Morningstar | Coli First-Quarter Operating Results in Line With Slightly Improving Margin
China Overseas Land & Investment, or Coli, had largely in line first-quarter results with sales performance that is decent compared with its peers. The company reported first-quarter revenue of HKD 28.2 billion and operating profit of HKD 8.7 billion. Compared to the same period a year ago, the top line increased 2%, while operating profit rose 5% on expanding margin. The revenue run rate is about 13% of our full-year estimate, roughly in line with the pace of previous years. The first-quarter results are broadly on track relative to our full-year estimates. We maintain our fair value estimate of HKD 34, as well as our no-moat rating.The operating margin rose to 31% from 29%, continuing the rebound of 2018, mainly because of strong average selling price growth. We expect the trend to moderate, as reflected in our full-year projection of 33% operating margin. For the year through March, the company’s contracted sales totaled HKD 78 billion, implying a reasonable run rate of 23% to the full-year target of HKD 350 billion. Contract sales are up 21% and 2% by value and volume, respectively, year on year. This is a respectable performance compared with most large peers. Land acquisitions totaled 8 plots, or 1.7 million square metres, with land premium of HKD 19 billion during the period, about half of the pace compared with first quarter 2018. This is in line with the company’s goal of midteen contract sales growth for the next two years to reach HKD 400 billion by 2020. The cash level remained stable and unchanged from year end. Net gearing rose to 38%, compared with 34% at year-end 2018.
China Overseas Land & Investment is an investment holding company. Co. is principally engaged in property development and investment, real estate agency and management, and treasury operations. Co.'s business activities are principally carried out in Hong Kong, Macau, Guangzhou, Shanghai, Beijing, Foshan, Chengdu, Nanjing, Suzhou and other regions in the China. Co.'s segments include: Property development, which is involved in the proceeds from property development activities; Property investment, which is involved in property rentals; and Other operations, which is involved in real estate agency and management services, construction and building design consultancy services.
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