Cedar Woods Properties Limited

CWP Details

Cedar Woods Properties Limited (ASX: CWP) is a residential and commercial property developer. It holds a portfolio of property assets in Western Australia, Victoria, Queensland, and South Australia. In the recent announcement, the company’s director, Nathan John Blackburne, has acquired 4,700 shares in CWP through Spencer Family Trust at the average price of $4.24 per share.

Q3FY22 Operational Updates:

• Its presales clocked a record growth of 40% in Q3FY22 to reach over $600 million. CWP is expecting ~17% of presales to settle in FY22.
• Net sales settled at $283 million in Q3FY22 as against $302 million posted in Q3FY21. This was on account of weak sales of lots and apartments. But net sales rebounded in March 2022 month and year to date net sales (nine months period) showed a 10% growth over the last year.
• The industry is reeling under increasing cost pressure and supply constraints. The company deferred its Subiaco project by another 12 months.
• It had acquired landholdings of Henley Brook, located in Western Australia, for $20.4 million (before tax). The project is expected to hit the market by 2023.

Net Sales Quarterly Trend (Analysis by Kalkine Group)

Key Risks: Rising interest rates may directly influence home ownership costs. Increasing home prices across states may erode household affordability.

Outlook: CWP is optimistic about the strong demand for residential property weighted by price growth, particularly in South-East Queensland and Melbourne. The tightening rental market is expected to lift sentiments for residential property investments in the upcoming years.

Valuation Methodology: Price-to-Earnings 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 has been corrected by ~20.65% in the past three months. The stock of CWP is approaching its 52-week low price of $4.020. 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 record highest presales achieved in Q3FY22. For the purpose of valuation, peers such as Servcorp Ltd. (ASX: SRV), Cromwell Property Group (ASX: CMW), Ingenia Communities Group (ASX: INA), and others have been considered. Considering the rollout of the Henley Brook project, soaring residential property prices across states, optimistic outlook, 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 $4.080, as of May 10, 2022, down ~1.69%. 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 

Finbar Group Limited

FRI Details

Finbar Group Limited (ASX: FRI) provides medium to high-density residential buildings and commercial property developments in Western Australia.

Latest Business Updates:

• The company’s director, Mr Ronald Chan, acquired 50,000 shares for total consideration of $37,500 on May 9, 2022.
• Effective on April 21, 2022, Wilson Asset Management Group becomes a substantial shareholder with ~23.61 million shares representing voting rights of 8.68%.
• In H1FY22, FRI reported a net profit after tax of $9.6 million in H1FY22, an increase from $4.023 million in H1FY21.
• Its Pelago commercial property witnessed an occupancy rate of 70%, while Pelago residential occupancy rate stood at 99%.
• FIR owns 364 properties under management for rental. It had experienced an uptick in average sales price per unit, reaching $645 in H1FY22 in contrast to $609 realized in FY21.

Sales Trend (Analysis by Kalkine Group)

Key Risks: Lockdown and mobility restrictions may put pressure on vacancy rates impacting volume offtake. Demographic shifts, elevated household savings ratio, and rising unemployment levels may put pressure on the demand side.

Outlook: FRI is expected to complete two major projects – AT238 and Civic Heart in the Perth CBD market by H1FY23 and FY24, respectively. Construction at Aurora has commenced off late, and earthworks activities are underway and are expected to be completed by FY24.

Stock Recommendation: The stock of FRI has been corrected by ~3.22% in the past three months. The stock of FRI just recovered from its 52-week low price of $0.745. On a TTM basis, the stock is trading at an EV/Sales multiple of 1.8x as compared to the industry median of 6.7x (Real Estate Operations). This indicates the stock is undervalued at current trading levels. Considering the rising property prices, major projects to achieve completion in the near-term, uptick in net profit in H1FY22, low debt levels relative to its peers, valuation on a TTM basis, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $0.750, as of May 10, 2022, up ~0.671%. 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.

FRI 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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