CDL & CDI ... Another Great Result

[greater fool]

Content passed use by date.

[BlackPeter]

Nice confirmed uptrend now ... and wondering what a good second half will do to the share price?

10862

16.09.: Breakthrough the EMA200 (and never fell back below) ...
21.10.: Golden Cross ...

Sure - still some time to go until we see the financials, but only 5 weeks left in the financial year and the story in the streets is that the housing market is doing nicely these days. Can't hurt a company developing affordable subdivisions - can it?

[mfd]

The latest REINZ report looks good for CDI - HPI up 13% in Hastings and 4.3% in Christchurch over the last year, 4.8% and 4% over the last 3 months. These are the main areas the company is currently selling subdivisions. Currently trading at a PE of around 8 based on annualised HY results, which they expect to improve on in the second half.

[NZSilver]

Nice little uptrend forming, probably one of the most undervalued stocks on the NZX while giving a tidy div yield considering the current bank interest rates. Should move towards the $1 mark pretty easily.

[mfd]

Good timing to take advantage of the uptick in Auckland housing

https://www.nzx.com/announcements/346460

"Sales at the Dominion Road subdivision have exceeded expectations with the first 44 lots of 45 in Stage 1 already under contract"

[BlackPeter]

as with MCK (direct majority owner):

Kwek Eik Shen moving onto the CDI (as well as MCK) board. He is the nephew of the (ultimate) majority owner Kwek Leng Beng. Kwek family clearly increasing its control.

http://nzx-prod-s7fsd7f98s.s3-websit...607/314680.pdf

Just wondering whether this might be the prelude to a complete takeover? Recent share price moves of these in my view ways undervalued shares could be a hint ...?

[Snoopy]

as with MCK (direct majority owner):

Kwek Eik Shen moving onto the CDI (as well as MCK) board. He is the nephew of the (ultimate) majority owner Kwek Leng Beng. Kwek family clearly increasing its control.

http://nzx-prod-s7fsd7f98s.s3-websit...607/314680.pdf

Just wondering whether this might be the prelude to a complete takeover? Recent share price moves of these in my view ways undervalued shares could be a hint ...?


If the company is taken over, then there is no publically accountable board any more. If a majority owner puts one of their own on the board, then that position would be disestablished in a takeover. So I would think that the appointment of Kwek Eik Shen is a firm indication that CDI will not be taken over by the majority shareholder?

SNOOPY

[NZSilver]

Yeah good value for sure, just a question of it will ever be fully reflected in the market price and suspect the only way it truly will is if it gets taken over. I got in at 78c mid last year so have had a little run up, but happy to park some money here as traditionally pays a decent div and with the value proposition it should have less downward risk if the markets come off the boil.

[Mr Slothbear]

I have been researching and mulling over CDI for quite some time. Has a few positives but ROE of only 15% with land valued at cost suggests it will not be anywhere close if land values are valued at current market price. If as you say ROE is 15% with an NTA of 78c or so then ROE will be close to half that if including the assets at true market value of around $1.50 and with no debt.

this roughly suggests a ROE of 7-8% which as there no leverage will be the same as its REturn on assets.

now heres the kicker

Ryman has a near identical return on assets however their average return on equity hovers in the 20-25% range. They do this by essentially borrowing interest free money via the sale of occupation rights.

really highlights the benefits of debt free gearing that the license to occupy moel gives.

Unless theres any hint of change in control / structure so its less of a value trap CDI is a pass from me.

[Snoopy]

I have been researching and mulling over CDI for quite some time. Has a few positives but ROE of only 15% with land valued at cost suggests it will not be anywhere close if land values are valued at current market price. If as you say ROE is 15% with an NTA of 78c or so then ROE will be close to half that if including the assets at true market value of around $1.50 and with no debt.

this roughly suggests a ROE of 7-8% which as there no leverage will be the same as its Return on assets.


The point you haven't mentioned Mr Slothbear is that all of the difference between book value and the market value of the development land will be captured by CDI shareholders. So to me it doesn't make investment sense to say that ROE is only 7-8% after land is developed at 'market value'. ROE is 15% because shareholders capture a development margin that incorporates any increase in market value since the land was acquired. It will always be like this for whatever land bank CDI holds

Where the problem for CDI investors arises is that once the land on the books is sold at an ROE margin of 15%, can CDI use those proceeds to find more land that they can develop with an ROE of 15%? I can see that success in developing past acquisitions of land at a good margin does not guarantee that future land purchases will be saleable at similar profit margins. In this sense, calculating a PE ratio to fairly value CDI is starting to look nonsensical. Perhaps it is best to measure this share at 'net market value' of land with a suitable discount factor to reflect the fact that 'development land on the books' takes some time to be converted into cash?

SNOOPY

[Beagle]

Snoopy, here is a question for you to ponder to further your education in retirement stocks..
Which development business model has a higher chance of being very successful for its shareholders.
1. Company A buys land and develops houses and sells them once, pays full tax on the profit and all future gains pass to the buyers.
2. Company B buys land and develops houses and sells them over and over and over and over again and over again, clipping a development / refurbishment margin on them every time and all gains stay with company and because its structured as a licence to occupy the company never pays tax on the overall increase in the value of the houses over time.

Which sounds like a better business plan to you mate ?

[Snoopy]

Snoopy, here is a question for you to ponder to further your education in retirement stocks..
Which development business model has a higher chance of being very successful for its shareholders.
1. Company A buys land and develops houses and sells them once, pays full tax on the profit and all future gains pass to the buyers.
2. Company B buys land and develops houses and sells them over and over and over and over again and over again, clipping a development / refurbishment margin on them every time and all gains stay with company and because its structured as a licence to occupy the company never pays tax on the overall increase in the value of the houses over time.

Which sounds like a better business plan to you mate ?


Taking the recent historical viewpoint the answer is 'Company B' obviously.

However, what would happen if:

1/ The appreciation in property prices slowed to the extent that maintenance upkeep costs exceeded the underlying property capital gains into the future? IOW owning a property became a net liability.
2/ The government seeing the tax free status of most the retirement village profits decided to restrict funding to the care side of the business so that retirement villages would be forced to divert some of their 'property profits' to subsidize the care units? (this is already happening now as a result of funding not being available to cover the cost of well deserved pay increases to retirement village carers).
3/ Discretionary movement to an own your right to occupy villa in a retirement village slowed as the price of the retirement village units caught up with the wider property market? IOW those making the move no longer had that incremental pile of capital gain to play with after selling their house on the outside and moving to a retirement village and so put off their decision to move. The effect of this could be that the demand for care units becomes much higher in proportion than the demand for independent living in villas. That could severely impact the profitability of retirement villages.

Under those circumstances, I can imagine a situation where 'Company A' would look better.

SNOOPY

[mfd]

A further point - which business model is likely to attract significant competition, ultimately reducing returns? There are now 6 listed companies chasing model B, each busily growing as fast as they are able, together with numerous private and charitable competitors. I wouldn't want all my eggs in that basket (although I do have a few in there).

[beetills]

Just wondering..would it be worth CDI taking on debt and purchasing large holdings of land for the future eg a dairy farm and continue to run it until needed for developing.
I know they purchase land already but i was thinking large tracts of land.

[Beagle]

Taking the recent historical viewpoint the answer is 'Company B' obviously.

However, what would happen if:

1/ The appreciation in property prices slowed to the extent that maintenance upkeep costs exceeded the underlying property capital gains into the future? IOW owning a property became a net liability. Even during the greatest financial challenge of our lifetimes the GFC, Ryman's underlying profits still went up every year.
2/ The government seeing the tax free status of most the retirement village profits decided to restrict funding to the care side of the business so that retirement villages would be forced to divert some of their 'property profits' to subsidize the care units? (this is already happening now as a result of funding not being available to cover the cost of well deserved pay increases to retirement village carers). Allready happening to some extent as you point out but I don't think its the major drain on profitability you imply.
3/ Discretionary movement to an own your right to occupy villa in a retirement village slowed as the price of the retirement village units caught up with the wider property market? IOW those making the move no longer had that incremental pile of capital gain to play with after selling their house on the outside and moving to a retirement village and so put off their decision to move. The effect of this could be that the demand for care units becomes much higher in proportion than the demand for independent living in villas. That could severely impact the profitability of retirement villages. Illogical that this would happen as ostensibly construction costs for either a retirement unit or a house are not dissimilar and retirement units are generally considerably smaller than people's houses, i.e .a natural downsizing usually occurs as part of the shift

Under those circumstances, I can imagine a situation where 'Company A' would look better.

SNOOPY

Of course if all the planets line up against model B they will do worse but on the balance of probabilities the point I am making should be clear enough for anyone with their head screwed on that's thinking objectivly

[percy]

Snoopy, here is a question for you to ponder to further your education in retirement stocks..
Which development business model has a higher chance of being very successful for its shareholders.
1. Company A buys land and develops houses and sells them once, pays full tax on the profit and all future gains pass to the buyers.
2. Company B buys land and develops houses and sells them over and over and over and over again and over again, clipping a development / refurbishment margin on them every time and all gains stay with company and because its structured as a licence to occupy the company never pays tax on the overall increase in the value of the houses over time.

Which sounds like a better business plan to you mate ?

Can't be put any simpler than that.

[Beagle]

Can't be put any simpler than that.

The real secret is that every time Company B clips the ticket its on the higher updated capital value thereby creating a virtuous circle of ever increasing wealth for shareholders.

[Snoopy]

Illogical that this would happen as ostensibly construction costs for either a retirement unit or a house are not dissimilar and retirement units are generally considerably smaller than people's houses, i.e .a natural downsizing usually occurs as part of the shift


Yes, but most people would not move from a brand new three bedroom house to a brand new two retirement village bedroom unit. You might be surprised by how many people downsize from their quarter acre section bungalow and end up paying all their proceeds towards a smaller brand new house on half the land.



Of course if all the planets line up against model B they will do worse but on the balance of probabilities the point I am making should be clear enough for anyone with their head screwed on that's thinking objectively

'All the planets lined up' against? I could imagine a much worse case for retirement village operators than the one I outlined. A case where property values fall and the retirement company starts to stack up a future depreciation bomb: a spectre of future losses , a collection that would be realised some years down the track when the losses on those 'licences to occupy' were forced through at a low price at sale time.

I first looked at Ryman around the year 2000 and decided that it might be worth looking into once the crazy Auckland property market settled down. Eighteen years later the correction came, although it wasn't really a correction in my book. How long do you think Auckland property prices can keep rising Beagle? Relative to incomes we are about the highest priced property market in the world already. I don't think we can get away without a proper price correction in NZ soon.

SNOOPY

[Beagle]

I would argue that we have probably lived through the greatest financial challenge of our lifetimes, the GFC which unquestionably was the biggest challenge to the financial system, including housing since the great depression. As I have said before, RYM grew underlying earnings throughout the GFC when property prices went backwards.

The model as I have succinctly spelled it out for you works Snoopy. Its not about Auckland prices, its about the national average because the best retirement companies invest throughout N.Z.

If you're determined to see the negatives and risks, that's what you'll see.

[Snoopy]

I would argue that we have probably lived through the greatest financial challenge of our lifetimes, the GFC which unquestionably was the biggest challenge to the financial system, including housing since the great depression. As I have said before, RYM grew underlying earnings throughout the GFC when property prices went backwards.

The model as I have succinctly spelled it out for you works Snoopy. Its not about Auckland prices, its about the national average because the best retirement companies invest throughout N.Z.

If you're determined to see the negatives and risks, that's what you'll see.


I would contend that with the rise in national average prices outstripping Auckland over the last few years, this is a symptom of Auckland prices having hit the ceiling. A neighbour of mine with a young family recently moved from Christchurch to Auckland. He is currently paying $590 per week to rent a three bedroom house. If my maths is right that equates to:

$590- x 52 = $30,680 per year.

If his average tax rate is 25% he will need an income of:

$30,680/ 0.75 = $40,906

just to pay his rent. Now factor in 'luxuries' like filling up the car to drive to work, paying for food, and power and I wonder what sort of income he needs to earn to survive? The answer will no doubt go up with another little one on the way. This is the reality of the working man in Auckland Beagle. This fellow is congenial, hard working but not particularly well qualified academically. He was working as a senior storeman in the firms Christchurch branch before he was sent up to Auckland by the firm. Needless to say he is already plotting his return down south!

Yet you still see house prices in general rising further in Auckland? House price average rises that have been driven in the past by building larger houses, financed by lower and lower interest rates? You think this trend can continue indefinitely just because we came through the GFC when I should remind you house prices were materially lower, particularly in Auckland, than they are today? I guess those of you who live in Auckland can't see the inevitable? You are like frogs in a slowly warming pot. Can you not see the wisdom for other people in jumping out before it boils? Not everyone in Auckland lives in a multi-million dollar mansion.

I think the lower profit model of CDI is looking much more sustainable into he future than the retirement village model who have for too long relied on free loans by their licence to occupy holders to fund their capital growth. It works if the property market keeps growing. But what happens if it doesn't?

SNOOPY

[percy]

In 1970 people in Sydney and London were wasting their time making the same points.?

[1leon]

In 1970 people in Sydney and London were wasting their time making the same points.?
Where were the free loans in Sydney and London in 1970?

[Beagle]

In 1970 people in Sydney and London were wasting their time making the same points.?

Yes exactly, and he completely skipped over my point that the better retirement village operators have villages throughout N.Z. Yes its expensive to live in Auckland, London, Paris, Sydney, Vancouver, New York and other very popular major cities in the world and it always will be. Most families need two incomes to live in Auckland.

I would simply reiterate post #264. If all you can see is risk, that's your call that you're perfectly entitled to make.
I see some risk and a truck load of opportunity.

[beetills]

I know of several families who were concerned with all the ""ticket clipping"" and looked at alternatives and 2 of the families eventually built granny flats on there property to house the parents.
The parents in both cases eventually moved to a rest home after their needs were more than the families could provide.
The elderly both only lived 12/18 months longer.

[macduffy]

The CDI/CDL thread seems to have morphed into another "retirement village operators" thread. Both deal in property but let's not confuse the two.

And incidentally, I agree Beagle - and am holding both CDI and a variety of retirement companies.

:)

[Snoopy]

Yes exactly, and he completely skipped over my point that the better retirement village operators have villages throughout N.Z.


No, what I said was:

"I would contend that with the rise in national average prices outstripping Auckland over the last few years, this is a symptom of Auckland prices having hit the ceiling."

By that I meant that the house price rises in the regions in the last five years are probably not sustainable either! Sure the problem isn't as bad as in Auckland. But ultimately the regions will be in trouble too.



Yes its expensive to live in Auckland, London, Paris, Sydney, Vancouver, New York and other very popular major cities in the world and it always will be. Most families need two incomes to live in Auckland.


House prices are already maxed out. So if house prices are to rise further you will need a third income? What is your plan? Send the children out as chimney sweeps or have them man a permanent lemonade stand outside the house after school?

Out of interest I have looked up this website:

https://www.numbeo.com/cost-of-living/compare_cities.jsp?

and drawn up the following table (updated January 2020):




Average Monthly Salary (After Tax) {A}
Cost of Living Index {B}
Relative Affordability {A}/${B}


Auckland$3,925.2575.7351.82


London$4,635.4180.5957.52


New York$7,839.2710078.39


Paris$3,724.2684.8443.89


Sydney$5,057.0379.3463.74


Vancouver$4,414.1073.4760.08



What were are looking for in the above table is a higher income to cover your expenses. This table shows that living in Auckland on average you will be relatively worse off than someone living in London, New York, Sydney or Vancouver. Pity the poor Parisian who is worse off than the average Aucklander, But, Paris apart, Aucklanders on the average are paying way more to live in their city, in relative terms, than all of those global headline cities you mention. Yet you still believe that Auckland property prices will continue to rise at historical rates and outstrip all the other global cities you mention because real estate in Auckland is too cheap?

This must cause CDI investors to think again about the fair value of those development assets on the books!

SNOOPY

[Beagle]

Sorry for the thread hijack folks. Let me conclude by simply suggesting that if perhaps some consider we are due for a long period of sideways house prices while incomes catch up like what happened to the national average price in the period between 2007 and 2013, see page 4 https://www.reinz.co.nz/Media/Default/Statistic%20Documents/2019/Residential/November/REINZ%20Monthly%20HPI%20Report%20-%20November%202019.pdf then if the retirement village model doesn't work how come RYM grew underlying earnings very strongly ever year over those 6 years ?

Snoopy If you are trying to plan for an event worse than the GFC I suggest you've lost perspective and are simply focusing too much on the negative.
We have arguably one of the most comprehensive social welfare systems in the world, with accommodation supplements and extremely generous family support packages for low and middle income families.

All long term data I have seen on the national average property price and some goes way further back than 1992, shows at worst the market goes slightly down to sideways for 5-6 years and if we go and have a look at RYM they made $41.6m in 2007 and that grew over the years the real estate market went sideways during the GFC to $100.2m in 2013.

The model really works. No time to get into social debates about housing affordability. If people can't stand the heat get out of the kitchen.

[kiora]

Who will ultimately benefit from the profits this company generates?
Certain major shareholder or small investors?

[percy]

Who will ultimately benefit from the profits this company generates?
Certain major shareholder or small investors?

Come on?
Do you really need to ask.?

[Scrunch]

Who will ultimately benefit from the profits this company generates?
Certain major shareholder or small investors?

The benefit or loss will be proportional to people's shareholding. Major shareholders can influence whether those returns are retained in the company or paid out as dividends but they don't get an uneven share of them.

As the ultimate parent company has recently changed ownership there is an increased chance of a different distribution strategy.

[Snoopy]

Some consider we are due for a long period of sideways house prices while incomes catch up like what happened to the national average price in the period between 2007 and 2013, see page 4

https://www.reinz.co.nz/Media/Default/Statistic%20Documents/2019/Residential/November/REINZ%20Monthly%20HPI%20Report%20-%20November%202019.pdf

We have arguably one of the most comprehensive social welfare systems in the world, with accommodation supplements and extremely generous family support packages for low and middle income families.

All long term data I have seen on the national average property price and some goes way further back than 1992, shows at worst the market goes slightly down to sideways for 5-6 years

No time to get into social debates about housing affordability. If people can't stand the heat get out of the kitchen.

You have to consider that while REINZ comments are interesting, they come from the perspective of wanting to promote sales of property.

These comments are along the lines of 'this is what happened in the past' so 'this is what we will expect in the future'. This is akin to drawing a price timeline graph and showing the line going steadily upwards, punctuated by flattish periods without any understanding of what is driving that line up. Yes there is no doubt most residential property rental owners are heavily subsidized, whether that is through tax concessions (making a cash loss so they enjoy a tax free capital gain later) or through the government topping up the income of their tenants. But is there a political appetite to increase those subsidies further?

Working for families has got to the stage where the average couple with a couple of kids pay no income tax. To grow the housing market further we are going to have to:

1/ Send children out to work to get that 'third income stream'.
2/ Increase family support so that not only do families pay no net income tax, but they are subsidized by other taxpayers to have children.
3/ Continue to consider that by living in Auckland people will be content to be 10% worse off in financial terms than if they lived in London or 20% worse off than if they lived in Sydney or Vancouver.
4/ Make sure Interest rates continue to track lower.
5/ Make sure houses continue to become larger and larger.
6/ Check wages are raised by 20% over and above normal wage growth from productivity and inflation.
7/ Reopen the housing market to foreign non-residents.

I suggest that none of the above is likely (except maybe 4 in the short term), and this is why some of the pent up demand for property by Aucklanders has spilled out into the regions boosting prices there. Auckland itself has reached its limit.

If the 'market value' of CDI shares is $1.50 (Mr Slothbear post 261) and not 78c as in the CDI published results then those market values must be inflated. I think at a minimum a market correction of 10% is inevitable. House prices have got too far out of synch to just flatline while wages catch up. And with a property pull back like that what will that do to the demand for new houses as developed by CDI?

SNOOPY

[macduffy]

And with a property pull back like that what will that do to the demand for new houses as developed by CDI?

As far as I know, CDI develop and sell residential sections/subdivisions, not houses. Yes, there may be a property price pullback, although I would expect this to be minor and more in the nature of a sluggish market for a time, but the fact remains that parts of NZ, particularly Auckland, need more housing which will be built, sooner or later, on the land being developed by CDI and others.

[blackcap]

No complaints from me. Record profit result:

https://www.nzx.com/announcements/348161

Note 8 states that Fair Value of development property is $315.6m on book value of $182.7m. (so add another $132.9m to the NTA if you like)

[macduffy]

No complaints from me. Record profit result:

https://www.nzx.com/announcements/348161

Note 8 states that Fair Value of development property is $315.6m on book value of $182.7m. (so add another $132.9m to the NTA if you like)

And no complaints either from this relatively new holder! CDI may prove to be one of my best stocks if the coronavirus "downturn" continues and worsens.

[BlackPeter]

Certainly a nice surprise:

https://www.nzx.com/announcements/348161

Revenue and EPS did rise in a year in which everybody expected a quite significant drop (based on a rather muted first half year and all these terrible forecasts about property markets crashing).

Alone the value of the land bank they are now holding reflects $1.13 per share ... at a share price of 92 cents. But who knows - SP might change as soon as the markets wake up from their slumber ;)?

Disc: very happy holder.

[Beagle]

They talk slowing market and slowing outlook but REINZ figures and many market commentators suggest the market is going gangbusters again, what gives ?

[BlackPeter]

They talk slowing market and slowing outlook but REINZ figures and many market commentators suggest the market is going gangbusters again, what gives ?

Well, this years outlook is certainly better than last years outlook, and look what they achieved last year!

I could live with another terrible year like 2019 :), but think they are just good in the discipline of under-promising and over-delivering. Love it.

[macduffy]

I was hoping the bear would bear some more gifts with CDI. Topped up at $0.82 but it has since climbed back to $0.89 when I was hoping to pick up some more. Will try to be patient and see if the bear gets grizzlier.

Me too, Mogul! Now don't be greedy when/if we get another opportunity!

:)

[BlackPeter]

Me too, Mogul! Now don't be greedy when/if we get another opportunity!

:)

Bad luck ... too many people waiting for the same opportunity :p

But really - I think these bearish opportunities are easier to realize with higher liquidity stocks. Better buy AIR, HGH and similar if & when the time is right (in my view not yet ... a good panic just needs to run its due course), there will be more of them around.

[Vaygor1]

[This post deleted and immediately resent] with the image-chart intact

[Vaygor1]

Updated my annual chart before the crash but only posting it now (prompted by CDI's announcement today).

Ref https://www.nzx.com/announcements/350145

11131

I can't detect any goodwill, trademarks, or copyrights in their Annual Reports to-date, so NTA/share should be the same as the Group Equity column.

Official glossy CDI Annual Report for year end 31-Dec-2019 should be out any day now.

I'm not surprised at the contents of their announcement this morning. MCK will be wanting CDI's dividend badly. I'm actually a bit surprised they didn't increase the previously announced dividend. They can certainly afford to.

PE Ratio as I type is 5.7 ... the lowest its ever been on the chart

Disc: Still a long-time happy holder

[BlackPeter]

Updated my annual chart before the crash but only posting it now (prompted by CDI's announcement today).

Ref https://www.nzx.com/announcements/350145

11131

I can't detect any goodwill, trademarks, or copyrights in their Annual Reports to-date, so NTA/share should be the same as the Group Equity column.

Official glossy CDI Annual Report for year end 31-Dec-2019 should be out any day now.

I'm not surprised at the contents of their announcement this morning. MCK will be wanting CDI's dividend badly. I'm actually a bit surprised they didn't increase the previously announced dividend. They can certainly afford to.

Disc: Still a long-time happy holder

Timely reminder that there are some gems in the market hiding at plain sight.

The outrageous thing is - if the majority holder MCK gets a low ball take over offer (which well might happen), than the purchaser would get their (MCK's) majority holding CDL in the cheap as well.

[Scrunch]

Timely reminder that there are some gems in the market hiding at plain sight.

The outrageous thing is - if the majority holder MCK gets a low ball take over offer (which well might happen), than the purchaser would get their (MCK's) majority holding CDL in the cheap as well.

The immediate majority shareholder is MCK. Given their profit (loss) update, there's pretty much 0% chance of them looking to take over CDL until we get back to normal economic conditions.

The ultimate majority shareholder is CDL (this time City Developments Ltd) listed in Singapore.
https://www.cdl.com.sg/index.php/diverse-portfolio/hotels/about-millennium-copthorne-hotels

This ultimate parent of CDL (and MCK) had SGD$6.6b of equity and SGD$5.6b of interest bearing debt. That's quite a bit and it increses to SGD9.7b if you look at the group accounts. I'd be very surprised if a company with this level of debt was going to undertake a takeover going into what could possibly be a global recession.

[blackcap]

The immediate majority shareholder is MCK. Given their profit (loss) update, there's pretty much 0% chance of them looking to take over CDL until we get back to normal economic conditions.

The ultimate majority shareholder is CDL (this time City Developments Ltd) listed in Singapore.
https://www.cdl.com.sg/index.php/diverse-portfolio/hotels/about-millennium-copthorne-hotels

This ultimate parent of CDL (and MCK) had SGD$6.6b of equity and SGD$5.6b of interest bearing debt. That's quite a bit and it increses to SGD9.7b if you look at the group accounts. I'd be very surprised if a company with this level of debt was going to undertake a takeover going into what could possibly be a global recession.

I think BP was referring to MCK being taken over by "someone" and in the process getting CDI cheaply.

[Scrunch]

I think BP was referring to MCK being taken over by "someone" and in the process getting CDI cheaply.

Not sure how much investment money is sloshing around but agree that if someone bought MCK they get a lot of CDI shares. The calculations I’d done were that CDI shares are worth approximately that amount of MCK’s share price. At 70c and 229, the rest of MCK’s business is therefore about 160. Trying to split of CDI’s value within MCK incidentally increases the discount to NTA.

[BlackPeter]

I think BP was referring to MCK being taken over by "someone" and in the process getting CDI cheaply.

Correct - and this somebody would be ultimately Kwek Leng Beng and his family ... who happen to run and ultimately own the Hong Leon Group in Singapore (https://www.hongleong.com.sg/about-us/group-corporate-profile/) who happen to be the ultimate owners of CDL in Singapore who happen to be the ultimate owner of MCK (UK) who happen to be the ultimate owner of MCK (NZ) who happen to be the ultimate owner of CDL (NZ).

Didn't say though that they will do that just now ... any further drop in SP would allow them to buy at still cheaper fractions of the real value of CDL (NZ) and MCK (NZ). If there will be a takeover offer I'd expect it at the bottom (or short after) of this bear market.

This is how rich people get still richer ... exploiting the fear in the markets.

[podg]

any thoughts as to why Standard Life Aberdeen has reduced its stake by about 1% ?? took more than a year to offload that amount ... such is the low level of liquidity in CDI ... small investors the buyers it would seem?

[clearasmud]

This stock is getting more liquid.
Can't be a bad thing.

[BlackPeter]

any thoughts as to why Standard Life Aberdeen has reduced its stake by about 1% ?? took more than a year to offload that amount ... such is the low level of liquidity in CDI ... small investors the buyers it would seem?

Who knows - might be just some clients leaving their funds (and them having to sell their shares in proportion to that) ... or it might be some deliberate action from them to push the share price down. They seem to have some sort of relationship with the Kwek family funds in Singapore (who are majority shareholders of CDL Singapore, who are majority share holders of MCK UK who are majority share holders of MCK NZ who are majority shareholders of CDL NZ.

[DarkHorse]

How severly will CDL be affected by a pandemic induced property slump? I'd love to hear any thoughts from those with more understanding of property development.

[BlackPeter]

How severly will CDL be affected by a pandemic induced property slump? I'd love to hear any thoughts from those with more understanding of property development.

I think you should ask here the pandemic experts ... but I am neither.

CDL is developing affordable sections in or close to NZ cities.

If demand for new properties drops (i.e. due to more people moving on or away rather than moving in), they will have issues ... as any other property developer. Unlikely in my view.

If demand for new properties rises (e.g. due to expats coming back), they will do well. In my view the more likely scenario.

If property prices drop, than their value will drop accordingly, but this would not be the end of the world.

Nobody can foresee the future, but I am sure CDL will do better than the likes of AIR or THL ... and think about it - long term property so far always outperformed other investment options.

[mfd]

How severly will CDL be affected by a pandemic induced property slump? I'd love to hear any thoughts from those with more understanding of property development.

You can have a look through their annual reports from the time of the GFC for some pointers. I couldn't say whether things will be better or worse this time round - it seems to me the market will completely shut down, with virtually no sales for a few months, after that things will bounce back but presumably at a lower level than pre-covid.

From the 2008 annual report, CDI revenue fell from $39 million in 2007 to $5 million in 2008 - about an 87% fall. From that $5 million, they made a profit of $1.6 million. That is to say, even after an 87% fall in revenue, they managed to make a profit. 2009 was similar, $5.5 million revenue, $1.2 million profit. It took about 8 years to beat the 2007 profits.

Major pro in these times - they seem to have very few fixed overheads and will just pull their necks in and survive their revenues falling dramatically. Con - if the cycle plays out like the GFC, it could take a long time to build back up to recent profits. P/E ratio is 6.5 based on 2019 earnings, net tangible assets per share is 84.5c with land valued at cost (using the most recent valuation adds another ~47c, but this is obviously out of date and pre-coronavirus). They have about $54 million in cash (19c per share) and could presumably deploy some of this if there is a major fall in land prices, although it is possible there will be pressure from the major shareholder to continue dividends to help fund MCKs empty hotels. CDI has no debt.

Not sure this answers your question exactly, but a little info about how the company fared last time something (perhaps) similar happened.

[percy]

You can have a look through their annual reports from the time of the GFC for some pointers. I couldn't say whether things will be better or worse this time round - it seems to me the market will completely shut down, with virtually no sales for a few months, after that things will bounce back but presumably at a lower level than pre-covid.

From the 2008 annual report, CDI revenue fell from $39 million in 2007 to $5 million in 2008 - about an 87% fall. From that $5 million, they made a profit of $1.6 million. That is to say, even after an 87% fall in revenue, they managed to make a profit. 2009 was similar, $5.5 million revenue, $1.2 million profit. It took about 8 years to beat the 2007 profits.

Major pro in these times - they seem to have very few fixed overheads and will just pull their necks in and survive their revenues falling dramatically. Con - if the cycle plays out like the GFC, it could take a long time to build back up to recent profits. P/E ratio is 6.5 based on 2019 earnings, net tangible assets per share is 84.5c with land valued at cost (using the most recent valuation adds another ~47c, but this is obviously out of date and pre-coronavirus). They have about $54 million in cash (19c per share) and could presumably deploy some of this if there is a major fall in land prices, although it is possible there will be pressure from the major shareholder to continue dividends to help fund MCKs empty hotels. CDI has no debt.

Not sure this answers your question exactly, but a little info about how the company fared last time something (perhaps) similar happened.

Thank you for you full and comprehensive post.

[Mr Slothbear]

Interesting to note its opening price in may 2007 was 44cps so unless there has been a sharesplit the shares have ‘only’ doubled over the last 13 years

the lowest price on open I could find was may 2009 so if you had timed things perfectly and got in at the lowest point you would have paid 19 cps for an approximate return of 4x / 400% over 11 years which is not too bad but less than what most ‘quality’ (mft, rym, pot, fph, etc) companies have returned over the same period


neither includes the dividends they have paid

[Scrunch]

Interesting to note its opening price in may 2007 was 44cps so unless there has been a sharesplit the shares have ‘only’ doubled over the last 13 years

the lowest price on open I could find was may 2009 so if you had timed things perfectly and got in at the lowest point you would have paid 19 cps for an approximate return of 4x / 400% over 11 years which is not too bad but less than what most ‘quality’ (mft, rym, pot, fph, etc) companies have returned over the same period


neither includes the dividends they have paid

And the key reason for this is companies like RYM, POT, FPH have shifted to very large multiples of NTA and CDL hasn't. They should do a lot better than your average property developer because they have a conservative no-debt operating model. They should therefore not be a forced seller of land inventory. If anything it enables some of the cash balances to be exercised in the purchase of cheap stress-sold development land.

Revenue and profitability may collapse (for a short time).

Disc - hold an exposure through MCK.

[DarkHorse]

You can have a look through their annual reports from the time of the GFC for some pointers. I couldn't say whether things will be better or worse this time round - it seems to me the market will completely shut down, with virtually no sales for a few months, after that things will bounce back but presumably at a lower level than pre-covid.

From the 2008 annual report, CDI revenue fell from $39 million in 2007 to $5 million in 2008 - about an 87% fall. From that $5 million, they made a profit of $1.6 million. That is to say, even after an 87% fall in revenue, they managed to make a profit. 2009 was similar, $5.5 million revenue, $1.2 million profit. It took about 8 years to beat the 2007 profits.

Major pro in these times - they seem to have very few fixed overheads and will just pull their necks in and survive their revenues falling dramatically. Con - if the cycle plays out like the GFC, it could take a long time to build back up to recent profits. P/E ratio is 6.5 based on 2019 earnings, net tangible assets per share is 84.5c with land valued at cost (using the most recent valuation adds another ~47c, but this is obviously out of date and pre-coronavirus). They have about $54 million in cash (19c per share) and could presumably deploy some of this if there is a major fall in land prices, although it is possible there will be pressure from the major shareholder to continue dividends to help fund MCKs empty hotels. CDI has no debt.

Not sure this answers your question exactly, but a little info about how the company fared last time something (perhaps) similar happened.

Really pertinent points and smart analysis MFD, thank you for sharing!

[podg]

Very good points. If i may, i'd like to offer a point or two about the prospects for the NZ property sector that might be worthwhile considering.

Firstly, 2008. The GFC domino started with a bubble (we know a few things about bubbles now) in the US prime mortgage market. When it burst, the property sector was hit hard, understandably so. Banks came under severe pressure as their lending practices and other risky financial instruments were exposed. Some banks and mortgage lenders (Fannie May) failed. Lehman Bros, gone forever.

To 2020. It seems as tho airlines and tourism are in the firing line. Unemployment will rise and some will have no option but to sell their homes. Banks have a big stake stake in the NZ property sector and are much better capitalised than they were in 2008. They will bare some of the burden, which may aid the economic recovery. We still have a housing shortage.

One last thing. I can't help but wonder .... if you were currently living in Britain, Western Europe, the US or developed Asia or just about anywhere else ... and you wanted to move yourself or your family to somewhere safer .... where would you go? our national carrier has plenty of spare seats.

[BlackPeter]

Hey, there are such things as positive surprises: Just when I started to get used to a no dividend policy from nearly anybody I find not one but two nice dividend payments from both CDL and MCK freshly transferred into in my bank account.

Great stuff !

CDI paid a 3.5 cents (fully imputed) dividend per share. Not bad for a share one can currently buy for 76 cents.

MCK paid a 7.5 cents (fully imputed) dividend per share.

While I acknowledge that CDI's payment might be next year less (and MCK's probably nil) - still great stuff considering the tough times ..

[BlackPeter]

Just coming from their virtual AGM. I guess this seems to be new for them as well - haven't seen yet any AGM where they rushed that quickly through the questions ... It was something like - here are the movements, no questions asked - meeting closed (roughly in the speed you can read that).

Next time I better prepare and enter the questions before the meeting, no chance to do that at question time.

But anyway - the presentation was interesting ... and I was pretty pleased to hear that their business up to end of April 2020 was better ($18.8m sales) than for the same time frame last year ($14.9m sales), despite 2019 having been their best year so far.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/CDI/353700/323223.pdf

Sounds as well they are quite happy with the margins they are able to achieve "We get the prices we planned for"

They expect however some softer demand in Q4 2020 and FY 2021, but predict to be profitable for FY 2020.

Great company - and in my view ways undervalued ...

[mfd]

Interesting, I missed the questions due to work distractions so glad to hear I didn't miss much.

Agreed, surprisingly positive start to the year. Confirmed all the good things we already knew - conservatively run company, will achieve a profit even in hard times. Amazing that the company runs with only 3 FTE staff. About 50 million in hand and expecting more as the sales continue to trickle in, so a good wad of cash ready for any bargain basement land deals. Still no debt and very low overheads.

[traineeinvestor]

Just coming from their virtual AGM. I guess this seems to be new for them as well - haven't seen yet any AGM where they rushed that quickly through the questions ... It was something like - here are the movements, no questions asked - meeting closed (roughly in the speed you can read that).

Next time I better prepare and enter the questions before the meeting, no chance to do that at question time.

But anyway - the presentation was interesting ... and I was pretty pleased to hear that their business up to end of April 2020 was better ($18.8m sales) than for the same time frame last year ($14.9m sales), despite 2019 having been their best year so far.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/CDI/353700/323223.pdf

Sounds as well they are quite happy with the margins they are able to achieve "We get the prices we planned for"

They expect however some softer demand in Q4 2020 and FY 2021, but predict to be profitable for FY 2020.

Great company - and in my view ways undervalued ...

Thanks for the report.

The having plenty of net cash on hand during times like these is definitely a good thing.

Disclosure: held

[podg]

CDL has always had plenty of cash on hand. It was certainly put to good use post-1998 Asian financial crisis, after the 2008 GFC and ... the next 12 months we hope. Every reason to think the same discerning approach to land purchase will apply in the near term. That said ... will the company heads ever be convinced to change the current accounting policy and value CDL's assets at net realisable value, rather than cost ??

[macduffy]

CDL has always had plenty of cash on hand. It was certainly put to good use post-1998 Asian financial crisis, after the 2008 GFC and ... the next 12 months we hope. Every reason to think the same discerning approach to land purchase will apply in the near term. That said ... will the company heads ever be convinced to change the current accounting policy and value CDL's assets at net realisable value, rather than cost ??

At least they're consistent with their treatment of assets! None of this quick change stuff to make life hard for investors.

[podg]

consistent, yes .... and we all know where we stand with that approach .... but to have on their books a large block of land purchased for development at the price they paid for it for several years previously undervalues the asset and the company.

[podg]

I don't have a problem either because it's been the accounting policy for quite a while and as such, there's no surprises with each result. And, as you correctly point out, it is straight forward enough to calculate the NTA. However, the share price seems to have been undervalued since that policy was adopted. Also, when you factor in some healthy dividend returns over the same period, it seems even more undervalued. Some observers have valued CDI at $1.30 or more, when the share price was in the 85-90c range.



Valuing at the lower of cost and market value rather than Valuation means they can record the profit when they actually sell the sections. I don’t have a problem with this approach given that they also disclose the market value, so it is easy to calculate what the NTA would be if land were to be include at valuation rather than cost. The positive variance foreshadows healthy profits in the next few years so long as property values don’t fall out of bed.

[traineeinvestor]

NZ Herald this morning: https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12334626

Behind the paywall it basically says that funding for commercial development and subdivision development has "essentially dried up."

Advantage to those like CDI who don't need third part funding.

[podg]

What a bonus it would be if city and district councils around NZ decided to sell some land for development rather than raise rates during this next period of economic recovery. win-win ??

[podg]

The Aberdeen team continue to sell down their CDI stake ... now at 6.3pc. would love to know who is buying ...

[macduffy]

The Aberdeen team continue to sell down their CDI stake ... now at 6.3pc. would love to know who is buying ...

I've probably taken a few - and I mean a few- off their hands recently.

:)

[podg]

I've probably taken a few - and I mean a few- off their hands recently.

:)well perhaps that is a pointer to individuals, rather than institutions, taking a stake. Personally, i would prefer to see more shareholders on the register because the stock is so tightly held and has been for years. A few more shareholders might encourage more trading and attract more smaller investors

[podg]

I've probably taken a few - and I mean a <em>few</em>- off their hands recently.<br>
<br>
<img src="images/smilies/001_smile.gif" border="0" alt="" title="Smile_2" smilieid="17" class="inlineimg">well perhaps that is a pointer to individuals, rather than institutions, taking a stake. Personally, i would prefer to see more shareholders on the register because the stock is so tightly held and has been for years. A few more shareholders might encourage more trading and attract more smaller investors<br>
<br>

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12341093 Interesting times.

[mfd]

Good job from the team in the first half of the year, profit only slightly down despite the period fully including the lockdown period. A little cautious about the next half, but I note they still have a huge pile of cash on the sidelines so a deteriorating market is not all bad as they may be able to pick up some well priced land.

https://www.nzx.com/announcements/357015

[beetills]

Another steady as she go's result.

[BlackPeter]

Half year results are out ... and looking nice:

https://www.nzx.com/announcements/357015


CDL Investments New Zealand Limited ("CDI") can report that the Company has
made an unaudited operating profit after tax of $13.74 million for the six
month period ending 30 June 2020 (2019: $15.10 million). Operating profit
before tax was $19.09 million (2019: $20.98 million).

The result is particularly creditable given the fact that New Zealand as a
whole was in a lockdown for six weeks from 26 March through to 14 May.
Despite the restrictions on physical movement, online sales and promotional
activity was able to continue which demonstrated that in the first six months
of this year, interest in CDI's subdivisions and sections has not waned.

Property sales and other income for the period was $40.96 million which
exceeded last year's figure of $40.29 million. Net Asset Backing (at cost)
for the period under review was 85.9 cents per share (2019: 77.6 cents per
share).

Revenue up, NPAT still 91% of last years record number (despite a 6 week lockdown holiday), Net asset backing up (and - as usual - above the share price). Outlook for the second half a bit softer, but still:


Our target is to deliver another positive result and a dividend to shareholders once again but the economic effects of COVID-19 are expected to be significant and long-lasting. While the New Zealand property market has passed its peak, we remain quietly confident about our prospective sales for the rest of the year.

Long term PE below 10 ... amazing asset backing ... and yes, I loved this years May dividend and expect another one around the same time next year.

Nice little money earner - happy holder here.

[Southern Lad]

A pleasing result released by CDI this morning. My observations:

1. Great to see the release of the half year figures within 29 days from 30 June;

2. Gross margin percentage achieved is impressive at 51.1%, but down a bit on FY19’s 55.9%;

3. CDI continues to run a very lean ship in terms of staff numbers and costs;

4. Directors have a history of expressing caution and then over delivering, so while the current caution is appropriate I take it with a grain of salt.

5. With the low dividend payout ratio, NTA continues to increase. Given managements track record of earning a great return, the share price justifies increasing year on year. I suspect the continued sell down of shares by Aberdeen Standard Investments is keeping a damper on price. until they finish selling, the are opportunities to accumulate at attractive prices.

6. Current MCK ownership appears stable. No prospect of a full takeover anytime soon and it doesn’t look like they need to sell out either.

[BlackPeter]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12341093 Interesting times.

Why would any of this be relevant for CDL? They are a property developer and their business has absolutely nothing to do with the misery some Auckland hotels may or may not suffer under?

If anything, then this might belong into the MCK thread (who are majority holder of CDL), though I understand that their Auckland hotels are fully booked thanks to the desire of travelers to find a space for managed isolation :):

Given that MCK just published a record profit .... if other Auckland hotels have problems, this only can be good for them. Less competition for the future.

[jimdog31]

Any updated thoughts here guys? Share price seems to be dropping further for no apparent reason. Balance sheet and net asset backing looks good? Dividend, property based.....

[greater fool]

Content passed use by date. Edited
12209

[frostyboy]

Any updated thoughts here guys? Share price seems to be dropping further for no apparent reason. Balance sheet and net asset backing looks good? Dividend, property based.....

I think "Aberdeen Standard Investments" is selling their their position. On 27 May 20 they had 6.3%, 16 September they had 4.7%

Its a thinly traded stock as mostly owned by MCK. Aberdeen Standard Investments also have similar size holdings of MCK and they have been selling that as well. MCK hasn't bounced off its March lows like other tourism stocks

[jimdog31]

I think "Aberdeen Standard Investments" is selling their their position. On 27 May 20 they had 6.3%, 16 September they had 4.7%

Its a thinly traded stock as mostly owned by MCK. Aberdeen Standard Investments also have similar size holdings of MCK and they have been selling that as well. MCK hasn't bounced off its March lows like other tourism stocks

Yep - WHen i placed an order for 50k before at .775 i got a phonecall asking if I wanted more...... Any thoughts on why they are wanting to exit? MCK not bouncing has waht implications on CDL do you think?

[jimdog31]

Think reason for the price slide is very obvious, if u compare page 3 here;
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/CDI/359879/330873.pdf (https://m.nzx.com/announcements/359879)

With page 31 here;
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/CDI/350306/319157.pdf

:D

Thoughts on why they are exiting?

[jimdog31]

Thoughts on why they are exiting?

Your referring to HSBC being in turmoil? They look to have reduced their holdings with HSBC 10,521,503 vs 1,828,086

[greater fool]

Expired content. Edited.
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[jimdog31]

Aberdeen manage three "bundles" of client accounts.
Look at Registered Holder column;
1. State Street Bank & Trust -based in Sydney -so clients are likely Australian + some Kiwi? Relatively small reduction in holding.
2. BNP Paribas. Nothing happening here. Stable holding for years.
3. JP Morgan Chase, also Australia. Some Kiwi clients as well?
Forget about HSBC Nominees. They don't own any shares they just "warehouse" them. Sort of document vault.

The big selling is from JP Morgan Chase, Sydney. They've gone from ~6.3m shares early March 2020 to ~1.8m at 17September20.
Clearly one or more of their clients are getting out.

11990

Thanks Greaterfool. So we are likely to see a further dump of 1.8 m shares which will keep the SP depressed for a time. Probably a good buying opportunity as its dividend yield isnt the worst?

[clearasmud]

Relentless dumping of CDI and MCP nearly over.?

[macduffy]

Relentless dumping of CDI and MCP nearly over.?

I havn't been counting but I doubt that the 1.8m Aberdeen - controlled CDI shares have all found new homes yet. Do you think otherwise?

[glennj]

I havn't been counting but I doubt that the 1.8m Aberdeen - controlled CDI shares have all found new homes yet. Do you think otherwise?

I haven't been counting either but I've been watching and picking up a few at 77.5 cents. The big seller keeps feeding the market at 78 cents and when they are taken out more appear at the same price. When the price breaks above 78 cents I think we can assume the big volume seller at this price has finished or is taking a pause. The volume offered below 78 cents has been relatively small.

[macduffy]

I agree, glennj. It hasn't happened yet.

[DarkHorse]

I'm interested in buying back in after selling early this year. Does anyone have any ideas about the legislation likely to replace the RMA and how it might affect developers such as CDL?

[BlackPeter]

I'm interested in buying back in after selling early this year. Does anyone have any ideas about the legislation likely to replace the RMA and how it might affect developers such as CDL?

How could anybody know, given that the parties themselves only know that they might scrap the RMA and replace it with something else. Whoever will govern next term and whatever they might do, I suspect they find its not as easy as they now think. However - with a bit of luck they might manage to reduce a bit of red tape (though I am not holding my breath), which should make life easier for CDL, but on the other hand might create as well more competition (land development would be easier for others as well).

Take real estate prices as the canary in the coal mine. As long as they climb that's good for CDL. If they start dropping big time, that's bad for CDL. However - I don't see any party fancying the latter either - bad outcome of they want to be re-elected.

[DarkHorse]

Absolutely - none of he politicians have a quick fix. If supply remains tight, then real estate prices generally will continue to be supportive; if rules are loosened, then that will create development opportunities and it will take some time for prices to be affected. I suppose CDL will do OK either way :) Council regulations also relevant. Has anyone had a go at calculating their true NTA based on market prices?

[Southern Lad]

Plenty of section sales under contract or in active negotiation at the Prestons Park subdivision in Christchurch:

https://www.prestonspark.co.nz/sections-for-sale/

The sections currently listed as 'for sale' are a mix of titles being issued in H2 FY20 and H1 FY21.

CDL run a 'On Hold' process where interested purchasers can place a 7 day hold on an unsold section. There are quite a few sections listed as being on hold, which suggests plenty of ongoing buyer interest. No guarantees the 'holds' convert to sales contracts, however there isn't a lot of freely available sections that have been released which presumably increases the FOMO.

Looks like there are a few stages yet to be released, which bodes well for CDL's immediate future.

[macduffy]

I haven't been counting either but I've been watching and picking up a few at 77.5 cents. The big seller keeps feeding the market at 78 cents and when they are taken out more appear at the same price. When the price breaks above 78 cents I think we can assume the big volume seller at this price has finished or is taking a pause. The volume offered below 78 cents has been relatively small.

Shareprice edging up and today at 81c. Perhaps the big seller has sold all or most of what has been for sale. It may be a case of lightening off, rather than selling out?

[frostyboy]

It looks like since 12 October the big seller; Aberdeen is no longer selling at market to the buyer bids. If they have been selling, then they've changed tactics to selling at limit price

[jimdog31]

It looks like since 12 October the big seller; Aberdeen is no longer selling at market to the buyer bids. If they have been selling, then they've changed tactics to selling at limit price

Agreed. They were putting through some big lots @ 77.5. I bought a 25k parcel@ 81, 5 mins later another 25k came back @ 81c

[jimdog31]

Agreed. They were putting through some big lots @ 77.5. I bought a 25k parcel@ 81, 5 mins later another 25k came back @ 81c

Massive off market at 75c?



75
10,608,665
12:39
SP H

[Southern Lad]

Massive off market at 75c?



75
10,608,665
12:39
SP H




Standard Life Aberdeen plc disclosed a shareholding of 13,277,891 CDI shares on 15 September 2020 when they fell below the 5% disclosure threshold. Assuming they have continued to sell over the last five weeks, maybe this is them out completely?

If this sale is the end of the overhang of shares on market, maybe there is some share price appreciation ahead (especially given the relatively good dividend yield). Or maybe the purchaser of the 10.6m shares will be tempted to offload some back into the market to realise a short term gain over the 75 cents purchase price?

[jimdog31]

Standard Life Aberdeen plc disclosed a shareholding of 13,277,891 CDI shares on 15 September 2020 when they fell below the 5% disclosure threshold. Assuming they have continued to sell over the last five weeks, maybe this is them out completely?

If this sale is the end of the overhang of shares on market, maybe there is some share price appreciation ahead (especially given the relatively good dividend yield). Or maybe the purchaser of the 10.6m shares will be tempted to offload some back into the market to realise a short term gain over the 75 cents purchase price?

Your thoughts oin why they so intent on unloading? @ 75c that seems well below market?

[Southern Lad]

A fund manager could have any range of reasons for selling such as:

1. Not wanting to be a trapped minority shareholder (noting that CDL Singapore control CDI);
2. They have identified alternative investments that they think have better growth prospects;
3. They have a negative view on the NZ economy, residential property subdivision, the future NZD exchange rate;
4. The CDI balance sheet is too lazy (no debt, cash in bank, and a dividend that is a low proportion of operating cash flow); or
5. Imputation credits of less value to them than NZ shareholders.

I'm not offering an opinion on whether any of the above factors are likely to be of real concern but rather offer them up to illustrate a point.

I also see there is some strife going down at CDL Singapore - see https://www.straitstimes.com/business/companies-markets/cdl-director-kwek-leng-peck-quits-after-clash-with-board-management

Given share trade price over the last few moths, 75 cents to offload a 3% stake in one go is probably what you would expect.

[jimdog31]

A fund manager could have any range of reasons for selling such as:

1. Not wanting to be a trapped minority shareholder (noting that CDL Singapore control CDI);
2. They have identified alternative investments that they think have better growth prospects;
3. They have a negative view on the NZ economy, residential property subdivision, the future NZD exchange rate;
4. The CDI balance sheet is too lazy (no debt, cash in bank, and a dividend that is a low proportion of operating cash flow); or
5. Imputation credits of less value to them than NZ shareholders.

I'm not offering an opinion on whether any of the above factors are likely to be of real concern but rather offer them up to illustrate a point.

I also see there is some strife going down at CDL Singapore - see https://www.straitstimes.com/business/companies-markets/cdl-director-kwek-leng-peck-quits-after-clash-with-board-management

Given share trade price over the last few moths, 75 cents to offload a 3% stake in one go is probably what you would expect.


and another!

75
1,576,992
15:35
SP

[Scrunch]

Massive off market at 75c?



75
10,608,665
12:39
SP H




and another!

75
1,576,992
15:35
SP



The second one matches the Aberdeen Standard Asia Focus PLC holding through BNP.

[jimdog31]

The second one matches the Aberdeen Standard Asia Focus PLC holding through BNP.

Wonder if MCK bought the 2 x parcels

[Scrunch]

Wonder if MCK bought the 2 x parcels

I'd be surprised if they did. If they were in the market to up their stake they would have been buying the original Aberdeen sales.

[Southern Lad]

I'd be surprised if they did. If they were in the market to up their stake they would have been buying the original Aberdeen sales.

ACC have today disclosed a 5% stake, so appears they were the buyer of last weeks trades at 75 cps.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/CDI/362087/333665.pdf

[jimdog31]

ACC have today disclosed a 5% stake, so appears they were the buyer of last weeks trades at 75 cps.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/CDI/362087/333665.pdf

Nice - hopefully less downward pressure!

[Southern Lad]

Nice - hopefully less downward pressure!

I see on further analysis that ACC purchased 7,138,300 shares at 75 cents whereas the 75 cent trades on Friday totaled 12,185,657 shares, so 5,047,357 have presumably gone to a different purchaser.

[stoploss]

I'm picking these will turn out to be a great buy for them at this level . I think people will be very surprised when they realise how much property values have increased in such a short period of time .
Some insane prices being paid, so it will in turn lead to very strong demand for sections as builders try and keep up with demand. The RBNZ should be alarmed with what is happening but they won't be . At best they might bring back the LVR's for investment property.

[percy]

I'm picking these will turn out to be a great buy for them at this level . I think people will be very surprised when they realise how much property values have increased in such a short period of time .
Some insane prices being paid, so it will in turn lead to very strong demand for sections as builders try and keep up with demand. The RBNZ should be alarmed with what is happening but they won't be . At best they might bring back the LVR's for investment property.

I think you have "hit the nail on the head".

[Southern Lad]

Looks like some of those shares purchased from Aberdeen last Friday at 75 cents are finding their way back onto the market in the 77 cents plus range. So maybe the overhang is still there!

[Southern Lad]

Looks like some of those shares purchased from Aberdeen last Friday at 75 cents are finding their way back onto the market in the 77 cents plus range. So maybe the overhang is still there!

Looks like the overhang has finally evaporated with a good run up in the share price over the last couple of weeks. Closed today at 87 on reasonable volume and with an intra-day high of 89.5. Share price hasn't hit these levels since pre the COVID-19 market melt down. The fundamentals for the share are stronger than the start of the year given the attractiveness of the dividend yield and the presumed increase in the value of the development land held with the strength of the residential property market.

Given the quality of cash earnings achieved by CDI, surely there is a reasonable prospect that the next dividend payable in late April / early May 2021 will be greater than the fully imputed 3.5 cps paid in the last few years. If you look back over the dividend history, CDI has sporadically increased the dividend paid over time, but haven't increased it for the last three years. I assume the level of dividend is dependent on the Directors view on cash required to replenish development land stocks, and maybe the the heat in the property market means that additional land will be more expensive and therefore require more cash. At 30 June 2020, cash on hand was $67.35 million (equivalent to 24 CPS) with no debt.

[DarkHorse]

Mcap was around 50% below market value late last year; prices are booming, and the government has no real answer beyond "it just cannot keep increasing at the rate that it is" (Jacinda at last week's press conference). The likes of Tony Alexander see continued growth. I thought about buying a unit last week then remembered CDI shares were far better value and far less hassle...got in boots and all :)

[podg]

anyone willing to have a guess at the numbers and the company commentary in the December 2020 annual result? you don't even have to be a CDLI shareholder, but, equally, if you are ..... take a shot and see how close you get. Will it be a bit more than the 2019 result? a bit less ?.... more than the market was expecting or not? will there be a special dividend, or a more conservative number accompanying a cautious outlook for 2021?? Any purchases of land in the last wee while, or is the focus more on preparing as much land for development as they can possibly prepare in the shortest amount of time? What about the newish venture in commercial building for rental returns ... what sort of impact will that have in the annual result? the results are usually out about 5-6 weeks into the new year.

[BlackPeter]

Interesting depth ... not many shares left below the new "resistance" of $1.58 ;):

12147

[WAIKEN]

Ho podg
I estimate the exuberance in the pursuit of new properties and thus recently subdivided land should give as a profit to 31.12.20 at least 10% higher than 2019.
I believe the underlying NTA may be over 1.60.
The yearly accs to 31.12.20 in note 8 show the balance sheet value is less than half of the independent valuation for development property. If I apply this to the 30.6.20 bal sheet and add on a 2H profit and an overall lift in their land by 10% I get 1.60

[macduffy]

The yearly accs to 31.12.20 in note 8 show the balance sheet value is less than half of the independent valuation for development property. If I apply this to the 30.6.20 bal sheet and add on a 2H profit and an overall lift in their land by 10% I get 1.60

Who else has the "yearly a/cs to 31.12.20 ?

;)

[WAIKEN]

Sorry accs to 31.12.19

[podg]

And any thoughts on a divided.? Or outlook commentary from the ceo.

[clearasmud]

And any thoughts on a divided.? Or outlook commentary from the ceo.

We're on an all time high lol.
Hopefully they will increase the dividend. Its time they did.

[podg]

We're on an all time high lol.
Hopefully they will increase the dividend. Its time they did.
in all my time with CDL, and it goes back to before it was actually CDL, I have never seen the $1 mark broken. A milestone to acknowledge certainty.

[clearasmud]

in all my time with CDL, and it goes back to before it was actually CDL, I have never seen the $1 mark broken. A milestone to acknowledge certainty.

Nice. You must have done well. For me its been a straggler, until now.

[macduffy]

A good, consistent performer, for me.

:)

[greater fool]

Not relevant. Edited
12208

[ratkin]

Kupe Group
Get out, while you can................:t_up:
https://milfordasset.com/insights/backdoor-listings-have-abysmal-record

Charlies and Montana (Corporate investments) bring back happy memories, made a ton out of those Two. The Charlies thread was one of the most entertaining on here

[Scrunch]

Charlies and Montana (Corporate investments) bring back happy memories, made a ton out of those Two. The Charlies thread was one of the most entertaining on here

Especially the corporate investments convertible notes. An unloved listed security with a lot of embedded value, a lot like CDL investments and a bunch of historically purchased land holdings held at cost in the books. Just remind me, has the land valuation element of your rates bill stayed flat in the last 1-2 council 3-yearly revaluation exercises?

[greater fool]

Off topic. Edited.
12207

[nztx]

Charlies and Montana (Corporate investments) bring back happy memories, made a ton out of those Two. The Charlies thread was one of the most entertaining on here



The old Renouf shell incarnated into Hellaby Holdings will have some quite nice recollections for many
with the long swing up from penny dreadful to something the Aussies liked look of @ $3 or so a shot ;)

[WAIKEN]

CDI carrying of undeveloped land at cost rather than current value like retirement Villages and other NZ property companies understates the value here. As I said in an earlier post I see the NTA above 1.60.
The scramble for land by builders to capitalize on excess demand is pushing section prices ever higher.
I have walked around CDI s subdivision at Prestons Park in ChCh and spoken to sales people from several builders there. The demand is overwhelming. All the sections developed and underdeveloped are spoken for.
We could see another 10% added to my estimate of NTA during 2021 ie 1.75

[Scrunch]

The construction boom and soaring house prices has led to a boom in purchases of sections and developable land to the point where shortages are appearing.

Tony Alexander puts out a regular newsletter. In the recent TONY'S VIEW Business Survey, he identified five key themes. The fifth of these is quoted above. This has to be good news for CDI.

[WAIKEN]

One major national residential builder/ developer has increased his section prices by20% in ChCh as sellers of parcels of land and other subdividers have raised prices for land. CDL is in a very sweet spot. As well as a deeply discounted NTA we may see a healthy dividend increase as it will help MCKs result as would a revaluation of CDLs land.

[BlackPeter]

One major national residential builder/ developer has increased his section prices by20% in ChCh as sellers of parcels of land and other subdividers have raised prices for land. CDL is in a very sweet spot. As well as a deeply discounted NTA we may see a healthy dividend increase as it will help MCKs result as would a revaluation of CDLs land.

From memory: CDL's policy is to keep their landbank at purchase value or at current valuation in their books, whatever is the lower. Given that do I not expect book values to change with any current revaluation ;):

However - any land price increases obviously will impact on sales price (and the sales revenue obviously does go into the balance sheet).

[Southern Lad]

CDI carrying of undeveloped land at cost rather than current value like retirement Villages and other NZ property companies understates the value here. As I said in an earlier post I see the NTA above 1.60.
The scramble for land by builders to capitalize on excess demand is pushing section prices ever higher.
I have walked around CDI s subdivision at Prestons Park in ChCh and spoken to sales people from several builders there. The demand is overwhelming. All the sections developed and underdeveloped are spoken for.
We could see another 10% added to my estimate of NTA during 2021 ie 1.75

Any increase in land values for CDI has an income tax effect given that they are subdividers and are therefore taxable on their land sales. For every $1,000,000 increase in land value, only $720,000 finds its way into an increase in the NTA. The other $280,000 ends up in the deferred tax liability.

Similarly, the difference between the land carrying value at December 2019 of $182.7m and the open market existing use value of $315.6m only increases effective Shareholders Funds by $95.7m rather than the full gross $132.9m

[WAIKEN]

Good point SL. i don't believe they will revalue. But its reassuring to know we have that additional value there.
CDL will pay tax but we get the ICs. Already we are on a gross yield of 4.674 ex NZX site. We have the capacity to double the dividend with all the embedded value to come on the market. Add to that our current PE of 8.85 - we could double the price. Most property based companies trade above NTA. This stock was flying under the radar until the astute fund managers at ACC discovered it. Smaller investors may be coming in.

[Southern Lad]

Latest stage at Preston’s Park (stages C1 and C2) released earlier this week. 15 out of 20 sections under contract already:

https://www.prestonspark.co.nz/stage-c1-and-c2/

Sections effectively selling as soon as they hit the market. Assume prices are being increased with each release as market continues to march along.

While sections selling this month will presumably be reflected in the profit for next financial year, profit for land developers can be lumpy in any half year depending on the date titles are available.

Does anyone know how many sections at Preston’s Park there are still to be released?

While this project has been hugely successful, key for CDI is what land they have in their land bank to deliver profits on over the next 3 or 4 years.

[DarkHorse]

"in a very sweet spot" is bang on. I'm almost entirely invested in Australian small caps these days, and rarely invest in property companies. But CDL is my biggest investment these days - couldn't go past the risk-reward there

[DarkHorse]

Up 30% in 2 months :)
Love to hear opinions from others, even if you don't hold atm. Esp those invested in the likes of SUM...pros and cons in comparison.

[clearasmud]

I feel this should be a 2 dollar stock.
It needs more turnover and a 4.5c dividend.

[percy]

Up 30% in 2 months :)
Love to hear opinions from others, even if you don't hold atm. Esp those invested in the likes of SUM...pros and cons in comparison.

I am very happy with my modest holding brought at 80 cents.

[nztx]

I feel this should be a 2 dollar stock.
It needs more turnover and a 4.5c dividend.


Possibly - but the well kept secret of alleged buried value appears to be not obvious to all
- coming through in trading result - is it not ?

A major incumbent stakeholder makes retail investors minorities & perhaps
with thoughts of what the major holder's long term plans for CDI may be
- take over, sell out of their majority position, whatever

Further upstairs haven't there been ownership changes of major holder stakeholders
or moves that likely looked that way in recent two years ?

Div isn't all that exciting, nor activity to perhaps inspire retail investors too much

As a share that's been around since Adam was a cowboy - it dont appear to be going anywhere fast
nor show future signs of anything but more of the same & a 3.5cps imputed dividend just once a year

Basically controlled by a listed hotel company (itself controlled from overseas) - it still hasn't
managed too much of something many would take a leap at grabbing a few shares in,
excitement or volatility that many other listed Companies have seen

The big question is where is it going ? More of the same ? or Increased dividend ? ;)

The Empire appears quite happy with the way things are going at the moment, no changes
needed, major shareholder doesn't want any changes (or so it seems) doesn't need
to cash up it's stake etc etc

SP seems to drift up & down according to prevailing times trends & economic winds, possibly
wishfully in some eyes, but that's about as far as things go .. and who knows may continue
to just do so similarly well into the future ? ;)


Sorry to burst a few balloons here .. maybe value of the underlying looks a bit better etc
the market is higher, so are many other stock prices .. but .. ;)

Discl: Patient Holder

[macduffy]

We all need a few steady performers in our portfolios, I reckon. CDI plays that role, for me.

:)

[nztx]

No complaints on the 'being steady' & 'performing' parts .. if even a bit on the light side in times
when the residential property market is reportedly on fire & going great, firing on all guns ahead .. ;)

Somehow many might be hoping / expecting such exciting vibrant market conditions to be showing slightly
better in CDI's neck of the woods .. ;)

but that may still show up .. who knows .. or maybe not .. ;)

[macduffy]

Somehow many might be hoping / expecting such exciting vibrant market conditions to be showing slightly
better in CDI's neck of the woods ..

Let's wait for the next report and trust that the lack of builders/tradesmen doesn't hold back CDI's ability to sell sections.

[DarkHorse]

For me ACC's purchase of 7 million shares in October - to own over 14 million in total (Dec a whisker below 5%) - was a a great vindication that the company is being run well, regardless of majority holder (ACC have great track record and do their homework).
With a very lean management structure, consistent EPS growth over 10 years, undervalued assets on the balance sheet and booming land prices, "more of the same" (as nztx put it) sounds fine to me :)

[LaserEyeKiwi]

I think they are likely to get gobbled up by MCK fully at some point over the next 12-18 months. CDL is trading at such a ridiculously low earnings multiple - BEFORE SUBTRACTING THE CASH PILE - that MCK would be stupid not to scoop up the remaining shares.

[podg]

you know, i must have thought that same thing about 6-8 times in the past 10 years. still nothing
I think they are likely to get gobbled up by MCK fully at some point over the next 12-18 months. CDL is trading at such a ridiculously low earnings multiple - BEFORE SUBTRACTING THE CASH PILE - that MCK would be stupid not to scoop up the remaining shares.

[BlackPeter]

I think they are likely to get gobbled up by MCK fully at some point over the next 12-18 months. CDL is trading at such a ridiculously low earnings multiple - BEFORE SUBTRACTING THE CASH PILE - that MCK would be stupid not to scoop up the remaining shares.

I think you need to look at the bigger picture:

Yes, CDL (NZ) is majority owned by MCK (NZ)
However MCK (NZ) is majority owned by MCK (UK).
MCK (UK) is majority owned by CDL (Singapore) and
CDL Singapore is majority owned (through a number of funds) by the Kwek family.

Big picture is: whatever is good for the Kwek family is going to happen.

I do not see how it would matter to them at all whether (a miniscule part of) their wealth is hidden in CDL (NZ) or in MCK (NZ).

So - why should they bother?

[Scrunch]

I think they are likely to get gobbled up by MCK fully at some point over the next 12-18 months. CDL is trading at such a ridiculously low earnings multiple - BEFORE SUBTRACTING THE CASH PILE - that MCK would be stupid not to scoop up the remaining shares.

I wouldn't be surprised to see them taken over, but IMO its more likely to be a private equity offer that is sufficiently compelling that MCK directors support it. If MCK were inclined to make a full takeover offer, it probably would have happened already. As podg notes above, similar conditions to the current one's have existed many times in the last 10 years. Also until we have a confirmed normal border and normal international tourist flows, MCK is likely to keep good cash balances as a buffer for an uncertain future.

[BlackPeter]

I wouldn't be surprised to see them taken over, but IMO its more likely to be a private equity offer that is sufficiently compelling that MCK directors support it. If MCK were inclined to make a full takeover offer, it probably would have happened already. As podg notes above, similar conditions to the current one's have existed many times in the last 10 years. Also until we have a confirmed normal border and normal international tourist flows, MCK is likely to keep good cash balances as a buffer for an uncertain future.

No takeover without the majority shareholder agreeing and selling out. Why do you think the majority shareholder Kwek Leng Beng should bother (https://en.wikipedia.org/wiki/Kwek_Leng_Beng)? Any indication that he needs cash? I am pretty sure he topped up his fortunes last year as any other billionaire did as well.

[Southern Lad]

Does CDI have a greater value to one of the larger group home builders (e.g. Fletcher Homes, GJ Gardener, Stonewood, etc.) that could justify a takeover (or purchase of underlying assets) at a price higher than NTA?

Securing exclusive building rights over land would enable them to unlock further value through the margin generated on buildings as well as the land.

[BlackPeter]

Does CDI have a greater value to one of the larger group home builders (e.g. Fletcher Homes, GJ Gardener, Stonewood, etc.) that could justify a takeover (or purchase of underlying assets) at a price higher than NTA?

Securing exclusive building rights over land would enable them to unlock further value through the margin generated on buildings as well as the land.

Possible ... but I think you still don't understand that CDI is a very small gem in huge international property empire majority owned by the Hong Leong group which is owned by the Kwek family in Singapore. Selling this little gem (even above NTA) would be for the Kwek family like it would be for McDonalds to sell one of their national leases for a handful of dollars to Restaurant Brand ...

Why would anybody want to sell the milking cow if they can continue to milk it?

Sure - there might be reasons, if the dollars are really convincing, but I would not base my investment strategy on it happening :):

[macduffy]

Assuming that the govt gets around to re-writing the RMA to make it more development - friendly, and that more land is eventually zoned residential, what effect, if any, do we see on CDL's business? Will it become more difficult for them, presumably competing with govt subsidised infrastructure sections - or will CDL participate as a major enabler of the govt's plans for more housing? Whatever form that takes. Any views?

I hold.

[BlackPeter]

Assuming that the govt gets around to re-writing the RMA to make it more development - friendly, and that more land is eventually zoned residential, what effect, if any, do we see on CDL's business? Will it become more difficult for them, presumably competing with govt subsidised infrastructure sections - or will CDL participate as a major enabler of the govt's plans for more housing? Whatever form that takes. Any views?

I hold.

I recon both of your options could be possible ... who knows?

However - given that CDL is ultimately majority owned and governed by people who are doing the same business (CDL - City development in Singapore) in many different countries and systems across the globe am I pretty sure that whatever decisions our government will make they will find a way to continue to prosper whatever the conditions ...

[DarkHorse]

Assuming that the govt gets around to re-writing the RMA to make it more development - friendly, and that more land is eventually zoned residential, what effect, if any, do we see on CDL's business? Will it become more difficult for them, presumably competing with govt subsidised infrastructure sections - or will CDL participate as a major enabler of the govt's plans for more housing? Whatever form that takes. Any views?

I hold.
Good questions. Could you explain what you mean by "government subsidised infrastructure sections"? (Brain's a bit fuzzy today^^)

[Scrunch]

Assuming that the govt gets around to re-writing the RMA to make it more development - friendly, and that more land is eventually zoned residential, what effect, if any, do we see on CDL's business? Will it become more difficult for them, presumably competing with govt subsidised infrastructure sections - or will CDL participate as a major enabler of the govt's plans for more housing? Whatever form that takes. Any views?

I hold.
One possibility is that the government creates an unintended consequence which is beneficial for CDL. With some new rules planned, owners with a difficult to consent subdivision may well just wait until the new rules become clear, rather than spend a small fortune trying to get consent under existing rules. Possible new entrants into the subdivision game may also wait to enter the market under the new rules, rather than try and learn all the tricks of the existing RMA, only to have to start again under the new re-write. Both of these possibilities will decrease competition and be slightly benefit of CDL.

Overall I think the most likely outcome is a positive one of Labour looking for partners to increase their development efforts. CDL is an obvious choice (along with fletchers) to scale up and create more sections and houses. More CDL activity is more profits. :)

However, my perception is that Labour is not particularly good at removing rules or adding flexibility to systems. I see Labour really struggling to get an RMA that is more development friendly done. Back in July 2020, David Parker was only hopeful for completing the work by 2023, so any new rules look to be first impacting in 2024 or possibly 2025.

[macduffy]

Good questions. Could you explain what you mean by "government subsidised infrastructure sections"? (Brain's a bit fuzzy today^^)

I was thinking about the possibility of govt contributions to services - roading, water, pipes etc - in new subdivisions, to ease the burden on developers and local authorities. Seems an obvious way to speed up development and reduce the cost of sections/housing.

[DarkHorse]

OK thanks :)
I think one way or another, with a high demand for land and more and more high density zoning, the share price significantly undervalues their assets.

[podg]

i dont think the govt can afford to wait till 2024-25 to get any RMA changes into effect. there is an election in 2023 and 2026 ... and the opposition (whatever that looks like) will be getting increasingly louder in its criticism of the housing crisis and any perceived inadequacies by the govt around addressing the issue. Elections aside .... the govt has a responsibility to find effective solutions to the housing shortage and the RMA is an obvious place to do that. they might have to bite the bullet (philosophically at least) and assist the private sector by reducing the red tape or by incentivising city and district councils to free up land for development. They can't drop the ball here, the ramifications could be serious.

[Scrunch]

i dont think the govt can afford to wait till 2024-25 to get any RMA changes into effect. there is an election in 2023 and 2026 ... and the opposition (whatever that looks like) will be getting increasingly louder in its criticism of the housing crisis and any perceived inadequacies by the govt around addressing the issue. Elections aside .... the govt has a responsibility to find effective solutions to the housing shortage and the RMA is an obvious place to do that. they might have to bite the bullet (philosophically at least) and assist the private sector by reducing the red tape or by incentivising city and district councils to free up land for development. They can't drop the ball here, the ramifications could be serious.

Yes Govt have a problem, and that problem only gets larger when you realise that the proposed replacement RMA is only the start of the process. After its passed, developers still need to get development approvals and build the new houses. Add these time factors in, and the RMA element of any solution should help the 2026-2030 period, but do little to help win the next two elections. Something else by govt is going to be needed - but what, and how does that impact CDL?

[podg]

I can hardly wait to see what that might be but the public will likely judge any actions taken by govt by the number of new houses built in the next 12-24 months. So land developers will play a part. And CDL should benefit. In my humble, one-eyed, opinion.


Yes Govt have a problem, and that problem only gets larger when you realise that the proposed replacement RMA is only the start of the process. After its passed, developers still need to get development approvals and build the new houses. Add these time factors in, and the RMA element of any solution should help the 2026-2030 period, but do little to help win the next two elections. Something else by govt is going to be needed - but what, and how does that impact CDL?

[invest]

in the meantime, their land bank keeps appreciating in value. Once investors realise how significant the value increases are we will see positive SP movement.

[podg]

in the meantime, their land bank keeps appreciating in value. Once investors realise how significant the value increases are we will see positive SP movement.
Oh I think they know, and have done for quite some time. The key here is somehow convincing the company to change their accounting approach and unlock that value on the books, rather than have it at purchase value.

[podg]

[QUOTE=podg;868501]Oh I think they know, and have done for quite some time. The key here is somehow convincing the company to change their accounting approach and unlock that value on the books, rather than have it at purchase price.

[traineeinvestor]

Oh I think they know, and have done for quite some time. The key here is somehow convincing the company to change their accounting approach and unlock that value on the books, rather than have it at purchase value.

I was also a bit confused by CDI not incorporating the current value of their land holdings into the balance sheet but ....

.... their business model is to buy and then rezone/subdivide land which means they are classified as a developer and must pay tax on the resulting gains. Any attempt to value CDI based on the market value of its land must also discount for the tax payable when the land is sold.

Disclosure: held.

[podg]

I was also a bit confused by CDI not incorporating the current value of their land holdings into the balance sheet but ....

.... their business model is to buy and then rezone/subdivide land which means they are classified as a developer and must pay tax on the resulting gains. Any attempt to value CDI based on the market value of its land must also discount for the tax payable when the land is sold.

Disclosure: held.

quite right .... tho CDL has a large mountain of tax credits dating back decades .... and no current plan on how to distribute them to shareholders. so maybe a change in business model and land valuation approach could address this issue ?? A substantial one-off dividend has been proposed (on here) before ....

[traineeinvestor]

quite right .... tho CDL has a large mountain of tax credits dating back decades .... and no current plan on how to distribute them to shareholders. so maybe a change in business model and land valuation approach could address this issue ?? A substantial one-off dividend has been proposed (on here) before ....

Maybe but it would have to make sense to the ultimate controlling shareholder (as well as to us plebs :)). I am not a fan of companies holding large amounts of cash on their balance sheets which are unlikely to ever be used in their business - it's a poor return on shareholders' capital (especially in these low interest rate times). Some options:

1. increased dividend - this would be good for shareholders so long as the dividends are fully imputed (and value destroying in they are not)

2. share buy back - not a good idea for a company which is already highly illiquid

3. scale up their existing business model buy buying more land for future subdivision - I'm fine with this if they can identify and acquire suitable projects

4. expand the development of industrial properties to be kept for long term rental income - I actually like this one the most. It would provide recurring income, help close the gap between the share price and reduce the risk of irregular returns from years where the sale of rezoned/subdivided land is less than normal.

The only things I don't believe would be good for shareholders are unimputed dividends and share buy backs.

[podg]

It’s possible the next annual result, due in two weeks or so, will provide a detailed breakdown of CDL’s first foray into rental returns. If the numbers are favourable, it may encourage similar ventures.

[macduffy]

3. scale up their existing business model buy buying more land for future subdivision - I'm fine with this if they can identify and acquire suitable projects

4. expand the development of industrial properties to be kept for long term rental income - I actually like this one the most. It would provide recurring income, help close the gap between the share price and reduce the risk of irregular returns from years where the sale of rezoned/subdivided land is less than normal.

Both options would involve increasing the size of the company's staff from the current tiny base - something less than five, I think. I doubt that the majority shareholder is interested in growth in any meaningful way but are happy with the status quo.

[podg]

Both options would involve increasing the size of the company's staff from the current tiny base - something less than five, I think. I doubt that the majority shareholder is interested in growth in any meaningful way but are happy with the status quo.

It has certainly looked that way for a long time. That said, if they see a profitable return on a block of land, they haven’t been slow in snapping it up, whatever the staff numbers.

But what about these tax credits .... will they never be used or distributed? Has it even been discussed at board level? I wonder if ACC has raised the topic for discussion....

[JeffW]

But what about these tax credits .... will they never be used or distributed? Has it even been discussed at board level? I wonder if ACC has raised the topic for discussion....

Are you meaning the Imputation Credits? If so, I don't see the issue - they can be attached to future dividends but of course only at a maximum of 28%

[podg]

Are you meaning the Imputation Credits? If so, I don't see the issue - they can be attached to future dividends but of course only at a maximum of 28%
yes, imputation credits. Which raises the previously proposed idea of special dividends, such is the stack of credits just waiting to be used.

[Scrunch]

yes, imputation credits. Which raises the previously proposed idea of special dividends, such is the stack of credits just waiting to be used.

When fully imputed dividends have 38.888% of the cash value as imputation credits. With CDL having $67.8m of imputation credits (in 2019), this indicates fully imputated dividend of around $174m could be paid - if there was the cash available to do so. With 278.8m shares on issue that's about 62c/share.

Clearly a dividend that large would require a lot of borrowing making it highly unlikely. Something smaller in the 10-20c range is however possible, if the various ultimate owners want additional cash. If a big dividend is paid, its pretty likely that MCK will also do a big dividend so it passes up the ownership chain.

The owners however have no rush because MCK's shareholding is sufficiently large that the IRD shareholder continuity are comfortably met.

[JeffW]

yes, imputation credits. Which raises the previously proposed idea of special dividends, such is the stack of credits just waiting to be used.

I'd prefer a more modest dividend, and the surplus cash ultimately reinvested in further land purchases (or "stock") for future development. Such is the times we live in, but replacing the stock that has been sold comes at an increased price

[Snoopy]

When fully imputed dividends have 38.888% of the cash value as imputation credits. With CDL having $67.8m of imputation credits (in 2019), this indicates fully imputated dividend of around $174m could be paid - if there was the cash available to do so. With 278.8m shares on issue that's about 62c/share.

Clearly a dividend that large would require a lot of borrowing making it highly unlikely. Something smaller in the 10-20c range is however possible, if the various ultimate owners want additional cash.


There is another way to distribute imputation credits, rather than just paying a bumper dividend. That is to make a taxable pro-rata bonus share issue.



If a big dividend is paid, its pretty likely that MCK will also do a big dividend so it passes up the ownership chain.

The owners however have no rush because MCK's shareholding is sufficiently large that the IRD shareholder continuity are comfortably met.


The ultimate owners have no incentive to realise imputation credits because they are overseas owners. Overseas tax authorities do not recognise imputation credits, so they are of no value to the Kwek family.

As a first step, you could in effect transfer imputation credits from CDL to MCK as both of those are NZ entities. But you have to ask the question: "Is it more sensible to have your capital in a land development company in a country chronically short of housing, or in a hotel company with a severely impacted tourism market?"

I would suggest the former is by far the best use of that capital. So from my perspective transferring capital out of CDL will only benefit minority NZ domiciled shareholders. And if the big bosses are headquartered in Singapore, you don't care about them. Consequently I would see the chances of a 'bumper dividend' from CDL to utilise those imputation credits being near enough to zero.

SNOOPY

[macduffy]

Agree, Snoopy. Incidentally, I am assuming that you aren't advocating CDI making a taxable pro-rata bonus issue of shares. No point in paying tax in order to have a bigger number of smaller interests in the company!

[Snoopy]

Agree, Snoopy. Incidentally, I am assuming that you aren't advocating CDI making a taxable pro-rata bonus issue of shares. No point in paying tax in order to have a bigger number of smaller interests in the company!

If a company has imputation credits on the books, this represents tax already paid. The IRD would not get any more money from CDI, if CDI made a taxable pro-rata bonus issue of shares to shareholders to use those imputation credits. Instead, the shareholders would get the imputation credits which they could then offset against their own other income tax due.

As to having a bigger number of smaller slices of the same pie (which is what would happen if new shares were issued on a pro-rata basis) that would make no difference to the overall aggregate value of everyone's shareholding. Such a transaction would be 'value neutral'.

I am not a CDI shareholder, so I am disinterested in advocating for either outcome. I only mention a taxable bonus share issue as an alternative way of unlocking those imputation credits for minority NZ shareholders.

SNOOPY

[podg]

There is another way to distribute imputation credits, rather than just paying a bumper dividend. That is to make a taxable pro-rata bonus share issue.



The ultimate owners have no incentive to realise imputation credits because they are overseas owners. Overseas tax authorities do not recognise imputation credits, so they are of no value to the Kwek family.

As a first step, you could in effect transfer imputation credits from CDL to MCK as both of those are NZ entities. But you have to ask the question: "Is it more sensible to have your capital in a land development company in a country chronically short of housing, or in a hotel company with a severely impacted tourism market?"

I would suggest the former is by far the best use of that capital. So from my perspective transferring capital out of CDL will only benefit minority NZ domiciled shareholders. And if the big bosses are headquartered in Singapore, you don't care about them. Consequently I would see the chances of a 'bumper dividend' from CDL to utilise those imputation credits being near enough to zero.

SNOOPYsadly, snoopy, I think you are right. What I would like to hear from the company is what’s their plan for those credits ..... whatever that plan may be. At the very least, it would be an acknowledgement by the company that shareholders are discussing the topic and have unanswered questions about the credits.....

year to december 2020 result could be out at the end of next week ....

[Snoopy]

What I would like to hear from the company is what’s their plan for those credits ..... whatever that plan may be. At the very least, it would be an acknowledgement by the company that shareholders are discussing the topic and have unanswered questions about the credits.....

year to december 2020 result could be out at the end of next week ....


I do know that the NZ tax laws are very friendly to overseas shareholders. They can get a supplementary dividend which compensates them for NZ deducted withholding tax. The company paying this dividend can claim the supplementary about back. However, not being an overseas shareholder of NZ shares I don't really understand fully how this system works. Perhaps an expat shareholder might like to comment?

SNOOPY

[JeffW]

sadly, snoopy, I think you are right. What I would like to hear from the company is what’s their plan for those credits ..... whatever that plan may be. At the very least, it would be an acknowledgement by the company that shareholders are discussing the topic and have unanswered questions about the credits.....

year to december 2020 result could be out at the end of next week ....

There does not need to be a plan for the credits - there are of no benefit to any shareholder with a tax rate of more than 28%. Any dividend or taxable bonus issue will mean the company pays 5% withholding tax on behalf of the shareholders for likely no gain assuming most shareholders are on a 33% rate

[BlackPeter]

There does not need to be a plan for the credits - there are of no benefit to any shareholder with a tax rate of more than 28%. Any dividend or taxable bonus issue will mean the company pays 5% withholding tax on behalf of the shareholders for likely no gain assuming most shareholders are on a 33% rate

Not sure I understand your post.

Imputation credits are issued in cents per share and can be deducted from the tax payment of the shareholder.

It does not matter what the personal tax rate of the share holder is - If they receive imputation credits, they will pay less tax to IRD then without receiving these imputation credits (as long as they have to pay taxes in New Zealand).

Example: Dividend $ 100
Imputation credit $28

If your personal top tax rate is 33%, you will need to pay another $5 in taxes (on top of redeeming the imputation credit), but you still save these $28 imputation credit, because otherwise you would have paid $33 (instead of $5) for the $100 dividends;

If your personal tax rate is however lower than 28%, you get the respective dividend basically tax free and you can use the difference between your personal tax requirements and the $28 imputation credit to lower other taxes you would need to pay.

The company will never pay the difference between your personal tax rate and the $28 - you are going to pay that (as being deducted from the registry before you receive your dividend payout);

[JeffW]

Not sure I understand your post.

Imputation credits are issued in cents per share and can be deducted from the tax payment of the shareholder.

It does not matter what the personal tax rate of the share holder is - If they receive imputation credits, they will pay less tax to IRD then without receiving these imputation credits (as long as they have to pay taxes in New Zealand).

Example: Dividend $ 100
Imputation credit $28

If your personal top tax rate is 33%, you will need to pay another $5 in taxes (on top of redeeming the imputation credit), but you still save these $28 imputation credit, because otherwise you would have paid $33 (instead of $5) for the $100 dividends;

If your personal tax rate is however lower than 28%, you get the respective dividend basically tax free and you can use the difference between your personal tax requirements and the $28 imputation credit to lower other taxes you would need to pay.

The company will never pay the difference between your personal tax rate and the $28 - you are going to pay that (as being deducted from the registry before you receive your dividend payout);

Absolutely agree - but Podg was, as I understand it, concerned about the plan for the Imputation Credits. Absolutely it makes sense to attach them to the maximum possible extent (28%) on any dividends paid

[traineeinvestor]

The ultimate owners have no incentive to realise imputation credits because they are overseas owners. Overseas tax authorities do not recognise imputation credits, so they are of no value to the Kwek family.


SNOOPY

SNOOPY - thanks for taking the time to comment on a share you don't hold. Much appreciated.

However, I'm not sure if your comment on imputation credits being worthless to the ultimate holder is entirely correct. It will depend on where they are located.

If a dividend carries full imputation credits then the supplemental dividend means that the overseas shareholder will receive the same amount after non-resident withholding tax as they would have received had there been no supplemental dividend and no withholding tax. I.e if a company pays a 10 cent dividend the shareholder will receive 10 cents. If there is no imputation credits there will be no supplemental dividend and non-resident withholding tax will be deducted at the relevant rate (which varies depending on the residence of the recipient). In my own case (Hong Kong), non-resident withholding tax is 30% so an unimputed 10 cent dividend would end up being 7 cents in my hands.

Overseas shareholders then have to consider what tax they pay in their own jurisdiction. Some countries do not tax overseas dividend income or do so at quite low rates.

I have not looked into the location of the upstream holding company from MCK, but if it is in Singapore (where the Kwek family are headquartered) then my read of this guide from Deloitte suggests that they would not have to pay any Singapore tax on imputed dividends from a NZ company but would have to pay 15% on dividends with no imputation credits.

"Foreign income remittances in the form of dividends, branch profits, and services income derived by resident companies are exempt from tax, provided the income is received from a foreign jurisdiction with a headline tax rate of at least 15% in the year the income is received or deemed received in Singapore and the income has been subject to tax in the foreign jurisdiction. Foreign income that has been exempt from tax in the foreign jurisdiction as a direct result of a tax incentive granted for substantive businessoperations carried out in that jurisdiction will be considered as having met the “subject to tax” test."




https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-singaporehighlights-2020.pdf

Happy to be corrected on all or any of this - I only know how it works for me as a Hong Kong resident.

[BlackPeter]

SNOOPY - thanks for taking the time to comment on a share you don't hold. Much appreciated.

However, I'm not sure if your comment on imputation credits being worthless to the ultimate holder is entirely correct. It will depend on where they are located.

If a dividend carries full imputation credits then the supplemental dividend means that the overseas shareholder will receive the same amount after non-resident withholding tax as they would have received had there been no supplemental dividend and no withholding tax. I.e if a company pays a 10 cent dividend the shareholder will receive 10 cents. If there is no imputation credits there will be no supplemental dividend and non-resident withholding tax will be deducted at the relevant rate (which varies depending on the residence of the recipient). In my own case (Hong Kong), non-resident withholding tax is 30% so an unimputed 10 cent dividend would end up being 7 cents in my hands.

Overseas shareholders then have to consider what tax they pay in their own jurisdiction. Some countries do not tax overseas dividend income or do so at quite low rates.

I have not looked into the location of the upstream holding company from MCK, but if it is in Singapore (where the Kwek family are headquartered) then my read of this guide from Deloitte suggests that they would not have to pay any Singapore tax on imputed dividends from a NZ company but would have to pay 15% on dividends with no imputation credits.

"Foreign income remittances in the form of dividends, branch profits, and services income derived by resident companies are exempt from tax, provided the income is received from a foreign jurisdiction with a headline tax rate of at least 15% in the year the income is received or deemed received in Singapore and the income has been subject to tax in the foreign jurisdiction. Foreign income that has been exempt from tax in the foreign jurisdiction as a direct result of a tax incentive granted for substantive businessoperations carried out in that jurisdiction will be considered as having met the “subject to tax” test."




https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-singaporehighlights-2020.pdf

Happy to be corrected on all or any of this - I only know how it works for me as a Hong Kong resident.

Interesting contribution - thank you.

Never thought that NZ Imputation credits could be of interest for foreign shareholders.

And yes, you are right - the ultimate majority owner of CDI is sitting in Singapore, however - the CDL dividends go first to MCK (NZ). The MCK (NZ) dividends go to MCK (UK) - MCK (UK) is then owned by the Singaporean City Development (CDL) ...

No idea what would happen on this long way to NZ Imputation credits ...

[podg]

Good info people. Thanks.

anyone willing to have a stab at the 2020 full-year numbers. I’m picking a net profit of $45m+ and 4c dividend. Fully imputed, of course.

[BlackPeter]

Good info people. Thanks.

anyone willing to have a stab at the 2020 full-year numbers. I’m picking a net profit of $45m+ and 4c dividend. Fully imputed, of course.

To be honest - NPAT is a quite irrelevant number for them, given that they easily can hide earnings in their landbank (and they do). I'd be quite happy with a NTA similar to last year (and the year before). Say NPAT around $35m. And yes, divie will be unchanged at 4 cents. Sure - sales might run a bit better but we don't know yet how their leases work out.

More interesting is - will the value of their landbank increase or drop (if they didn't replace the sold land)? Can't remember any recent announcements about land purchases (which could point to a higher NPAT), but I don't think they announce all land purchases - i.e we don't know - yet.

More interesting will be their new NTA (say 95 cents per share?) and really interesting will be the updated re-valuation value of their landbank (s. above):

However - no problems with me if you are right :): - whatever it is, I am sure they will do fine.

[traineeinvestor]

Interesting contribution - thank you.

Never thought that NZ Imputation credits could be of interest for foreign shareholders.

And yes, you are right - the ultimate majority owner of CDI is sitting in Singapore, however - the CDL dividends go first to MCK (NZ). The MCK (NZ) dividends go to MCK (UK) - MCK (UK) is then owned by the Singaporean City Development (CDL) ...

No idea what would happen on this long way to NZ Imputation credits ...

I hadn't done my homework and missed the bit about MCK (NZ) dividends going to MCK (UK) before ending up in Singapore. I'm not sure what the UK tax treatment is but a quick search for some free tax advice suggests that there would be considerable tax leakage. If so, I can't see CDL going down that route.

[Southern Lad]

The MCK Operational Update issued today stated that their FY20 annual result would be released tomorrow Wednesday 17 February. It follows that the CDI annual result will also be released tomorrow, given the CDI numbers feed into MCK given their 66% shareholding.

Assume it will have been a strong six month of sales, however the question remains how many of these are booked up to 31 December given that I assume sales aren’t recognised until title to subdivided sections is issued. So in addition the reported profit, a key for me is what locked in FY21 sales have been negotiated and also what is the market value of their land bank relative to book value. Also interested to see how big the cash balance is and how much of this is ear marked for shareholders verses additional land purchases.

[podg]

You, and many others, will be looking at those very things, i'm sure. The forecast use of the cash balance in particular will provide a signal as to where CDL thinks the NZ property sector is heading. Given the record shortage of houses across the country, it may well be ... more of the same for CDL.

[percy]

Steady as she goes result.
https://www.nzx.com/announcements/367669
At 31 December 2020, CDI’s shareholders’ funds increased to $257.1 million (2019: $235.5 million) and total assets also increased to $265.0 million (2019: $240.7 million). Net tangible asset per share (at book value) was 91.7 cents (2019: 84.5 cents).

[BlackPeter]

Steady as she goes result.
https://www.nzx.com/announcements/367669
At 31 December 2020, CDI’s shareholders’ funds increased to $257.1 million (2019: $235.5 million) and total assets also increased to $265.0 million (2019: $240.7 million). Net tangible asset per share (at book value) was 91.7 cents (2019: 84.5 cents).

... and lets not forget:
10.7 cents earnings per share (which makes it a PE of 9.9) and a fully imputed dividend of 3.5 cents;
backward earnings CAGR (10 years) is 26 ... which makes companies like Ryman looking like their poor cousins :),
and the market value of their land bank is $286.4m, - i.e. still $1.02 per share.

While the asset value is not anymore higher than the share price, one still pays (at SP = $1.06) only four cents per share above asset value for a fast and still sustainably growing company in a future proof industry.

Discl: happy holder.

[BlackPeter]

... but above all: Who would have thought that we (well, I) can use CDI's reports to learn new English words:

from the chairs report:

Shareholders should be pleased that CDI was able to achieve a result in 2020 which mirrored 2019
especially in a year which, to put it mildly, was discombobulating


I first thought that they didn't use the spell checker, but "discombobulating" apparently stands for "disconcerting" or "confusing".

Need to include this word into my standard vocabulary ... "I am discombobulated" sounds so much better than the plain "I am confused", doesn't it?

[macduffy]

... but above all: Who would have thought that we (well, I) can use CDI's reports to learn new English words:

from the chairs report:


I first thought that they didn't use the spell checker, but "discombobulating" apparently stands for "disconcerting" or "confusing".

Need to include this word into my standard vocabulary ... "I am discombobulated" sounds so much better than the plain "I am confused", doesn't it?

Seems I use that word every day at present!

Yes, a good result in a difficult environment.

[percy]

Result was not as good as I expected so have sold.

[LaserEyeKiwi]

Interesting to note that MCK has opted to receive their dividend as shares instead of cash - which means they are effectively increasing their ownership percentage while boosting the cash holdings of CDL (which won't have to pay out 66% of the dividend).

[nztx]

Looks like more of 'continue down the same path' to me .. no change to payout etc

steady in Covid times, if you like..

nothing like consistency maintained in turbulent times.. not sure what SP direction will ensue
out of this - perhaps retreat toward south of the buck again ? ;)

Once a year Div payers tend to do that in some cases ..

[traineeinvestor]

FWIW, my quick review of the results announcements:

1. NAV calculation: Shareholders equity of $257.1 million includes development property at the lower of cost or value. Note 8 to the accounts states that development property is valued at $286.4 million against cost of $161.4 million. As developers, the eventual realisation will be subject to tax so I have factored in 33% tax to get a net difference of $83.7 million. Adding this $83.7 million to the shareholders equity stated in the accounts and dividing by the 280.4 million shares in issue suggests NAV per share is around $1.21. This is an increase from the $1.16 NAV the same calculation produced off the back of the previous annual report.

2. dividend is stead at 3.5% fully imputed

3. cash and deposits have increased from $70.7 million to $96.7 million

4. they spent $56.2 million on land acquisitions. This is actually a very important number for CDI's business model as they depend on constantly buying more land to replace what is being sold

5. this year they have given more detail on their held for investment properties. While only valued at $3.3 million, over the longer term, I would prefer that they hold more income producing properties and less cash on the balance sheet

6. one way of looking at CDI is to note that the NAV increased from $1.16 to $1.21 - an increase of about 5 cps to which can be added the dividend of 3.5 cents for a total increase to shareholders of about 8.5 cents. Based on today's closing price that's a total after tax return of 8.5/102 = 8.3 percent.

NOTE: rounding has been done in all calculation so the final 8.3% may be a bit rough.

Overall, no surprises in either direction. CDI just keeps on doing it's thing. It's a boring steady as you go business.

Disclosure: held

[Southern Lad]

My observations from todays announcements from CDI (and MCK):

1. Despite total cash available at December 2020 of $96.7m, MCK are saying they will participate in the DRP "to optimize (CDI's) cash resources to progress its development plans". The capital and land development commitments note details total commitments of $76.0m comprising development expenditure of $19.7m and land purchases of $56.3m. The land purchase commitment amount is interesting given the Directors Review indicates that additional acquisitions are being considered in 2021 to ensure that the company has sufficient development stock - perhaps the considerations are more concrete than indicated. These factors may explain why the dividend not being increased despite there being ample cash on hand.

2. There appears to be a more material diversification into investment property than had previously been indicated. The Directors Report notes "In the past three years, we have also embarked on strategies to diversify our development programme and revenue stream and we will continue with this where we believe this is suitable and will deliver additional value to shareholders". In addition to the Stonebrook commercial centre (cost $3.1m and value $6.4m), CDI are starting work on a 15 unit commercial centre at Preston's Park and a development at one of the commercially zoned sites in Wiri. The report of lacking in any further detail on the Wiri development (e.g. cost, lease arrangements, tenant, etc.) or details of other land held at Wiri that may be intended for additional development. Normally commercial property is partially funded by debt - is CDI looking to invest development profits into 100% equity funded commercial property ownership rather than distributing cash to shareholders? Some clear signaling on the how on the directors thinking and dividend payment policy would be useful. Are minorities going on a journey at the whim of the major shareholder without any clear indication on where they will end up?

3. As income from residential property development is recognised by CDI on settlement of the property sale (see accounting policy (f)), the profit derived in any reporting period will be influenced by the timing of settlements of a particular stage of property development project. Sales will therefore be lumpy rather than occurring evenly in any given period. The reporting lacks any transparency on what sales contracts are in place at balance date and are yet to be completed and settled. I therefore take the profit fall in the latest six months with a grain of salt.

4. Given the bouyancy of the residential property market, it is surprising that there is no increase in the unrecognised revaluation gain on the land bank (unrecognised gain this year of $125m v $133m last year). Does the valuation basis (an open market existing use basis) mean that there is a fair degree of conservatism built into the market valuations?

[Scrunch]

Steady as she goes result.
https://www.nzx.com/announcements/367669
At 31 December 2020, CDI’s shareholders’ funds increased to $257.1 million (2019: $235.5 million) and total assets also increased to $265.0 million (2019: $240.7 million). Net tangible asset per share (at book value) was 91.7 cents (2019: 84.5 cents).


Result was not as good as I expected so have sold.

I would be interested in what additional details you saw in looking at the result more closely. This closer look appears to have flipped you from "steady as she goes" to sell.

NTA increased by 7.3c, but this is exactly what you would expect from CDI given they don't take property reval's through the P&L or comprehensive income. EPS of 10.8c less the 3.5c div is 7.3c.

The last five years have seen a 2nd half profit of $11.1m, $11.8m, $8.2m, $19.0m & $16.4m this half year. 2020 wasn't their record 2nd half, but still one of the better they have had. Also the accounting policy has sales recognised when title is transferred. A sale off the plans in Oct-Dec 2020 that is delivered in 2021 is nearly invisible within the 2020 result. It might increase trade and other payables as I'm presuming any deposit would be booked as cash and a revenue in advance payable. Payables were up from $1m to $4m (but that could also be development costs that are payable). While the L4 lock-down was in the 1st half, it may have cascaded some delivery of titles from 1st half to 2nd half and from 2nd half to 2021.

I'd hoped to see a substantial increase in the subdivision based property valuation but there's very little information on the valuation inputs used. The lack of an increase may still be a conservative valuer. Valuers like using actual sales, so what may have prevented this increase appearing is CDI having discounted some sections as NZ was just coming out of covid lock-down and everyone was predicting property prices would fall. If these sections had title transfers in the 2nd half, they would become the comparable sales a valuer may have used as evidence for what the rest of the land block would sell for. It would have also kept the 2nd half surplus down. Even if the valuation is still the best estimate, there's still 45c of future value that's yet to go through the P&L and improve NTA. That's a good margin of safety over the current share price and NTA.

The property development current assets are $42m. This is 13% higher than at Dec 2019 indicating CDI are gearing up for more cost of sales in 2021 than in 2020. A higher value of sections sold is likely to mean more profit, particularly if prices and therefore margins are strong.

Then there's the increase in the land bank. At the half-year land purchase commitments were only $1.3m. Its now its $56.3m indicating a S&P to buy land to the value of $55m has been agreed and is waiting to either go unconditional or settle. You will get a lot of hectares of land for this amount. It may be what the MD was referencing when he said "Those acquisitions will position CDI beyond property cycles and after what we experienced in 2020, it is even more important to do that”

Disc hold

[percy]

I was expecting more than "steady as she goes",as real estate has been going gang busters.Steady divie was also not enough for me.
I purchased my shares on 30th October at 80 cents.I sold out at $1.0355 yesterday.A substantial increase in three and a half months.I doubted they will increase the same amount over the next year.

[Scrunch]

I was expecting more than "steady as she goes",as real estate has been going gang busters.Steady divie was also not enough for me.
I purchased my shares on 30th October at 80 cents.I sold out at $1.0355 yesterday.A substantial increase in three and a half months.I doubted they will increase the same amount over the next year.

Thank you. Glad to see there wasn't a hidden gremlin, and your decisions were just considering possible company vs share price growth prospects

[percy]

Thank you. Glad to see there wasn't a hidden gremlin, and your decisions were just considering possible company vs share price growth prospects

I am not sure of the market direction.Seems to be very high .I have core holdings I intend to hold.However I have too many holdings,particularly a large number of small holdings in Aussie.
I am not mucking around.Any result that is not up to my expectations is sold.I have always found when I have cash sitting around opportunities seem to come along.I also will add to companies I hold that come with a surprise earnings upgrade.I am also happy to sit on too much cash.

[LaserEyeKiwi]

FWIW, my quick review of the results announcements:

1. NAV calculation: Shareholders equity of $257.1 million includes development property at the lower of cost or value. Note 8 to the accounts states that development property is valued at $286.4 million against cost of $161.4 million. As developers, the eventual realisation will be subject to tax so I have factored in 33% tax to get a net difference of $83.7 million. Adding this $83.7 million to the shareholders equity stated in the accounts and dividing by the 280.4 million shares in issue suggests NAV per share is around $1.21. This is an increase from the $1.16 NAV the same calculation produced off the back of the previous annual report.

2. dividend is stead at 3.5% fully imputed

3. cash and deposits have increased from $70.7 million to $96.7 million

4. they spent $56.2 million on land acquisitions. This is actually a very important number for CDI's business model as they depend on constantly buying more land to replace what is being sold

5. this year they have given more detail on their held for investment properties. While only valued at $3.3 million, over the longer term, I would prefer that they hold more income producing properties and less cash on the balance sheet

6. one way of looking at CDI is to note that the NAV increased from $1.16 to $1.21 - an increase of about 5 cps to which can be added the dividend of 3.5 cents for a total increase to shareholders of about 8.5 cents. Based on today's closing price that's a total after tax return of 8.5/102 = 8.3 percent.

NOTE: rounding has been done in all calculation so the final 8.3% may be a bit rough.

Overall, no surprises in either direction. CDI just keeps on doing it's thing. It's a boring steady as you go business.

Disclosure: held

Just to confirm:

Property assets market value: $286.4 million, + $96.7 million cash and deposits (no debt) = $383.1 million

Current CDL market cap: $286 million

Is that right? Currently a $97 million / 25% discount to the true asset valuation?

[traineeinvestor]

Just to confirm:

Property assets market value: $286.4 million, + $96.7 million cash and deposits (no debt) = $383.1 million

Current CDL market cap: $286 million

Is that right? Currently a $97 million / 25% discount to the true asset valuation?

On a pre-tax basis, yes.

But we need to remember that CDL is a developer so all gains in the company's portfolio of development properties will eventually be subject to tax when they sell the completed project. IMHO, the NAV calculation should reflect the tax on the difference between the cost and value of the development properties.

[podg]

any thoughts on the latest effort to arrest soaring house prices and how it might impact on CDI ?? my initial thoughts were that the infrastructure boost and the exemption from the new laws for new builds would be positive for both development of new subdivsions and the building of new homes on those subdivisions. If supply is the primary problem, then surely CDI and other developers must be part of the answer.

[traineeinvestor]

any thoughts on the latest effort to arrest soaring house prices and how it might impact on CDI ?? my initial thoughts were that the infrastructure boost and the exemption from the new laws for new builds would be positive for both development of new subdivsions and the building of new homes on those subdivisions. If supply is the primary problem, then surely CDI and other developers must be part of the answer.

My initial thoughts are much the same as far as the short term is concerned - increased demand for new sections to build on is a likely outcome. The potential downside is that the new rules will push up the cost of land to subdivide as more players try to invest in bare land for the same purpose. No idea which way it will play out.

Disclosure: holding

[Scrunch]

any thoughts on the latest effort to arrest soaring house prices and how it might impact on CDI ?? my initial thoughts were that the infrastructure boost and the exemption from the new laws for new builds would be positive for both development of new subdivsions and the building of new homes on those subdivisions. If supply is the primary problem, then surely CDI and other developers must be part of the answer.

Big rerating upside. The sort of property investor that sells out of residential property is a potential investor of that capital in CDI.

[podg]

MKTUPDTE: CDI: CDI: Sale of Auckland Land

CDL Investments New Zealand Limited (NZX:CDI) advises that it has reached
agreement with Fernbrook Property (No.1) Limited for the sale of its land at
9 Jerry Green Street, Wiri. The land is 3.8320 hectares and is currently
zoned Business - Heavy Industry Zone.

Settlement of the sale is to take place in January 2022 and the terms of sale
and sale price are both confidential to the parties.

CDI Managing Director Mr. BK Chiu said that the sale was beneficial to the
company and the proceeds would be utilised for further land purchases and
development.

No further announcement will be made by either party until settlement of the
transaction in 2022.

[beetills]

Fernbrook no 1 controlling company Rank Group.I presume Graeme Hart is still involved with Rank.

[podg]

fairly muted response at the market's opening

[podg]

i wonder why they chose to have the sale recorded in next year's results

[traineeinvestor]

Without the sale price and cost price of the land being sold, there's no way to evaluate the impact of the sale on CDI. While I would have preferred to see the company develop and retain some industrial properties for long term income, they've shown themselves to be sensible dealmakers so I'm willing to assume the deal is a good one for CDI shareholders.

No idea whether the 1.5 cents share price increase is due to this announcement or the fact that they go ex-dividend on 29 April. Either way, as someone who intends taking the DRP, it's costing me a few shares.

Disclosure: held

[traineeinvestor]

i wonder why they chose to have the sale recorded in next year's results

They don't need the cash and I'm guessing the deferred completion date will defer the tax for a year?

Or it could have been driven by the purchaser?

[Scrunch]

They don't need the cash and I'm guessing the deferred completion date will defer the tax for a year?

Or it could have been driven by the purchaser?

Probably the purchaser looking to get consents through the council so that they can commence the build the new owners have planned as they get title.

[BlackPeter]

Another All Time High tonight for CDI: $1.125 per share

... and this share comes with a reliable (and fully imputed) dividend of currently 3.5 cents, a forward PE of 8.6 (at current prices) and a company operating in a industry with lots of tailwind.

12509

Discl: very happy holder ...

[percy]

CDI is one of only a handful of NZX listed companies that,according figures in the latest The New Zealand Company Register, in the past 5 years has seen both eps and net assets growth year on end.
Perhaps I should not have sold my holding.?

[BlackPeter]

CDI is one of only a handful of NZX listed companies that,according figures in the latest The New Zealand Company Register, in the past 5 years has seen both eps and net assets growth year on end.
Perhaps I should not have sold my holding.?

I am sure you can buy them back .. though sadly not at the price you sold them for :eek2: ;

As long as there is a housing shortage in NZ I would expect them to do just fine.

[Southern Lad]

I see that CDI issued $7.8m worth of DRP shares (7,077,888 shares at $1.102013 each) out of a total possible dividend of $9.8m, so they have only paid out $2.0m in cash last Friday. Based on earlier signalling, MCK reinvested their dividend "to allow CDLI to optimize its cash resources to progress its development plans". Excluding MCK, over 40% of shareholdings must (once RWT is taken into account) have reinvested their dividend. This is as high a participation rate as it gets for a widely held company and demonstrates either a continuing high conviction by existing shareholders or that they forgot to cancel their prior DRP election despite the significantly higher share price this year.

Will be interesting to see what future plans and general outlook is presented by directors at the AGM on Tuesday week (25 May), although if the past is anything to go by they will be both conservative and play their cards close to their chests.

[percy]

I am sure you can buy them back .. though sadly not at the price you sold them for :eek2: ;

As long as there is a housing shortage in NZ I would expect them to do just fine.

Yes I still like CDI,however the Silver Fern Farms I used the funds to add to at 80 cents, are doing really well [$1.02],and i received their 5.5 cents fully imputed divie.
CDI and MCK seem to be good value,
Have ended up with my two largest holding PAZ and SFF, both being on the Unlisted market.PAZ brought for growth,while SFF brought for income and growth.

[Sideshow Bob]

I see that CDI issued $7.8m worth of DRP shares (7,077,888 shares at $1.102013 each) out of a total possible dividend of $9.8m, so they have only paid out $2.0m in cash last Friday. Based on earlier signalling, MCK reinvested their dividend "to allow CDLI to optimize its cash resources to progress its development plans". Excluding MCK, over 40% of shareholdings must (once RWT is taken into account) have reinvested their dividend. This is as high a participation rate as it gets for a widely held company and demonstrates either a continuing high conviction by existing shareholders or that they forgot to cancel their prior DRP election despite the significantly higher share price this year.


Interesting! Not sure how many holders are through Sharsies etc, but they can't elect the DRP - due to being held by their custodial holding. Can transfer them out if they are keen on the DRP however.

[LaserEyeKiwi]

Yes I still like CDI,however the Silver Fern Farms I used the funds to add to at 80 cents, are doing really well [$1.02],and i received their 5.5 cents fully imputed divie.
CDI and MCK seem to be good value,
Have ended up with my two largest holding PAZ and SFF, both being on the Unlisted market.PAZ brought for growth,while SFF brought for income and growth.

I think MCK being undervalued is almost an understatement. MCK now over 66% ownership of CDL, taking the value of their stake to ~$209 million.

MCKs entire market cap (MCK + MCKPA) = $392 million, which means their entire Hotel portfolio & Sydney apartment holdings (Zenith) + Cash is only worth $183 million according to the market.

MCK current asset backing per share is $4.70c (vs $2.49 share price)

[percy]

Here is some thing you may find of interest.
MCK's share price [$2.49] is 52.98% of their NTA.[$4.70]
SFF's share price [$1.02] is 31.20% of their total share holders equity [$3.20].
"Not a lot of people know that."

[Snoopy]

Here is some thing you may find of interest.
MCK's share price [$2.49] is 52.98% of their NTA.[$4.70]
SFF's share price [$1.02] is 31.20% of their total share holders equity [$3.20].
"Not a lot of people know that."


NTA is useful when there is a growing demand for a certain class of asset, which means that those assets on the books have real value and trade at a 'replacement discount'. However, when there is a surplus of assets, the underlying value of those 'assets on the books' reverts to that of the asset's earning potential with the current business model, or for an alternative use. Right now in a Covid-19 world, there isn't a shortage of hotel beds. So it is not surprising that listed hotels trade at less than NTA. Even in times of 'better tourism', existing hotels tend to trade at less than NTA because they will have a hard time competing with the latest new build hotels. Hotels can be reworked into apartment accommodation for sale, an alternative use, which is, I think, the case for MCK's Zenith apartments in Sydney.

OTOH with livestock processing, alternative uses of these are assets are scarce, there is automation creeping into the industry and animal numbers are falling. That means that some of the legacy meat chain assets probably don't have a value anywhere near their build cost. So it is no surprise that collective meat processing assets trade at well under NTA. For alternative use, I guess you could put a hammock between two meat hooks as low cost backpacker accommodation. That would increase the income potential of the asset that should see the share price get closer to NTA. You would just have to make sure the night guests were well out of there before the chain started up for the next day though!

SNOOPY

[Sideshow Bob]

OTOH with livestock processing, alternative uses of these are assets are scarce, there is automation creeping into the industry and animal numbers are falling. That means that some of the legacy meat chain assets probably don't have a value anywhere near their build cost. So it is no surprise that collective meat processing assets trade at well under NTA. For alternative use, I guess you could put a hammock between two meat hooks as low cost backpacker accommodation. That would increase the income potential of the asset that should see the share price get closer to NTA. You would just have to make sure the night guests were well out of there before the chain started up for the next day though!

SNOOPY

Snoopy is right, who wants an old meat plant aside from its land value (and many have a decent chunk of land). While it is the wrong thread to perpetuate this line of discussion, but property, plant & machinery only about 36% of their assets - trade/receivables/inventories are about 56% of total assets (note total assets rather than net assets).

[percy]

NTA is useful when there is a growing demand for a certain class of asset, which means that those assets on the books have real value and trade at a 'replacement discount'. However, when there is a surplus of assets, the underlying value of those 'assets on the books' reverts to that of the asset's earning potential with the current business model, or for an alternative use. Right now in a Covid-19 world, there isn't a shortage of hotel beds. So it is not surprising that listed hotels trade at less than NTA. Even in times of 'better tourism', existing hotels tend to trade at less than NTA because they will have a hard time competing with the latest new build hotels. Hotels can be reworked into apartment accommodation for sale, an alternative use, which is, I think, the case for MCK's Zenith apartments in Sydney.

OTOH with livestock processing, alternative uses of these are assets are scarce, there is automation creeping into the industry and animal numbers are falling. That means that some of the legacy meat chain assets probably don't have a value anywhere near their build cost. So it is no surprise that collective meat processing assets trade at well under NTA. For alternative use, I guess you could put a hammock between two meat hooks as low cost backpacker accommodation. That would increase the income potential of the asset that should see the share price get closer to NTA. You would just have to make sure the night guests were well out of there before the chain started up for the next day though!

SNOOPY
Perhaps we should look at the old fashioned way of comparing companies,ie EPS, PE yields and market cap.?
..........................EPS................PE... ......Yield,....Market cap
MCK..................43.58..cps........5.76....... 0%............$264.7mil with MCKPA ($130.2mil] =$394.9 mil
CDI....................10.76.cps........10.41..... .3.13%........$322mil.
SFF....................35.37..cps........2.85..... ..5.347%.......$101.3mil

[LaserEyeKiwi]

Perhaps we should look at the old fashioned way of comparing companies,ie EPS, PE yields and market cap.?
..........................EPS................PE... ......Yield,....Market cap
MCK..................43.58..cps........5.76....... 0%............$264.7mil
CDI....................10.76.cps........10.41..... .3.13%........$322mil.
SFF....................35.37..cps........2.85..... ..5.347%.......$101.3mil

have to combine MCK & MCKPA (Preference shares) to get total MCK market cap. Based on your above figures the business would only be worth $55 million more than their 66% CDI shareholding.

[percy]

have to combine MCK & MCKPA (Preference shares) to get total MCK market cap. Based on your above figures the business would only be worth $55 million more than their 66% CDI shareholding.
Have added the MCKPA's to my post.

[Southern Lad]

CDI (and MCK) AGM’s were held virtually today. CDI sales for the four months ended April 21 were $35.7m verses $19.8m last year. The point was made that sales were lumpy (presumably coinciding with obtaining title for stages of subdivisions), but none the less a good start to the current year. Directors expressed confidence in acquiring additional land, funded from the cash on hand of $122m at 30 April 2021. Sentiment was that vendors expectations on selling undeveloped land were getting more realistic and being a cash buyer provided CDI with a relative advantage. All in all director’s were sounding cautiously optimistic on the future.

[podg]

just a couple of weeks or so till the half-year figures are out. As the government makes increasingly louder calls for, and incentives to, build new houses, CDL sits pretty. Will it show up in the interim's numbers? Keen to read what the chief says about the next 6 months

[traineeinvestor]

just a couple of weeks or so till the half-year figures are out. As the government makes increasingly louder calls for, and incentives to, build new houses, CDL sits pretty. Will it show up in the interim's numbers? Keen to read what the chief says about the next 6 months

Also looking forward to it but expect the usual conservatism in the outlook.

Side note: worth remembering that higher prices for land affect both both revenues and expenses.

Disclosure: hold

[LaserEyeKiwi]

just a couple of weeks or so till the half-year figures are out. As the government makes increasingly louder calls for, and incentives to, build new houses, CDL sits pretty. Will it show up in the interim's numbers? Keen to read what the chief says about the next 6 months

I don’t expect much different to what was revealed at the recent AGM, which had performance details through April, not much would have changed in 2 months.

disclosure: Hold MCK

[podg]

The market seems to be expecting something worthwhile. A new, all-time, historical, never-before-seen lifelong high of $1.16 was recorded today. Is $1.20 an easy target now?

[Getty]

Its been stated in the media, that the government may buy some hotels.

Maybe some speculators are expecting a Tranzrail type deal, a la Helen Clark.

[Getty]

Its been stated in the media, that the government may buy some hotels.

Maybe some speculators are expecting a Tranzrail type deal, a la Helen Clark.

Oops, I've become "discombulated", this comment is more appropriate to the MCK thread.

[LaserEyeKiwi]

Its been stated in the media, that the government may buy some hotels.

Maybe some speculators are expecting a Tranzrail type deal, a la Helen Clark.

i don’t know why that would happen (a trans rail type deal at least where it was sold for $1) - MCK at least says it’s hotels are currently cash flow positive, and they don’t need any cash at present (they have a large cash balance and they also chose to take shares instead of a cash dividend from CDL).

There would perhaps be some talk around the Millennium Grand in Auckland however, which is the largest MIQ hotel and which the government has sunk quite a bit of money into to upgrade ventilation systems. This hotel MCK operates as manager, but doesn’t own the building itself. I think this is perhaps a possible transaction if the government goes ahead with the plan, and the impact on MCK is probably they either get paid a break fee for their management contract termination OR they continue managing the hotel for the government.

[Getty]

I was referring to the $690M buyback of rail announced in the 23 May 2008 budget, and completed in July 2008 by Michael Cullen & Helen Clark.

On Terms including leases that Toll laughed all the way to the bank.

[podg]

Back to CDL ... more shareprice growth today ... and almost no volume on the sell side to stop it from breaking through 120-125, or even higher?

[WAIKEN]

Estimate of NTA at 31.12.21 - Rough working

Net Assets 31.12.20 257 Mill
Indep valuer margin over BV 130
Total 387

15% Gain in land value during 2021 58
2021 net profit after tax 30

Total 475
Divide by shares at 31.12.20 286

NTA 1.66

No of shares will be up a bit with div reinvestment
The trend towards tinier sections is likely to add a lot more value to their land bank

[BlackPeter]

Closing at new all time high ($1.20) and still so cheap :):

[JeffW]

Estimate of NTA at 31.12.21 - Rough working

Net Assets 31.12.20 257 Mill
Indep valuer margin over BV 130
Total 387

15% Gain in land value during 2021 58
2021 net profit after tax 30

Total 475
Divide by shares at 31.12.20 286

NTA 1.66

No of shares will be up a bit with div reinvestment
The trend towards tinier sections is likely to add a lot more value to their land bank

Both the $130 and the $58 are taxable though, so you need to take off $53 for tax, which makes your $475 more like $422 - so NTA closer to $1.47 by my calculations

[podg]

Any chartists out there? There is a sharp falloff in volumes on the sell side, as there usually is, about 20k is on offer .. up to $1.50 .. !! The share price is up about 50pc in the past 7months, on today's close. spooky

[BlackPeter]

Any chartists out there? There is a sharp falloff in volumes on the sell side, as there usually is, about 20k is on offer .. up to $1.50 .. !! The share price is up about 50pc in the past 7months, on today's close. spooky

Charting is an exercise which can help you to understand where the herd is going. It makes a lot sense if you operate with statistically relevant numbers - i.e. stocks with good market liquidity and trading volumes.

CDL is a very low liquidity stock and minimal trading volumes (i.e. no herd around), market actions are often dominated by just one buyer or seller. No statistically relevant numbers.

What do you think charting this stock would tell you?

[podg]

Well, it would possibly support the other factors playing a part in the daily record high share price. Or perhaps it would show there is not the justification for such a high share price right now. The trading volume, or lack of it is, of course, a fly in that ointment, as you correctly point out.

[Bob50]

The NTA of this company (at cost price - not true value) in the last annual report was 91.7 cents. This figure has increased constantly each year by 6-9 cents. The last five years NTA was 58.4 , 67.1 , 75.7 , 84.5 and now 91.7cents.

Share price exceeded NTA in 2018 by 30 cents( a higher premium then the following years, some years this premium is only 10cents or less in dips) this seemed to be an over step as little or no capital gain for the next 3 years.

If NTA at next years annual reports increases by a record amount - say 12 cents - it will be an NTA of 104cents. Add an typical premium of 20 cents and I think you have a fair value early next year of 124 share price with a 4cent dividend on the way.

Side note. I drove past their 5 unit commercial centre in Rolleston today - all empty apart from one lonely empty small dairy type thing.

Disclaimer I am disappointed I didn’t buy more last spring and haven’t bought any since.

[LaserEyeKiwi]

The NTA of this company (at cost price - not true value) in the last annual report was 91.7 cents. This figure has increased constantly each year by 6-9 cents. The last five years NTA was 58.4 , 67.1 , 75.7 , 84.5 and now 91.7cents.

Share price exceeded NTA in 2018 by 30 cents( a higher premium then the following years, some years this premium is only 10cents or less in dips) this seemed to be an over step as little or no capital gain for the next 3 years.

If NTA at next years annual reports increases by a record amount - say 12 cents - it will be an NTA of 104cents. Add an typical premium of 20 cents and I think you have a fair value early next year of 124 share price with a 4cent dividend on the way.

Side note. I drove past their 5 unit commercial centre in Rolleston today - all empty apart from one lonely empty small dairy type thing.

Disclaimer I am disappointed I didn’t buy more last spring and haven’t bought any since.

not sure you can ascribe a “typical premium” to NTA with CDL.

like you say, NTA only values the land assets at cost, which is fairly meaningless given the value created by CDL once they onsell it as residential sections, along with the market value of residential sections changing in the interim period between purchase of bulk land and sales of residential sections as new subdivisions.

[podg]

all empty apart from one empty small dairy type thing ?? so all empty or one empty ?

[Bob50]

4 of 5 units vacant. The one occupied unit is a dairy - empty of customers.

[podg]

Interest rate expectations may have had some say in what could have been some profit-taking today. understandable i suppose. tho i can't see an interest rate change doing much to solve the demand and supply issues in the property sector.

[traineeinvestor]

Interest rate expectations may have had some say in what could have been some profit-taking today. understandable i suppose. tho i can't see an interest rate change doing much to solve the demand and supply issues in the property sector.

Any increase in interest rates is IMHO a good thing for CDI:

1. earn more on the cash they have on the balance sheet

2. may make some of the less liquid land bankers pull back reducing competition for new land

However, both would be immaterial in the overall scheme of things.

Agree that I don't see any changes in supply and demand.

[podg]

Any thoughts on the Havelock North announcement? Big chunk of land. So plenty of work ahead in the next few years.

[traineeinvestor]

Any thoughts on the Havelock North announcement? Big chunk of land. So plenty of work ahead in the next few years.

Purchase price was not disclosed but the announcement describes it as "a very significant acquisition" so has to be meaningful. I'm happy to see some of CDI's cash pile being deployed and, based on that record, have confidence that the shareholders will do well when the time comes to realise the resulting subdivisions.

Disclosure: hold

[Southern Lad]

Any thoughts on the Havelock North announcement? Big chunk of land. So plenty of work ahead in the next few years.

I’m guessing that the purchase price may be at least $1m per hectare, so has used up a fair chunk of cash on hand. Depending on subdivision section average size and lie of the land in terms of space required for roads and reserves, there may be 1,000 sections to be developed. In terms of not swamping the market, I’m assuming these will be developed and sold over quite a few years.

Decision of MCK to participate in the DRP and muted CDI May 2021 dividend level now makes sense.

Given yesterday’s announcement stated that settlement had already occurred, I’m surprised the continuous disclosure rules didn’t require an announcement as soon as the purchase was unconditional.

OIO approval disclosure in due course may detail the land purchase price.

Overall I’m happy that CDI have secured a significant land holding in a very desirable area, which will underpin their development pipeline for years to come.