Cedar Woods Properties Limited (ASX: CWP) shares are lifting today following news the company has purchased a 40-hectare property in Queensland. Cedar Woods also released its operational update for the third quarter this morning.
At the time of writing, the Cedar Woods share price is up 4.1%, trading at $7.35.
Let's take a look at Cedar Woods' latest news and performance.
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New property
The property developer shared today that it will purchase a 40-hectare property in South Maclean, around 45km south-west of Brisbane. The company will build 500 homes and a childcare centre on the site.
According to Cedar Woods' release, the company expects South Maclean to play an important role in the growth of Queensland.
The company will pay $12.5 million for the land, with the acquisition's settlement due in July 2021. Currently, the land is held by a private landowner.
In its release, Cedar Woods said the South Maclean development would address the demand for detached housing in Southeast Queensland. The company pointed to BIS Oxford Economic research that found housing stock in Queensland will soon be deficient. At the same time, its likely population growth is higher than the national long-term average.
Cedar Woods believes the acquisition will substantially grow its portfolio and contribute to its medium-term earnings.
Alongside the residential development, the company will revegetate a nearby creek.
CEO's commentary
Cedar Woods Properties' CEO Patrick Archer said the purchase was part of the company's strategy to diversify the geography and price point of its projects.
The South East Queensland market is very attractive due to its relative affordability compared to Sydney and Melbourne, and this South Maclean site will be one of the last remaining large-scale residential projects in the area to commence development, meaning it will benefit from the existing amenity in surrounding communities.
Quarterly update
Cedar Woods also shared its updated 2021 financial year guidance this morning.
It has increased its forecast net profit after tax (NPAT) for the current financial year to approximately $32 million. That figure is 53% higher than it was in the previous comparable period (pcp).
The company attributed the increase to a rise in presale contracts, which has come despite a reduction in government housing stimulus.
Cedar Woods said it had a strong balance sheet and enough capital to fund the business' requirements. Its corporate finance facility will provide funding security.
At the end of the third quarter of FY21, Cedar Woods had access to more than $94 million in undrawn finance facilities.
The company stated its presales contracts are currently valued at a record $426 million. That's a 17% increase on the figure reported in the pcp.
The company states around 10% of presales are to settle in this financial year, with the balance contributing to earnings in the coming 2 financial years.
Cedar Woods believes market conditions over the quarter were positively impacted by an improving economic environment, better employment prospects and confidence in Australia's handling of the COVID-19 pandemic and the global vaccine rollout.
Further, it stated the Reserve Bank of Australia's affirmation that low interest rates will continue in the long term allowed its customers the confidence to purchase properties and protect themselves against increasing house prices.
Managing director's commentary
Cedar Woods Properties' managing director Nathan Blackburne commented on the upgraded forecast. He said the company's increased presales and pipeline of more than 8,400 dwellings and lots means its future looks bright:
Our high performing projects across four states are trading strongly, presales are at record levels and the business remains well-placed to grow earnings…
We expect the improved buyer confidence and low interest environment which have underpinned our performance to endure for some time.
Cedar Woods Properties share price snapshot
Currently, the Cedar Woods share price is up 18% year to date. It's also up by 84% over the last 12 months.
The company has a market capitalisation of around $570 million, with approximately 80 million shares outstanding.
