CDL & CDI ... Another Great Result

[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.