Cedar Woods Properties Limited

CWP Details

Cedar Woods Properties Limited (ASX: CWP) operates as a property developer focused on residential communities and commercial properties. It owns a portfolio of assets in Western Australia, Victoria, Queensland, and South Australia.

H1FY22 Result Spotlight:

• CWP generated pre-sales of over $560 million driven by low stock levels and pent-up demand exhibited in some markets.
• The recovery in inbound migration provided relief to the property market. But the pandemic has delayed a few projects and deliveries that are scheduled to be completed in H2FY22 slipped into H1FY23.
• Revenue climbed over 3% to $174.4 million in H1FY22 as compared to H1FY21.
• It has 11 projects in Western Australia with more than 5,000 lots/ dwellings. CWP added over 1,200 lots to the developmental pipeline at Eglinton. Its Victoria market saw increased pipeline post-acquisition of Fraser Rise and Fieldstone.
• Net profit plunged from $22.7 million in H1FY21 to $14.1 million owing to slippages in project deliveries and an increase in costs.
• On the balance sheet front, it had closed the period with a cash balance of $5.6 million as of December 31, 2021. The interest coverage ratio appears strong at 9.5x. CWP has over $86 million in headroom to borrow under bank facilities.

Financial Highlights (Analysis by Kalkine Group)

Key Risks: Increase in interest rate by RBA may adversely affect the housing demand. Delays in site approvals and clearances by regulatory bodies may affect execution. The residential property market is prone to cyclical risks. High inventory levels and a spike in property listings may invariably affect property prices.

Outlook: The management is optimistic about its growth outlook with affordable markets (QLD, WA, and SA) to continue to perform well. CWP has over 10,000 lots/ dwellings in quality locations that are expected to support earnings.

Valuation Methodology: P/E 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 company just recovered from its 52-week low price of $4.330. The stock of CWP has been corrected by ~14.18% in the past three months, making a decent opportunity to accumulate. The stock has been valued using a 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 premium to its peers, considering the sequential quarterly increase in sales and conducive policy environment for housing projects. For the purpose of valuation, peers such as Cromwell Property Group (ASX: CMW), Lifestyle Communities Ltd. (ASX: LIC), Sunland Group Ltd. (ASX: SDG), and others have been considered. Considering the healthy pipeline in affordable markets, adequate liquidity, optimistic outlook, current trading level, upside potential as indicated by the valuation, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $4.660, up by ~0.215%, as on 1 April 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

CWP Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.