Results first take: 1Q22 on track
- A decent 1Q22 performance with revenue and operating profit lock-in both came in slightly better than expected
- Proactive land replenishing via M&A in 1Q22 would supplement the company’s FY22 saleable resources outlook should the physical market recover
- A neglected name trading at discounted valuations despite its evidently above-peers presales outlook, SOE status and earnings certainty
- Sector top pick among mid-caps to ride on policy support and potential physical market recovery.
- We have a BUY with HK$7.03 TP
What’s new?
China Overseas Grand Ocean (81 HK, BUY) announced 1Q22 financial and business review yesterday.
Our view
A decent 1Q22 performance. COGO recognized c.Rmb6.8bn in revenue during 1Q22, up 58% y-o-y and represented a revenue lock-in ratio of 11% of our and market estimate. This compares decently against its historical 1Q revenue lock-in ratio of c.8-9%. Operating profit came in at Rmb914m, up 19% y-o-y and locked in c.9% of our and consensus forecasts, which is also moderately better than historical lock-ins of 7-8%. Operating margin fell 4ppt to 13.4%, which was also largely in-line.
Land replenishment via M&A to supplement 2022 saleable resources. While COGO did not acquire any land from the public auction channel, the company secured two M&As in Jan-22 (consolidated partial interest of 3 projects from Agile (3383 HK)) and Mar-22 (100% interest of a Shantou project from Logan), spending an attributable land premium of Rmb2.0bn or Rmb4.5bn in gross basis and represented c.49% of COGO’s 1Q21 gross presales. All 4 projects have already commenced construction and is expected to supplement COGO’s saleable resources this year. As at Mar-22, COGO have a total landbank of 29.5m sm with an attributable interest of 86%. (vs 29.8m sm as at Dec-21 with attr. Interest of 85%
A neglected name that warrants for more investor attention. The company is currently trading at c.2.4x FY22F PE with dividend yield of >8%, a deeply discounted level for its evidently above-peers presales outlook, SOE status and earnings certainty. The name continues to be our top pick among the mid-cap universe to ride on further policy support and potential physical market recovery.