Result first take: FY21 results below expectations
- FY21 results came in below expectations upon a slower than expected recognition in revenue and a higher-than-expected tax expense
- Final dividend was declared at HK2.7cents, and implies c.3.3% final dividend yield. This translates into a full year dividend payout of c.71% on net profit.
- Signs of pressure on its balance sheet with restricted cash as % of total cash rose to 40% and a deterioration of cash to ST debt to 1.5x (or 0.9x ex-restricted cash)
- More to follow after the company’s result briefing tomorrow (29 Mar) at 10am
- Our rating and TP on the counter are currently under review.
What’s new?
Central China announced a set of below-expected FY21 results after market close
Our view
FY21 results below expectations upon slower than expected revenue recognition and higher-than-expected tax expense
- FY21 revenue fell 3% y-o-y, which came in 13% below our expectations on a slower than expected project recognition pace. Recognised GFA fell 7%, which partially offset a 5% increase in recognized ASP.
- Overall gross profit fell by 3.7ppt to 16.2%, primarily resulted from a sharp decline in development margins to 14.8% in 2021. This was largely in-line with our expectations
- An inventory write-down of c.Rmb979m was made within other net income in FY21 (vs Rmb591m in FY20)
- SG&A as % of presales was held largely flat at 5.5%, primarily resulted from 1) absence of advertising fee incurred on football sponsorship; and 2) reduction in staff cost
- Effective tax rate unexpectedly rose 5ppt to 63%
- Core net profit margin fell 3.6ppt to 0.4% and translated to a 91% y-o-y decline in attributable core net profit, which came in below our expectations.
Slight deteriorated balance sheet
- Cash fell by a larger than expected 40% to Rmb9.8bn as at Dec-21. Restricted cash as % of total cash rose 6ppt h-o-h to 40%
- Net debt to equity rose 2ppt h-o-h to 95%. Cash to ST debt reduced to 1.5x (from 1.9x as at Jun-21), or 0.87x ex-restricted cash (vs c.1.3x as at Jun-21).
- Adjusted liabilities to asset ratio stayed high at 86.4% despite a slight 1ppt improvement from Jun-21.
- The company stands within the “Yellow Camp” according to the “Three Red Line”
Dividend payout at 71% on net profit
- CCRE declared a final dividend of HK2.7cents per share, a 90% y-o-y decline from 1H20’s HK26.8cents. This translates to a full-year DPS of HK17cents, a 54% y-o-y decline from FY20 and represents a slightly higher 71% dividend payout ratio on net profit (vs 53% in FY20)
- This translates to a final dividend yield of c.3.3% or a full-year dividend yield of c.18% according to the company’s previous closing price.
More to follow after the company’s online result briefing to be held at 10:00am on 29 Mar (Tues)
We will be hosting a group call for the company on 4 Apr (Mon) at 9am with Mr. Vinh Mai (CIO) to represent the company. Please let us know if you are interested to join the call.
Key things to watch for:
- Debt repayment plan, off-balance sheet status
- Land acquisition strategy and operational scale going forward – the company has been relatively muted on land acquisitions in 2020 and 2021, and may likely have to remain on the sideline in 2022 given the current liquidity struggle in the property sector. How will the company choose to navigate in between? Will the company expect a decline in operational scale going forward?
- Profit margin outlook – how much further will development margins fall from the current 14.8% in FY21? How much discounts have we offered in 2021 and what is the presales margins commanded? What is the average GPM in the company’s unbooked sales?
- Delivery schedule for 2022 and 2023
- Dividend policy ahead – will the company consider to maintain an unchanged absolute DPS for the full year?
- Updates over the execution of “Greater China Strategy” – will the company take a halt in light of current difficulties in the property sector?
- 2022 presales outlook, among others
