YANLORD LAND GROUP LIMITED
Z25.SI
Yanlord Land Group - Pricing Strategy Is The Key
- 1Q17 contracted sales were slower than peers, but demand for its new launches is still strong
- Land bank replenishment continues in key cities
- 1Q sales delivery was decent with margin improvement; high FY17 earnings visibility with substantial unrecognised sales outstanding
- Maintain BUY on its strong earnings and margin outlook
What’s New
Maintain BUY on its high earnings visibility and decent margin.
- Yanlord is trading at 6.7x FY17 PE and 0.8x P/BV (vs historical average of 9.3x PE and 1.1x P/BV).
- On top of the strong 1Q17 delivery with decent margin, Yanlord’s earnings visibility for FY17 is high with c.Rmb24bn unrecognised sales outstanding as at end-March.
- We revised up its FY17/18 earnings estimates by 10%/17% to reflect the better-than-expected margin of recent sales delivery. Accordingly, we revised its TP to S$2.25, based on a lower FY17 PE of 8.3x (vs previous 8.9x) due to the uncertain sales outlook for 2H17.
- Maintain BUY.
1Q17 contracted sales slower than expected but demand for its projects still strong in April/May.
- Including car park sales, Yanlord achieved c.Rmb4.3bn presales in 1Q17. The sales lock-in rate of 13% is lower than sector average of 26%. However, Yanlord’s sales had picked up to c.Rmb2bn in April and we believe May sales should remain stable supported by its recent new launches in Shanghai and Tianjin.
- Up to mid-May, the company had locked in c.Rmb6.5bn contracted sales, and additionally, c.Rmb4- 4.5bn subscribed sales pending to be contracted.
- Amid the government’s tight price control, we expect Yanlord to take a longer time for presales approval and sales registration of its high-ASP projects. However, we believe management may need to give up further ASP growth for quicker sales in order to meet its sales target by year-end.
Land bank replenishment to continue in 2017.
- Yanlord entered Wuhan by acquiring a 55% stake in a residential project at AV Rmb4.8k/sm. Given the good location, we believe the project could deliver c.30% margin with the current c.Rmb20k/sm ASP of nearby projects.
- Apart from this project, management is planning to add new projects in Wuhan as well as other tier 1/2 cities to support the company’s mid-term growth.
1Q17 results were decent with strong sales delivery and margin.
- Revenue and earnings increased by 122%/501% yo-y in 1Q17, locking in 23%/37% of our full-year revenue and earnings estimates (vs 16%/12% revenue and sales lock-in in 1Q16).
- 1Q17 gross margin came in strong at 49.5% mainly due to the delivery of high-margin projects - Yanlord Yangtze Riverbay Town in Nanjing and Yanlord Marina Centre in Zhuhai. However, Yanlord’s net gearings ratio increased to 47% from 16% as at December 2016 due to the land premium payment for projects it acquired in Nanjing, Shenzhen and Wuhan.
- For the full year, management plans to keep gearing within 60%.
Andy YEE CFA
DBS Vickers
|
Danielle WANG CFA
DBS Vickers
|
Carol WU
DBS Vickers
|
http://www.dbsvickers.com/
2017-05-16
DBS Vickers
SGX Stock
Analyst Report
2.25
Up
2.210
