 CWG International's Wuhan Chiway Royal Lake Mansion is over 20% completed and was due to be launched in 3QFY2017. (Artist's impression)
CWG International has posted 9MFY2017 presales receipts of RMB 6.25 billion, exceeding receipts for FY2016. Its target is RMB 10 billion for FY2017, and it has another three projects scheduled to be launched for the rest of the year.
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Financial Highlights |
3QFY2017 |
yoy change |
|
Revenue |
193.0 |
63% |
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Gross profit |
72.8 |
66% |
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Gross margin |
37.7% |
6ppt |
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Net profit attributable to shareholders |
-25.0 |
-53% |
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Cash and cash equivalents |
2,945.8 |
45% |
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Gross gearing |
524% |
84ppt |
At the Group's 3QFY2017 results briefing on Tuesday (14 November), Executive Director Chua Hwee Song provided insights into the Group's business model as well as property sector trends in China. Below is an excerpt of his discussion.
Losses mask growth
Expenses have increased in tandem with our rapid expansion. This is immediately reflected in the quarter's profit and loss statement but revenue is only recognized after delivery of the residential unit.
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– Chua Hwee Song (Photo by Sim Kih) |
This means our revenue reflects the scale of our operations a few years back.
Conservative accounting distorts the profitability of property development companies in China.
The growth of our operations can be seen from our cash reserves, which increased significantly to about RMB 3 billion in 3QFY2017.
Gearing
We have kept tight control over our borrowings, but our gearing increased because shareholders equity fell due to our losses. We also retired S$30 million of preference shares in 3QFY2017.
| Stock price | 15c |
| 52-week range | 1.3c - 20c |
| Market cap | S$98.6 m |
| Gearing | 5.2 x |
| PE ratio | 2.8 x |
| Dividend yield | 6.7% |
| Source: Bloomberg / Company | |
Land sales curbs
This year, we bid for 27 parcels of land in China and won only 7. Of this 7, only 3 projects will be developed wholly by us. The others are joint ventures.
Nowadays, the government intervenes in land tenders when bid prices become excessive. The curb on land sale prices is meant to control home prices. A balloting process decides which of the final bidders that are willing to pay the intervention price gets the project.
More often than not, the project is subsequently shared among the final bidders with the bellwether property developer heading the consortium. All the projects we have won are in tier 3 cities. These are the type of projects that sell well.
