Date: October 18, 2024
Broker: CGS International

Overview of China Overseas Land & Investment Ltd (COLI)

China Overseas Land & Investment Ltd (COLI) is a state-owned enterprise (SOE) developer operating in the real estate sector. The company benefits from a strong SOE background, a solid balance sheet, and market share growth potential, especially as other distressed developers face sales slumps.

Recent Performance and Management Insights

1. Footfall and Sales Trends:

   • Following the announcement of “517,” there was a marked increase in footfall at COLI’s show flats. However, sales have not yet matched the increased visits.
   • Despite a 31% quarter-on-quarter sales decline for the first five months of 2024 (5M24), the company remains optimistic about its full-year performance.

2. Sales and Profitability Outlook:

   • Full-Year Guidance: Management has reiterated a commitment to achieving stable sales growth year-over-year (yoy). They cite sufficient sellable resources as a key factor supporting this outlook.
   • Profit Expectations: The company anticipates stable booking gross profit margins (GPM) and core net profit growth for the full fiscal year 2024 (FY24F).
   • Dividend Payout: COLI plans to maintain a dividend payout of 30% on core net profit for FY24F.

Investment Thesis

1. Reiteration of “Add” Rating:

   • CGS International has reiterated its “Add” rating for COLI, driven by the company’s robust SOE background, sound financial health, and expectations for market share gains.
   • COLI is seen as a reliable player with the capacity to capitalize on the challenges faced by other developers, thereby securing growth even in a challenging market environment.

2. Competitive Edge:

   • Strong SOE Backing: The backing from being an SOE provides COLI with strategic advantages, including stability and access to resources.
   • Market Positioning: The company’s strong balance sheet positions it favorably against distressed competitors, enabling it to potentially capture a larger market share.

Conclusion

The report from October 18, 2024, by CGS International highlights China Overseas Land & Investment Ltd’s resilient performance amid broader industry challenges. Despite a dip in sales earlier in the year, management remains confident in achieving stable sales and profit growth. The company’s strong financial foundation and SOE support are key factors driving the positive outlook.