From DBS:-
Encouraging signs?
Story: Yanlord Land reported a decent set of results for 1Q08. Revenue came in at S$116.2m, up 30% y-o-y. The higher reported sales figure was mainly attributable to a higher volume of GFA delivered during the period, which at 41,671sqm, represents a 50% y-o-y increase over the corresponding period last year.
Gross profit margin was down by c. 12ppt to 37.5% due to relatively lower ASP recorded from the delivery of the first batch of units at Yanlord Peninsula in Suzhou. Selling expenses were slightly higher on the back of higher staff headcount, while fair value losses on held-for-trading-investments led to higher non-operating expenses. Overall, net profit came in at S$9.3m, translating to a growth of 220% y-o-y.
Point: Despite the fact that the beginning of the year is the traditional off-season for home sales, pre-sales volume grew to S$405.0m as of end 1Q08, from S$288.8m as of end 2007. This is expected to be progressively recognised throughout the year as the units are delivered, and will provide visibility to the Group’s FY08 earnings.
We view this as an encouraging sign, given that the market has generally adopted a “wait-and-see†approach as concerns persist over the outlook of the China property market amid the PRC government’s credit tightening measures.
Relevance: With their recent launches experiencing higher than expected ASP, we have revised our FY08 and FY09 earnings forecast upwards by c.10% and 4%, to S$329.0m and S$391.1m respectively. This results in a slightly higher TP of S$2.71, pegged to a 20% discount to its RNAV, as we maintain a cautious view on the physical market performance going forward under the current tightening environment and policy overhang.