Result first take: 3Q22 results largely in-line
- 3Q22 results in-line, with shortfall in revenue offset by higher than expected operating margin
- The company remained active in the land market, having spent c.23% of its 9M22 presales on land acquisitions
- A neglected SOE name trading at a deep discount to SOE peers with fruitful dividend yield of >8%.
- We have a BUY on the name with HK$4.08 TP
What’s new?
China Overseas Grand Ocean (81 HK, BUY) announced 3Q22 financial and business review after the morning trading session today.
Our view
3Q22 performance largely in-line; shortfall from revenue recognition offset by higher-than-expected operating margin. COGO recognized c.Rmb6.1bn in revenue during 3Q22, down 47.2% y-o-y from 3Q21 and placed 9M22 revenue at Rmb35.9bn, down 4% y-o-y. This translates to a 9M revenue lock-in ratio of 62%/60% of our and market consensus revenue estimate, which is lower than historical levels of 65-69%. 3Q22 operating profit fell 52% y-o-y alongside a lower operating margin at 17.2%, which brought the 9M22 figure to Rmb5.6bn at an operating margin of 15.6%, which locked in c.76%/65% of us and market’s forecasts, as compared to historical lock-in ratio of 74% in the past two years.
Remains proactive in land acquisitions. COGO acquired 3 land parcels in Lanzhou, Zibo and Ganzhou in 3Q22, at c.Rmb1.6bn. This brought the company’s 9M22 gross land premium spent at c.Rmb6.7bn and represents COGO’s c.23% of its presales in the same period. As at Sep-22, the company has c.27.5m sm of gross landbank at 86% attributable interest (vs. 27.3m sm with 86% interest as at Jun-22)
A deeply discounted and neglected name. The company is currently trading at c.2.3x FY23F PE with dividend yield of >8%, which is just on par to surviving POE names and at a deeply discounted level to its SOE peers. We believe its presales weakness stemmed from its lower-tier city exposure is more than reflected in price, and its current low valuation is unwarranted. BUY.
