Cedar Woods Properties Limited
 
This is an ASX 300 company with a track record of consistent growth in earnings and meeting its targets and has reported four years of consecutive record profits to 30 June 2014. Its portfolio is strategically located and diversified and includes urban and regional areas of growth in Western Australia, Victoria and Queensland, apartments, integrated housing,mixed use and large master planned communities close to transport infrastructure close to transport infrastructure and other amenities. Its balance sheet is strong and the gearing is prudent giving it the capacity to fund acquisitions and it offers an attractive fully franked dividend yield. Its business model is to grow and develop a national portfolio diversified by geography, product types and price points so that it can appeal to a broad range of customers and continue to perform well despite changing market conditions.
 
Western Australia portfolio overview
 
The company's experience in WA demonstrates that well-located projects, close to transport infrastructure and in growth corridors, continue to generate strong buyer demand. Sales activity continues at Mariners Cove, Piara Central, Rivergums, Elements, Byford on the Scarp and the Brook at Byford A number of stages at these projects settled in 2H FY2015.Mangles Bay Marina Project has been granted Federal Department of Environment approval and the project now moves to the planning phase.Significant planning milestones have been achieved during the half year, building the pipeline for future earnings.


Forecast Housing (Source -  company Reports)
 
Victoria portfolio overview
 
Positive market conditions for residential property developers continued in 1H Y2015 and CWP projects performed well in this period with price growth being achieved while sales remain strong. Comprehensive delivery program is underway at Williams Landing with stage 1 of the $ 23 million Williams Landing shopping completed and opened in the first half.13,500sqm Masters Home Improvement store at Williams Landing under contract for $36m will be settling in June 2015 and the Realm project has now fully sold and settled. Final stage of Banbury Village (Botanica Apartments) has been 90% sold and settlements are expected in FY2017.
 
Queensland project update
 
Upper Kedron development received Brisbane City Council (BCC) planning approvals in December 2014.The BCC approved a masterplan for the site with the capacity for 980 lots.Detailed design work for the initial stages is now underway and stage applications will be made progressively as the development is delivered. 200 of the 980 lots will be considered after delivery of various road works and intersection upgrades . The 228 hectare site, 13 kilometres west of the Brisbane CBD, is expected to attract strong buyer demand and the project will include 90 hectares of green space .


NPAT Growth (Source - Company Reports)
 
Third quarter FY 2015 operational update
 
The company confirms a record FY2015 net profit after tax (NPAT) guidance of $41 million, based on the consistent performance of the company’s established residential estates in Perth and Melbourne during the third quarter of the 2015 financial year and the sale of the Masters Home Improvement store at Williams Landing in Victoria.The company has exchanged contracts with a Melbourne based investor for the sale of the Masters store for $36 million, representing a yield of 6%. The company received strong interest from a number of parties, which resulted in a shorter sale process than originally anticipated. Settlement is scheduled for June 2015, prior to the end of the financial year.
 

Population Growth (source - Company Reports)
 
Cedar Woods Managing Director, Paul Sadleir, said: company was very pleased with the result from the Masters store sale, which highlights the quality of the Williams Landing project and Cedar Woods’ increasingly diversified earnings base.“As a result of the earlier than expected sale, the timing of settlements from residential projects has been adjusted, in keeping with the company objective of delivering consistent annual growth in profits and dividends for shareholders. Accordingly, some settlements previously planned for 4Q FY2015 are now due to occur in July 2015.Pre-sales are currently at a healthy $75 million, putting the company in a strong position for the current financial year.
 

Cedar Woods Daily Chart (Source - Thomson Reuters)

The company will continue to operate with a modest level of gearingand expects net debt to equity to remain at the low end of its target range of 20-75% up to the end of the financial year.the company remains on track to deliver a full year net profit after tax in FY2015 of $41 million. Market conditions in Western Australia, Victoria and Queensland are strengthened by solid population growth and low interest rates. With many projects in Australia’s fastest growing municipalities, the company is well placed to benefit from these conditions. It continues to build strong FY2016 pre-sales, which are currently $75 million and comprised largely of high margin product. Assuming current market conditions continue, this is well positioned to maintain earnings momentum into FY2016.
 
First half 2015 results
 
Net profit after tax for the period came to $ 9.1 million and the result was consistent with the previous expectations and the result of the timing of the stages of various projects. The fully franked dividend of 12 cents per share was declared on level with the same period of the previous year. The financial strength was maintained with gearing at 36% and the three-year bank facility was extended. The operating cash flow before acquisitions was ($ 7.8 million) compared to $ 18.2 million in the previous year. Payments for land acquisitions came to $ 25.5 million compared to $ 14 million and the net operating cash flow was ($ 33.3 million) compared to $ 4.2 million in the previous year.
 
 
 Company Outlook
 
The company is maintaining the full FY 2015 guidance for a record NPAT of $ 41 million and this positive outlook is reinforced by presales of $ 75 million at the end of the third quarter of 2015 to be settled in FY 2016. The development programme is on track supported by a strong presales initiative and disciplined execution and delivery of projects. The momentum for presales in FY 2016 continues to build and the company is well positioned to carry forward its earnings momentum into the next year.
 
We believe that the forecast record NPAT could well lead to share price growth and further possible enhancement in the already attractive trailing dividend yield of around 5.7%. We put a buy on the stock at the currernt price of $5.11.

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