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?

Attachment 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