Yanlord Land Group - OCBC Investment 2018-11-21: Some Blips But Sound Overall


Yanlord Land Group - Some Blips But Sound Overall

  • Yanlord’s 3Q18 PATMI +61.3% y-o-y.
  • Lower contracted sales target for FY18.
  • Addressing its higher gearing ratio.

Recent 3Q18 PATMI beat our expectations

  • Yanlord Land Group Limited’s (Yanlord) recent 3Q18 results were solid, with PATMI beating our expectations. Revenue jumped 51.7% y-o-y to RMB5,711.6m, underpinned by a 40.1% increase in GFA delivered (147.1k sqm) and 3.1% increase in ASP to RMB33,758 psm. PATMI increased 61.3% y-o-y RMB1,012.4m.
  • For 9M18, Yanlord’s revenue rose 57.1% to RMB22,562.6m, forming 75.5% of our FY18 forecast. PATMI of RMB3,287.7m represented an increase of 62.4% and this accounted for 87.8% of our full-year projection due largely to lower-than-expected non-controlling interests (PAT accounted for 78.4% of our FY18 forecast).

Some delay in project launches; contracted sales target lowered

  • Looking ahead, Yanlord has RMB11.3b of accumulated pre-sales pending recognition, as at 30 Sep 2018, with advances received amounting to RMB9.0b.
  • Yanlord has a land bank of 7.79m sqm, which is sustainable for development for approximately five years.
  • Yanlord highlighted that it had encountered some pre-sales permit delays for two projects in Shenzhen, with a push back to early next year. As such, management signalled that a more feasible contracted sales target for 2018 would be RMB27b, versus RMB30b previously.
  • For 2019, including the delayed projects, Yanlord would have ~RMB80b of saleable resources. We believe a sell-through rate of ~50%-60% is achievable.
  • In Singapore, Yanlord is hopeful of obtaining Provisional Permission from the authorities by 17 Jan 2019 for its Tulip Garden en-bloc project.

Rising gearing a concern, but seeking to address this

  • One of the negatives in 3Q18 was the increase in Yanlord’s net gearing ratio from 78.3% in 2Q18 to 91.2%. Management acknowledged that that this was above its comfort zone, and highlighted that it will continue to be more prudent in its land acquisition.
  • The push back in the delayed projects in Shenzhen will also eventually translate into cash inflows once they are launched, thus alleviating the situation (typical cash collection rate is > 90%).
  • After fine-tuning our assumptions and lowering our target P/E peg to 5x from 5.5x to take into account Yanlord’s higher gearing ratio, we derive a lower fair value estimate of S$2.04 (previously S$2.13).

Wong Teck Ching Andy CFA OCBC Investment Research | https://www.iocbc.com/ 2018-11-21
SGX Stock Analyst Report BUY MAINTAIN BUY 2.04 DOWN 2.130