CDL & CDI ... Another Great Result

[LaserEyeKiwi]

Some preliminary thoughts:

1. even though cash/deposits and cash flow would easily allow payment of an interim dividend, I wasn't expecting any change to the past practice of only paying dividends annually (and I'd be surprised if anyone else was either)

2. the result was a solid one - in spite of the slow down on the residential property market and rising interest rates, the company still managed to maintain sales at a decent level. Given the policy of holding property in the books at cost rather than market value, it's difficult to make year-on-year comparisons on margins

3. the level of development property has increased from NZD186 million to NZD197 million. Again, given the differing times at which this inventory was acquired it's difficult to compare one year with another but it looks like they are not depleting the land bank

4. investment property has increased from NZD23 million to NZD33 million. As yet, the income from investment property is de minimus (NZD84K in the half year) but over time this can be expected to rise as the properties are completed and leased out. As a shareholder, I hope the company will continue to expand the investment property portfolio - at present investment properties represent approximately 11% of net assets

5. we will have to wait for the annual report to come out in about six months and read the notes to the accounts to see the market values of the portfolio but I would like to know whether they will continue to value all properties at cost (and show the difference in the notes to the accounts) or whether they will mark the investment properties to market (like other property companies do)

6. cash and deposits are at NZD 65 million. Although down on the NZD 83 million six months ago, the difference is explained by increases in development and investment properties. As a side note, rising interest rates will benefit the company. Finance income picked up in the six months in spite of the lower cash/deposit balance and should be even higher in the second half (subject to any investments they may make)

Very happy to continue holding.

I think they will continue to value property at cost, seeing as parent MCK changed to that method just last year as well.

I’m not 100% convinced of there reasoning for it (the explanation being that it shows core operational performance and ignore variability of asset values) - and if I’m being cynical there is a possibility this is a long term play for eventually the majority shareholder to take the company private at a vastly discounted valuation. But that might cause hiccups for CDL operations regarding OIO etc so maybe not that realistic.

[buy_high_sell_lo]

Eh? They are gushing money & have $75 million in cash & cash equivalents available and no debt. There normal annual dividend announced at year end results is $10m. But as mentioned last week - an interim dividend would have been highly unusual for the company.

Historically they have always kept around 40 to 70 million cash on hand.
Given their cash on hand was 83million in the prior half and is now 75million this is why I have commented that they are spending on land and development costs which makes sense given that properties are at a discount right now.

But you are right historically they don't pay an interim dividend anyway.

[beetills]

SP in the doldrums not going anywhere.

[DarkHorse]

Does anyone know/recall how CDL fared during the property slump of 2008?

[BlackPeter]

Does anyone know/recall how CDL fared during the property slump of 2008?

Something like 50% down from 2007 peak to 2009 bottom.

Given that the recent peak was a bit above $1.20 ... 60 cts here we come?

I assume however that this property slump will be less significant than the 2008 one (i.e. we might be already there).

Anyway - holding - and certainly no intention to sell at current prices. Solid well managed company ... essential industry and and Mark Alexander indicated recently that we might miss the property bottom when we blink (i.e. he thinks it might come already this spring).

[DarkHorse]

Helpful thanks BP!

[Sideshow Bob]

Interim Report. http://nzx-prod-s7fsd7f98s.s3-websit...900/378763.pdf

FINANCIAL PERFORMANCE:For the six month period ending 30 June 2022 CDL Investments New Zealand Limited (“CDI”) can report that itmade an unaudited operating profit after tax of $22.90 million (2021: $20.75 million). Our operating profit beforetax was $31.81 million (2021: $28.82 million).

Property sales and other income for the period was $47.81 million (2021: $61.27 million). Net Asset Backing (at cost)for the period under review was 104.08 cents per share (2021: 95.95 cents per share).These results come despite significant downward changes to market conditions seen over the period.

The Board is pleased that CDI has been able to withstand some of the negative sentiment to date but we are also consciousthat the current trading environment will likely continue for some time and this will impact on our full year resultsto some extent.

PORTFOLIO UPDATE:The first half of 2022 has seen a lot of activity across our portfolio. CDI settled sales of residential sections in Auckland and Canterbury from its Kewa Road and Prestons Parksubdivisions during the first half of 2022. The settlement of our sale of commercial development land at Jerry GreenStreet, Wiri (South Auckland) is also recognised in the results.

We also purchased 4.85 hectares of land in north-east Hamilton adjacent to some of our existing land holdings andthis new holding gives us further economies of scale.A particular highlight of the last six months has been the progress with our warehousing ‘design and build’ projectsin Wiri. The first was completed in June and is now occupied by our tenant. The second is rapidly nearing completionand on track to be occupied and operational in the coming weeks. We have been very pleased with both of these projects, neither of which were badly affected by labour or supply chain delays.

The majority of our units at our other commercial local centre developments at Stonebrook and Prestons Park are also occupied and operational, and ourleasing agents are continuing working on tenanting the remaining units.We continue to work on the master planning and consent applications for the Iona Block in Havelock North andwe expect that the stage 1 consents will be issued shortly. This will ensure that we are able to commenceearthworks in Q4 2022 as planned. In addition, the stage 2 resource consent application is on track to be lodgedend September

2022.COMMENTARY AND OUTLOOK: Market conditions for the immediate future will be challenging. Interest rate increases, tighter bank mortgage lending criteria coupled with abnormally high inflation caused by global pressures will doubtless continue to befelt well into 2023.

For this year, we are aiming to match our 2021 results overall and to ensure that we haveprepared the groundwork for sales into 2023. That will not be an easy task given the current trading environment but we believe that it is a realistic one given our sales performance to date. We are targeting new sales in Auckland(Christian Road, West Auckland) and in Canterbury (Prestons Park) to deliver those results.

At the same time, those market factors will put additional pressure on highly-leveraged developers and owners who will be looking to offload land or other property holdings. CDI is not under that kind of financial pressure and will be actively positioning itself to use its resources to take advantage of suitable opportunities should they arise.

[blackcap]

Looks like a good result. HOwever I see they are also warning about challenging market conditions in the immediate future.

From memory, bought my first CDI shares at 35 cents back in 2005 (or thereabouts), they did suffer a bit through the GFC but after that rose strongly in line with the rest of the market. There is a feeling out there that they are perpetually "undervalued" due to their shareholder structure.

[BlackPeter]

Looks like a good result. HOwever I see they are also warning about challenging market conditions in the immediate future.

From memory, bought my first CDI shares at 35 cents back in 2005 (or thereabouts), they did suffer a bit through the GFC but after that rose strongly in line with the rest of the market. There is a feeling out there that they are perpetually "undervalued" due to their shareholder structure.

It was a good result, and yes, the immediate future might be a bit rough for everybody in the industry.

New houses are currently shooting in many places like mushrooms out of the ground and at the same time our government worked hard to get rid of potential buyers. Young people often prefer to join the exit queues at the airports instead of stepping on the property ladder here. Immigration has been stopped in its tracks by a xenophobe government. Our population is dropping (negative net immigration plus negative population growth).

I recon though the current immigration policies combined with the ineptness of our immigration department are not very sustainable. Just waiting for the tide to turn - and the need for places to live to increase. This is when CDL will be (again) very well placed.

[LaserEyeKiwi]

FYI these are the same results that were released last month.