Sunland Group Limited

SDG Details

Sunland Group Limited (ASX: SDG) is engaged in the development and construction of the residential property. The group operates through its two core business segments – “Residential Housing and Urban Development” and “Multi-Storey” developments.

Results Performance for FY21 (For the Year Ended 30 June 2021)

• The company has recorded a net profit after tax of $24.9 million after tax adjustments of $4.8 million compared to $2.4 million in 2020 after tax adjustments of $13.9 million.
• Underlying earnings before inventory adjustments stood at $29.7 million (2020: $16.4 million).
• The directors of the company have declared a fully franked final and special dividend of 4 cents and 16 cents per share, respectively.
• It generated a strong cash flow from property settlements worth $274.4 million compared to $159.8 million in 2020.

Source: Company Reports, Analysis by Kalkine Group

Recent Update                         

• In the recently released annual general meeting report, the group stated that SDG will continue to allocate capital towards repayment of debt as well as delivery of active projects. The board remain emphasized on the delivery of the portfolio and the settlement of key assets sold.
• The company on 28 October 2021, declared that it has formed an agreement (by its subsidiary Sunland Developments No. 22 Pty Limited – The Seller) for the purpose of sale of its retail development precinct - “The Lanes” located at Mermaid Waters for consideration of $45.8 million.

Outlook

The management stated that the delivery of its existing projects and the cash generated from these along with proper usage of the group’s debt lines will aid the group’s strategy which is aimed at delivering fair value to shareholders. Meanwhile, the company focuses on maintaining a strong financial position to maintain adequate capital to complete projects to be developed.  Further, it focuses on the sustained return of surplus capital.

Key Risks

The group is exposed to credit risk pertaining to the fair value of each class of receivable. The group is also susceptible to changes in variable interest rates for classes of financial assets and liabilities. 

Valuation Methodology: Price/Earnings per Share Multiple Based Relative Valuation (Illustrative)

Technical Overview

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

SDG has delivered 9-months and one-year returns of ~+29.09% and ~+45.61%, respectively. The stock is trading higher than the average of the 52-week high price of $2.890 and the 52-week low price of $1.931.

Considering the aforementioned factors, along with the current trading levels, and the associated business risks, we advise the investors to book profits. We give a “Sell” rating on the stock at the closing market price of $2.85 per share, up by 1.79% on 17^th December 2021. 

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

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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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