Yanlord Land Group - OCBC Investment 2018-08-16: Not One, Not Two, But Threefold Growth!

Yanlord Land Group - OCBC Investment Research 2018-08-16: Not One, Not Two, But Threefold Growth! YANLORD LAND GROUP LIMITED SGX:Z25

Yanlord Land Group - Not One, Not Two, But Threefold Growth!

  • Yanlord Land 2Q18 PATMI tripled y-o-y.
  • 7M18 pre-sales of RMB13.1b.
  • Lower fair value but valuations still compelling.

2Q18 results beat our expectations

  • Yanlord Land Group Limited (Yanlord) reported a strong set of 2Q18 results which beat our expectations. Revenue accelerated 125.9% y-o-y to RMB9,663.1m, underpinned by a 184.1% increase in GFA delivered (363.6k sqm), but partially offset by a lower ASP of RMB25,648 psm (-10.0%). PATMI more than tripled y-o-y to RMB1,478.2m.
  • For 1H18, Yanlord’s revenue rose 59.0% to RMB16,851.1m. PATMI of RMB2,275.3m represented an increase of 62.9% and this accounted for 65.0% of our full-year projection.
  • Looking ahead, Yanlord has RMB14.2b of accumulated pre-sales pending recognition, as at 30 Jun 2018, with advances received amounting to ~RMB11.5b. Due to its growth path, its net gearing ratio rose q-o-q from 52.9% to 78.3%.

~ SGinvestors.io ~ Where SG investors share

Total contracted sales target of RMB30b- 32.5b for FY18

  • During 7M18, Yanlord achieved contracted sales of RMB13.1b and sold 339k sqm of GFA. Encouragingly, Yanlord’s cash collection rate remained strong, at an estimated ~95%.
  • Looking ahead, management updated that it has RMB47-50b worth of saleable resources. Based on an assumed sell-through rate of 65%, this would translate into a total contracted sales target of RMB30b- 32.5b for FY18. 
  • Although this was a moderation from its previous guidance RMB32-35b, we believe it is not necessarily an indication of weaker demand but also Yanlord being selective on its launches given price controls. That said, the Chinese government appears to be open on selective residential price growth. For example, Yanlord on the Park in Shanghai managed to attain a higher price cap of RMB115k psm, versus RMB107k psm previously.

Trading at FY18F P/E of 3.9x as at 15 Aug close

  • Following this sturdy set of results, we raise our FY18 and FY19 core PATMI forecasts by 6.9% and 1.3%, respectively, even as we increase our finance costs assumption. We also incorporate an updated FX assumption of S$1: RMB5. Finally, we lower our target P/E peg from 6x to 5.5x. This is approximately one standard deviation below its 5-year mean P/E of 7.2x. Following these adjustments, our fair value dips from S$2.24 to S$2.13.
  • As at the closing price of S$1.51 on 15 Aug, Yanlord is still trading at a compelling FY18F P/E of 3.9x, while offering a prospective yield of 5.1%.

Wong Teck Ching Andy CFA OCBC Investment Research | https://www.iocbc.com/ 2018-08-16
SGX Stock Analyst Report BUY Maintain BUY 2.13 Down 2.240