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Cedar Woods Properties Limited
CWP Details
Q3FY22 Financial Update: Cedar Woods Properties Limited (ASX: CWP) is a residential and commercial property developer. It holds a portfolio of property assets in Western Australia, Victoria, Queensland, and South Australia.
Quarterly Net Sales; Analysis by Kalkine Group
Key Risks and Challenges
Increasing interest rates may directly influence homeownership costs. Rising home prices across states may raise household affordability concerns.
Outlook
Backed by $600 million in pre-sales, CWP estimates an NPAT of almost $35 million for FY22, with robust earnings growth anticipated in FY23. Over 10,000 undeveloped lots/dwellings across four states position CWP favourably for future growth.
Valuation Methodology: Price/Book Value 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: The stock of CWP gave a negative return of ~38.32% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $4.020 - $7.110. The stock has been valued using the Price to Book Value multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the slowdown in construction activities and inflationary pressure in the real estate space, the company might trade at some discount to its peers’ average Price to Book Value multiple average. For valuation, a few peers like LendLease Group (ASX: LLC), Servcorp Ltd (ASX: SRV), Eureka Group Holdings Ltd (ASX: EGH), and others have been considered. Given the decent financial performance, favourable macro prospects, bulged pre-sales, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $4.240, down by ~0.235%, as of 24th May 2022.
CWP Daily Technical Chart, Data Source: REFINITIV
Finbar Group Limited
FRI Details
H1FY22 Financial Performance: Finbar Group Limited (ASX: FRI) provides medium to high-density residential buildings and commercial property developments in Western Australia. On 19 May 2022, Ronald Chan, Trustee & beneficiary, and director of FRI, increased his indirect position by 50,000 shares to consider $36,000.
H1FY22; Analysis by Kalkine Group
Key Risks and Challenges
Lockdown and mobility restrictions may put pressure on vacancy rates impacting volume offtake. Demographic shifts, elevated household savings ratio, and rising unemployment levels may pressure the demand side.
Outlook
Construction of Civic Heart in South Perth and AT238 in the Perth CBD continues to progress, with AT238 estimated to be completed in H1FY23 and Civic Heart in FY24. FRI launched The Point, an apartment estate in Rivervale, in H1FY22 with reported pre-sales of 87 apartments at $48.4 million.
Stock Recommendation: The stock of FRI gave a negative return of ~13.10% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $0.720 - $0.920. On a TTM basis, the stock is trading at an EV/Sales multiple of 1.8x compared to the industry average of 15.7x (Real Estate Operations). It indicates that the stock is undervalued at current trading levels. Given the elevated levels of dwellings approved, decent project progress, profitable status, current trading levels, and valuation on a TTM basis, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.730, up by ~1.388% as of 24th May 2022.
FRI 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 depend on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level where-in stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in stock prices tend to find resistance when they are rising, and an 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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