not vested
Yanlord Land Group: Some blips but sound overall
Yanlord Land Group Limited’s (Yanlord) recent 3Q18 results were solid, with PATMI beating our expectations.
However, Yanlord highlighted that it had encountered some pre-sales permit delays for two projects in Shenzhen, with a push back to early next year.
As such, management signalled that a more feasible contracted sales target for 2018 would be RMB27b, versus RMB30b previously. For 2019, it has abundant saleable resources of ~RMB80b.
Management acknowledged that that the increase in its net gearing ratio from 78.3% in 2Q18 to 91.2% was above its comfort zone, and highlighted that it will continue to be more prudent in its land acquisition.
The eventual launches of its delayed projects would also alleviate the situation (typical cash collection rate is >90%).
After fine-tuning our assumptions and lowering our target P/E peg to 5x from 5.5x to take into account Yanlord’s higher gearing ratio, we derive a lower fair value estimate of S$2.04 (previously S$2.13).
Maintain BUY with a fair value estimate of S$2.04.