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DBS: China Overseas Grand Oceans Group Ltd – Buy Target Price HK$7.03

Posted on August 17, 2022August 17, 2022 By alanyeo No Comments on DBS: China Overseas Grand Oceans Group Ltd – Buy Target Price HK$7.03
1H22 results in-line
  • 1H22 earnings in-line, with the decline in GPM offset by better-than-expected revenue booking
  • Balance sheet remained solid despite presales declines in 1H22 and stayed firmly in the “Green Camp”
  • Interim dividend was declared at HK$0.06/sh, representing a stable dividend payout ratio and an interim dividend yield of 1.6%
  • Presales outlook, expected impact from COVID-19 disruptions and dividend policy would be among the key things to watch for
What’s new?
COGO released a set of largely in-line 1H22 results after morning close 

Our review

1H22 earnings in-line with expectations, with the decline in GPM offset by better-than-expected revenue booking 

  • 1H22 revenue rose 16% y-o-y on the back of a 16% increase in development revenue despite disruptions from COVID-19 lockdowns. This locked in 49%/47% of our/market full-year estimate, ahead of expectations
  • Gross margin slid 5ppts to 18.4% mainly driven by recognition of inventories write-down of Rmb229.6m and lower GPM projects (1H22 recognised GPM at 19.2% before write-downs) recognized during the period. This fell short of our and market expectation
  • SG&A as % of revenue stayed flat at 4.4% while the % of contracted sales surged 4ppts to 6.4% due to 52% plunge in presales in 1H22
  • Estimated core net margin fell 2ppts to 7.3%, which translate into 12% decline in core earnings and locked in 42%/40% of ours/market consensus full-year earnings estimates
  • Interim dividend was declared at HK$0.06/sh (vs. HK$0.08/sh in 1H21), representing largely stable dividend payout ratio of c.8.5% on core earnings. This translates to 1.6% interim dividend yield per the company’s closing price after the morning trading session.

Balance sheet was well maintained despite its presales plunge and stayed firmly in the “Green Camp” 

  • Total debt rose 6% from Dec-21 while total cash fell 6%. This translates into a higher net gearing ratio of 46.9% from 35.6% as of Dec-21.
  • Cash to ST-debt stood at 2.1x (vs. 2.5x as of Dec-21) while adjusted liabilities to asset ratio improved to 68.2% (vs. 69.4% as of Dec-21). COGO remains “Green Camp” under the “Three-Red-Lines” policy
  • Non-restricted cash stayed flat while restricted cash fell 15% vs Dec-21
  • ST debt as % of total debt is maintained at 30% (vs. 28% as of Dec-21)

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Research - Equities Tags:China Overseas Grand Oceans Group Ltd, COGO

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