Cedar Woods Properties Limited

CWP Details

Pre-Sales Improved by 9% for Sep Qtr on pcp:Property developer and investor, Cedar Woods Properties Limited (ASX: CWP) recently informed the market that its independent Director Mr. Ron Packer has recovered from illness and has resumed his role. Following this, Independent Director Jane Muirsmith has been confirmed as Chair of the Audit & Risk Management Committee, with Independent Directors Valerie Davies and Ron Packer continuing as members of the committee. Independent Director Valerie Davies has been confirmed as Chair of the Remuneration and Nominations Committee, with Independent Directors Jane Muirsmith and Ron Packer continuing as members of the committee.

Company’s flagship project includes Glenside in South Australia, Ellendale in Queensland, Bushmead and Ariella in Western Australia and Jackson Green and Williams Landing in Victoria, respectively.Bushmead was awarded Western Australia’s best residential project over 250 lots, while its Glenside project was recently recognised with three South Australian development industry awards for best masterplanned development, best residential development and for excellence in urban renewal. Moreover, its Jackson Green and Williams Landing have also been nominated for Victorian development industry awards.

Q1FY20 Highlights for the period ended September 30, 2019:Pre-sales for the period was reported at $409 Mn, an increase of 9% on the $376 Mn in the previous corresponding period. Close to two thirds of pre-sales are expected to settle in FY20 with the remaining to contribute in FY21. The Pre-Sales figures include $45 Mn of commercial developments across two separate projects, reflecting the growth in the company’s commercial development activities.

During the period, construction started on the nine-level, 165-unit Huntington Apartments project at Jackson Green, which is expected to be completed in mid-2021. Its 75% of units have been sold.


CWP’s Historical Financial Metrics (Source: Company Reports)

What to Expect:Despite the challenging national property market, the company has a good level of pre-sales to be carried in the ongoing and future financial years. On current market conditions, the company is expected to generate moderately lower full-year earnings in FY20 compared to FY19, with the balance of earnings weighted to the second half.

CWP’s development pipeline across four states include more than 10,000 lots/units. Several new projects are expected to contribute to earnings from FY21, including Huntington Apartments in Victoria, Ariella (adjoining parcel) and Solaris in Western Australia.

Industry Outlook:As per the home loan application data (AFG Index), there has been a 21% increase as on September 30, 2109 (Q-o-Q), with notable improvements in Melbourne’s and Sydney’s auction clearance rates and median house pricing over the quarter. This is expected to generate improved enquiry and sales in the second half of FY20.

Valuation Methodology:Price to Earnings (PE) Based Approach

Price to Earnings (PE) Multiple Approach (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, *NTM-Next Twelve Months

Stock Recommendation:Aventus’ share generated positive YTD return of 5.14%. The company is well-positioned across four states. Its strong balance sheet, substantial funding capacity is expected to help the company in making strategic, counter-cyclical acquisitions while assessing opportunities in a number of markets.

Its gross margin, EBITDA margin and net margin for FY19 stood at 30.7%, 19.8% and 12.9%, better than the industry median of 38.3%, 28.7% and 17.7%, respectively. Considering the company’s business model, profitability margins and current trading level, we have valued the stock using PE market multiple and arrived at the conclusion that the stock is overvalued. Hence, we recommend a “Sell” rating on the stock at the current market price of $7.820, up 2.895% on December 16, 2019.

 
CWP Daily Technical Chart (Source: Thomson Reuters)

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