Date: October 18, 2024
Broker: CGS International
Company Overview
China Overseas Land & Investment Ltd (COLI) is a state-owned enterprise (SOE) developer, known for its robust market presence in the real estate sector. The company has a solid SOE background and is well-regarded for its financial stability and strategic market share.
Recent Developments
Positive Market Feedback Post-“517” Announcement
COLI reported that following the announcement of “517,” there was a noticeable increase in foot traffic at their show flats. However, despite this uptick, actual sales figures have not yet aligned with the increased interest.
Sales Performance and Management Outlook
- 5M24 Sales: COLI experienced a 31% quarter-on-quarter decline in sales during the first five months of 2024.
- Full-Year Guidance: Despite the decline, the management remains optimistic and has reiterated their guidance for stable year-on-year sales growth. They attribute this outlook to having sufficient sellable resources for the remainder of the year.
Financial Expectations
- Stable Growth: Management anticipates a steady booking gross profit margin (GPM) year-on-year, which suggests confidence in maintaining profitability.
- Core Net Profit & Dividend Payout: There is an expectation of core net profit growth year-on-year, with a commitment to maintaining a dividend payout ratio of 30% based on core net profit for FY24.
Investment Thesis
Reiterate “Add” Recommendation
The analysis reiterates an “Add” rating for COLI due to:
- Strong SOE Background: COLI’s state-owned status provides a solid backing and stability, which is advantageous in the current market.
- Solid Balance Sheet: The company’s financial health remains robust, supporting its growth and operational stability.
- Market Share Expansion: COLI is expected to continue gaining market share, particularly as other developers struggle with distressed sales. This positions COLI favorably in the real estate sector.
Conclusion
China Overseas Land & Investment Ltd shows resilience and optimism, with management maintaining a positive outlook for the year despite a recent dip in sales. The company’s strong backing, financial health, and strategic market positioning are key factors supporting the continued “Add” recommendation.
