Singapore-listed CWG International, being a developer of overseas property projects, recognises revenue upon completion of projects. 

 RMB'm

1QFY17

4QFY16

Revenue

317  

3,443

Gross profit

54.6

768.3

Net profit/loss

(37.2)

382.8

Net profit/loss after minority interests

(30.6)

222.2

Thus, its revenue and profit/loss are likely to be lumpy from quarter to quarter as projects take 1-2 years to complete.

The lumpiness is reflected in its 4Q2016 and 1Q2017 results (see table).

ChuaHweeSong2 8.2016Chua Hwee Song, CFO and executive director, CWG International.
NextInsight file photo.
What then is the recommended metric of CWG's business performance to track?

"Pre-sales is the best indicator of our company's current performance," says CWG's CFO, Chua Hwee Song, at a recent 1Q17 results briefing.

Pre-sales paints an ongoing story, while reported revenue/profit essentially is about units sold in projects just completed. 

The reported profit/loss for any quarter sends mixed messages because it incorporates selling and distribution costs for new and ongoing projects (whose revenue/profit will be booked a long way down the road).

This year, CWG will launch 11 projects while delivering (and recognising revenue of) 6 major projects.

In 1Q2017, despite China's market-cooling measures, CWG achieved pre-sales of RMB1.8 billion, which is higher clip than the RMB1.6 billion recorded in 4Q2016. And it's a big jump from the RMB826 m achieved in 1Q2016. 

CWG looks to be on track to achieving its target, announced in end-2016, of achieving RMB10 billion of pre-sales this year.

RMB6.5 billion to be recognised

♦ In 1Q17, revenue from properties sold but not yet recognised stood at RMB6.5 billion. This is unsurpassed in CWG’s nine-year history, except in 3Q16 when the figure stood at RMB7.0 billion.

Explaining how this figure was arrived at, Mr Chua said CWG planned to launch RMB14 billion worth of projects this year and expects to achieve sales for some of its unsold inventory from projects that have achieved TOP. 

Where will the action come from? In 1Q17, in China:

♦ By value: Suzhou, a second-tier city, contributed 48% of pre-sales while the rest of China (mainly third-tier cities), 44%. 

♦ By GFA: Suzhou accounted for 32% while the rest of China, 68%.

This table shows the 6 projects that will achieve TOP this year. Revenue recognition is skewed towards 4Q -->

Project

 

GFA (sqm)

ASP (RMB
/sqm)

Equity stake

% sold

Total cost (RMB ‘m)

TOP date

Shanghai Royal Palace

37,764

10,882

100

70

293.2

1Q17

Xuzhou Royal Palace

117,533

5,792

80

90

540.2

2Q17

Xuancheng Chiway

58,422

4,612

100

90

198.9

4Q17

Suzhou Chiway

73,819

20,560

75

50

1,088.80

4Q17

Suzhou Ind Park Royal Mansion

43,360

39,118

60

50

787.8

4Q17

Uptown (Australia)

16,249

14,500

60

80

161

4Q17


While it is developing projects, CWG has been seeking to acquire landbank too. Mr Chua highlighted that CWG has been prudent in its landbanking, giving some information on the 10 sites that CWG aborted its tenders in Feb-April 2017 because prices have gone up beyond its comfort levels.

CWG will increasingly seek to do joint ventures with established developers and collaborate with state-owned enterprises that have existing landbanks.

To this end, the Group has acquired a 60.0% stake in Suzhou Xinglun Tourism Co., Ltd. from the Singapore Suzhou Industrial Park, which owns the iconic Suzhou Ferris Wheel Theme Park, for RMB197.2 million.

 CWG

1Q17

1Q16

NAV/share

S$0.38

S$0.32

Gearing

402%

280%

Share price

S$0.168

S$0.075

Market cap

   S$111 m

S$50 m

Post-acquisition, CWG will own two plots of land with a total GFA of 75,797 sqm on which a landmark integrated development will be built comprising serviced apartments, premium residential units and retail space.

In addition, CWG has also entered into a joint venture with Modern Land (China) Co., Limited, to develop a residential project in Wuhan.

CWG has entered into a strategic partnership with a state-owned enterprise, Shanghai Lingang Economic Development (Group) Co Ltd, the third largest industrial park developer in China, in April 2017.  

For more info, see CWG's presentation materials here.

For an idea of CWG's projects, watch our video of an analyst visit in Sept 2016 -->

 


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