Cedar Woods Properties Limited

CWP Details

Business Update: Cedar Woods Properties Limited (ASX: CWP) is engaged in property development and investing. The company holds a portfolio of quality developments and has delivered projects on residential lots, townhouses, apartments, and commercial spaces.

• Jobkeeper Payments Notification: On 12 November 2021, CWP delivered the appended Jobkeeper Payments Notification. The total sum of all Jobkeeper payments that CWP received for FY21 stands at $1.083 million.
• Completion of Asset Acquisition: As announced on 07 November 2021, CWP broadened its portfolio with a $49.5 million acquisition of an 86-hectare site in Eglinton. The site will add 1200 lots to CWP’s development pipeline and is estimated to contribute to earnings for 11 years from FY24.

Q1FY22 Operational Update

• Top-line Update: Pre-sale contracts by the end of Q1FY22 stood at $460 million, up 39% from realised $332 million. Circa 45% of pre-sales are estimated to settle by FY22, with the balance contributing to income in FY23 and FY24.
• Operational Stance: The project construction continues in all four states, with significant construction milestones to be achieved in FY22. CWP’s projects experienced robust selling conditions with subsequent volume and price growth. As a result, the lot and unit sales were up by 9% PcP.
• Portfolio Highlights: Construction at Monarch apartments in Southern Australia was brought forward by five months. Boston Commons strata offices in Victoria achieved above 30% of offices sold within a week. Ellendale project in Queensland witnessed a 25% price surge in the trailing twelve months.

The trend in Net Sales, Analysis by Kalkine Group

Key Risks and Challenges

• Supply Constraints: Cost pressures and supply constraints are becoming a significant issue across the real estate industry. Some project stages in Victoria witnessed delays due to containment measures.
• Retrenchment of Government’s Relief Policies: The gradual retrenchment of government policies in support of the real estate sector may threaten fallout in real estate indicators.

Outlook

• Market Position: CWP holds a strong position in current market conditions across all states and $460 million in pre-sales which is expected to settle over FY22 – FY24.
• Earnings Growth: Strong earnings growth is expected in FY22, with a pipeline of over 9,500 undeveloped dwellings/lots across the four states.
• Key Projects: Several projects are expected to contribute to FY23 earnings, including Fraser Rise, Mason Quarter and Aster Apartments, Monarch apartments in SA, Incontro in WA, and Burpengary in Queensland.

Valuation Methodology: EV/EBITDA 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 ~13.133% in the past year. The stock has a 52-weeks’ low and high level of $5.270 and $7.700, respectively. The stock has been valued using the EV/EBITDA multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The company might trade at some premium to its peers’ average EV/EBITDA multiple, considering the housing sector’s robust market conditions, continuous asset acquisition strategies, etc. For valuation, a few peers like Sunland Group Ltd (ASX: SDG), LendLease Group (ASX: LLC), Servcorp Ltd (ASX: SRV), and others have been considered. Considering the current trading levels, high pre-sales conversion expectations, growth in pricing conditions, growing pipeline of dwelling/lots for FY22, upside indicated by valuation, current trading levels, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $5.320, as of 15 November 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

CWP Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

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.

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