Incontro in Western Australia, and Burpengary in Queensland might contribute FY23 earnings.
• Further, the company has a strategic acquisition that is anticipated to supplement the company's portfolio in future years.
• Moreover, low interest rates and unemployment might support the demand for the housing sector, expecting to rise in sales.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: 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: As per a recent announcement, the company has issued 16,232 ordinary shares and 178,652 issued under an employee incentive scheme. The stock of CWP is trading below its average 52-weeks' levels of $5.140-$7.700. The stock of CWP gave a negative return of ~7.33% in the past one month and a positive return of ~17.90% in the past one year. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at some premium to its peers' average EV/Sales, considering a strong topline and bottom-line growth and a lower interest rate. For the purpose of valuation, peers such as Servcorp Ltd (ASX: SRV), Sunland Group Ltd (ASX: SDG), Tian AN Australia Ltd (ASX: TIA) have been considered. Considering the current trading levels, indicative upside in valuation, government grants, strategic acquisition, projects in the pipeline, optimistic outlook, we recommend a 'Speculative Buy' rating on the stock at the current market price of $6.150, up by ~0.654% as on 16 September 2021. Investors with high-risk appetite should evaluate this stock in view of the technical support and resistance levels as well as taking into consideration associated risks in housing market, inflation and liquidity risks.

CWP 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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