YANLORD LAND GROUP LIMITED
Z25.SI
Yanlord Land Group - Capitalising on the strong market
- 1H16 results better than expected on high sales delivery.
- Strong sales momentum in key cities support higher ASPs in new launches.
- Land bank replenishment in existing cities to support sales from FY17 onwards.
- Revise up FY16/17 EPS by 6%/1% to reflect the better-than-expected delivery.
Maintain BUY on its exposure to strong markets and potential to raise dividends.
- Yanlord announced strong results in 1H16 from high sales delivery in Shanghai. Over 50% of the Rmb28.9bn unrecognised sales as of end-June will likely be booked in 2H16, which points to high revenue visibility.
- Margins in 2H should pick up strongly to c.30% as majority of the high-margin projects will be delivered then. On a decent property sales and earnings outlook this year, management is considering to raise dividend payouts in FY16/17 which could boost up its dividend yield from the current 1-2% level.
Continue to raise ASP in 4Q for better margins
- Buoyed by the strong property market in Shanghai and Nanjing, Yanlord’s 7M16 contracted sales came in strong at Rmb18.7bn, which is 45% higher y-o-y and locked in 70% of target. Management plans to pace sales in the coming months as it will raise ASPs of the new launches for better margins.
- However, we believe Yanlord could still achieve Rmb28-29bn sales in 2016 (vs Rmb27bn sales target). The company has yet to finalise its sales plan for 2017, but we expect the faster land acquisition YTD as well as new launches from existing projects could fuel a mild sales growth in 2017 to above Rmb30bn.
Land acquisitions continue to materialise to support mid-term growth.
- As at 7M16, Yanlord had spent Rmb8.3bn to acquire c.1.8m sm of new land in Nanjing, Shenzhen, Tianjin and Suzhou. Given its strong balance sheet (i.e. 2% net gearing and Rmb19bn cash on hand), we believe Yanlord could spend up to Rmb10-15bn to acquire new projects this year to fuel future sales growth.
- Yet, management is cautious on the rising land costs and would acquire through M&A and JV with other developers to keep a reasonable acquisition cost.
- Management will mainly focus on the Tier 1/2 cities in which it currently has exposure.
Valuation
- We maintain our BUY rating on Yanlord but revised up its TP to S$1.46 based on 8.9x FY17 PE, which is benchmarked to its historical average PE since 2014.
Key Risks to Our View
- Land acquisition, especially in key tier1/2 cities, will face higher competition that could drag up land acquisition costs.
Andy YEE CFA
DBS Vickers
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Danielle WANG CFA
DBS Vickers
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Carol WU
DBS Vickers
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http://www.dbsvickers.com/
2016-08-12
DBS Vickers
SGX Stock
Analyst Report
1.41
Up
1.350
