China Overseas Land profits up 10% but below expectations

Unrecognised contracted sales of HK$111bn by end-Sep 2012 should underpin sales in 4Q.

"Although sales revenue in 9M12 only made up 62% of our full-year number, we expect acceleration in delivery in 4Q on the back of its HK$111bn unrecognised contracted sales. More land purchases ahead are stock catalysts," said CIMB

CIMB expects COLI to deliver satisfactory sales and earnings in 4Q12.

Here's more from CIMB:

COLI announced that its sales revenue and operating profit in 9M12 rose by 18% and 10% yoy, respectively. Both topline and core operating profit (about HK$16bn) accounted for 62% of our full-year estimates.

The report disclosed that its recognised gross margin stayed above 40% in the first nine months, higher than our estimate of 38% for FY12. In addition, COLI’s net gearing fell to 23% at end-Sep 2012 from 32% in mid-2012. 

COLI had unrecognised contracted sales of HK$111bn by end-Sep 2012 which should underpin its sales recognition in 4Q12.

We estimate that it has locked in nearly 100% of our FY12 sales revenue forecast and 50% of our topline number in FY13. 

We raise our FY12 GPM estimate from 38% to 40% while conservatively lower our FY12 sales revenue forecast by a moderate 6%. 

In addition, FY13-14 GPMs are lifted by nearly 1% to 36.6% and 37.4%, respectively.

We expect more land purchases in the rest of this year. In our estimate, even if COLI spends HK$30bn (vs. management’s target of HK$25bn) in land purchases this year it should manage to control its net gearing at about 30% at end-2012.