CDL & CDI ... Another Great Result

[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.