Cedar Woods Properties: Building back to pre-COVID levels
About the author:
- Author name:
- By Scott Murdoch
- Job title:
- Date posted:
- 31 August 2021, 8:30 AM
- Sectors Covered:
- Contractors/Developers, Diversified Financials
- CWP reported FY21 NPAT of A$32.8m, up 61% on the pcp (covid-impacted year).
- Pre-sales stand at A$478m, up 33% on the pcp (A$360m), with approximately two thirds expected to settle in FY22 (balance in FY23), securing solid visibility for earnings recovery over the next two years.
- Formal earnings guidance was not provided, however CWP expect continued growth in FY22, supported by pre-sales and a strong capital position.
- CWP retains a very strong balance sheet position to take advantage of pipeline acquisitions. Whilst we see earnings recovering strongly, pre-COVID levels remain unlikely until post FY23. Trading in-line with our valuation, we maintain a Hold.
Rebounding FY21 result
CWP delivered FY21 NPAT of A$32.8m, up 61% on the pcp (A$20.2m) however still 32% below peak FY19 earnings (A$48.6m).
Gross margin improved to 31%, up from 28% in pcp, a function mainly of product mix (with some benefit from improved prices flowing though).
CWP declared a final dividend of 13.5cps (fully franked), bringing total dividends to 26.5cps for the year (65% payout).
Net debt stood at A$113.3m (down from A$142.7m in pcp), with sufficient headroom (A$94m) under current facility limits. CWP remain conservatively geared, with interest cover at a comfortable 12.1x.
Reported NTA (at cost) was at A$4.92ps (A$4.68ps pcp).
Pre-sales up 33% on the pcp
CWP did not provide any formal guidance, however positive outlook commentary centered around presales of A$478m). Around two thirds are expected to settle in FY22 (~A$320m), which is a ~14% uplift of land/buildings sales in FY21. We expect this underpins around the same gross profit levels as delivered in FY21 (before any further sales to come).
We expect slight gross margin compression in FY22, which is a function of more built form product to be delivered in the year. Recent price growth in several markets should assist heading into FY23+.
Sector conditions remain buoyant across most of CWP’s core markets (low interest rates, improving unemployment and broadly low levels of supply). CWP has broad geographic exposure, with only Victoria currently exposed to COVID-related restrictions (WA, QLD, SA all operating unrestricted currently).
CWP’s pipeline should enable a medium-term earnings rebound (to pre-covid levels). Several significant projects will commence revenue contribution in FY23, including Greville (Qld, 281 lots); Subiaco (WA, 131 lost) and Wollert (Vic, 834 lots).
Forecast and valuation update: minor changes
We make relatively minor changes to forecasts: FY22 -2.2%; FY23 -4%.
Investment view: Hold maintained
Our PE/NTA based price target is (login to view). We remain positive on CWP’s medium-term prospects and earnings delivery through the cycle. CWP’s dividend is supported by a strong project pipeline, embedded earnings within existing projects and a strong balance sheet.
Accretive acquisitions; and better-than-expected sales rates.
Short-term project timing risk; fall-over rates; project assumptions not materialising as expected; zoning/density approvals being delayed or negatively impacted; and a change in cyclical demand environment affecting our sales assumptions.
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