vested
Yanlord (YNLG.SI) citi maintains NEUTRAL with TP S$1.75 (from S$1.92)
Strong Margins but Certain Focus Cities Seeing Higher Tightening Pressure
Focus player in T1/2 cities — As a niche player in key T1/T2 cities, we believe Yanlord has a quality and low cost landbank with a presence focused on metro areas that could deliver medium- to long-term growth.
That said, with strict policy (e.g., broader HPR; price control, etc.) and credit control, we see sales challenges may continue in the short term.
We believe the share price sees good downside support on current inexpensive valuation (vs. peers) together with decent earnings outlook. Hence we maintain our Neutral recommendation with a TP of Sin$1.75/sh, which is based on 50% (previously 40%) NAV discount on our revised FY18E NAV of HK$3.50/sh (from FY17E NAV of S$3.20) and raise FY17- 19 estimates by 24-32% to factor in our 2018 physical market assumptions and new landbank.
We raise our NAV discount to 50% on its high focus of T1/2 cities in China which may be subject to continuous tightening.
Strong unbooked revenue likely guarantees good earnings growth for 2017 — Yanlord attained Rmb27.8bn unrecognized pre-sales revenue by Sep 2017 (est. 45% can be booked at year-end), which should drive a surge in 4Q earnings.
However, 10M17 contracted sales were slower due to stronger price and pre-sale tightening in T1/2 cities, which we see has hurt the company’s short-term sales performance.
10M17 contracted sales account for 62.5% of full-year target — Yanlord achieved roughly Rmb20bn contracted sales in 10M17, which accounted for only 62.5% of its full-year sales target of Rmb32bn.
The sales continued to slow due to policy tightening, especially in T1/T2 cities, on granting presale permits and price restriction, resulting in a delay of project launches.
Net gearing surged to 70.1% on new land acquisitions — Yanlord’s net debt to total equity (including MI) increased to 70.1% at Sep-17 from 20.3% at end-16, paying ~Rmb18bn for the Nanjing and Shanghai land acquisition.
Asset breadth drives sustainable income streams; initiate at Neutral
Source: Citi