Cedar Woods Properties Limited

CWP Details

Issue of Performance Shares: Cedar Woods Properties Limited (ASX: CWP) is a property investor and developer. On 3 November 2021, CWP issued 102,895 performance shares/ rights to John Blackburne, key management personnel. On 28 October 2021, AustralianSuper Pty Limited, increased its shareholding from ~8.79% to ~11.41% in CWP.

Q1FY22 Operational Update:

• The company reported net sales of ~339 units of lots across the four operating states in Australia, an increase of ~9% YoY in Q1FY22. It is the highest quarterly sales posted since Q4FY20. The growth in Q1FY22 was due to robust sales conditions, sales rates, and price increase across most of the projects.
• CWP held ~$460 million of pre-sale contracts at the Q1-end, up by 39% on a pcp basis. The company continues with project construction in all operating states.

Cash & Cash Equivalents Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces fluctuations in real estate prices, demand, and cycles. An increase in interest rates, construction costs, lockdowns due to COVID-19 continue to pose risk to business growth.

Outlook:

• The company expects to settle ~45% of pre-sales contracts in FY22 and remaining in FY23 and FY24. Multiple new projects such as Mason Quarter apartments in Victoria, Incontro in Western Australia, Burpengary in Queensland, and Monarch apartments in South Australia, are expected to contribute to FY23 earnings. Expansion through further acquisitions is also expected to supplement the corporate portfolio in the future.
• CWP has a pipeline of over 9,500 dwellings, lots, and offices, and anticipates new housing sector fundamentals (buyer’s optimism, low unemployment, and low-interest rates) to remain favourable in the short term.
• The news of the gradual reopening of borders in November 2021 and the expected rise in net overseas migration in the next few years is expected to increase the housing demand.

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: The stock of CWP gave a negative return of ~11.86% in the past three months and a negative return of ~17.09% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $5.650 - $7.700. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium than its peers’ median EV/Sales multiple considering prevailing robust market conditions for the new housing sector, buoyant residential property markets, and increase in net sales in Q1FY22. For this purpose of valuation, a few peers like Sunland Group Limited (ASX: SDG), Servcorp Limited (ASX: SRV), Ingenia Communities Group (ASX: INA) have been considered. Considering the current trading levels, robust sales, and price growth conditions, increase in Q1FY22 net sales and units, near-term favourable sector fundamentals, pipeline of dwelling & lots & contracted pre-sales for FY22, valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $5.870, as of 3 November 2021, 11:04 AM (GMT+10), Sydney, Eastern Australia.

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.

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