Yanlord Land Group - OCBC Investment 2019-11-14: Targeting Higher Pre-sales Ahead


Yanlord Land Group - Targeting Higher Pre-sales Ahead

3Q19 results significantly below expectations; strong bookings expected in 4Q

  • YANLORD LAND GROUP LIMITED (SGX:Z25) reported a disappointing set of 3Q19 results which came in significantly below our expectations. Revenue fell 49.5% to RMB2,881.7m, due largely to a 58.5% y-o-y dip in GFA delivered, but partially offset by higher ASP of RMB38,263 psm (+13.3%), which resulted in a higher gross margin of 57.9% (+12.1 ppt y-o-y). See Yanlord Announcements.
  • PATMI slumped 94.2% y-o-y to RMB58.8m due to higher expenses and a larger proportion of non-controlling interests.
  • For 9M19, Yanlord’s revenue slipped 53.0% to RMB10,593.6m, while PATMI of RMB1,247.2m represented a decline of 62.1% and constituted only 44.6% of our FY19 forecast.
  • Notwithstanding this subdued performance, Yanlord highlighted that it has accumulated contracted pre-sales of RMB16.6b which are pending recognition (as at 30 Sep 2019), of which ~60% are expected to be booked in 4Q19.

Raised contracted sales target to RMB50b for this year

  • Yanlord’s accumulated contracted pre-sales and subscription sales (including JVs and associates) surged 74.1% y-o-y to RMB33.6b for 9M19.
  • Management sounded upbeat about its sales outlook, and raised its contracted sales target from RMB40b to ~RMB50b for the full-year. This is supported by RMB30b of saleable resources for 4Q19.
  • Looking further ahead, Yanlord has ~RMB120b of saleable resources for 2020, and based on a conservative sell-through rate of 50%, this would translate into contracted sales of RMB60b for the year.

Lower fair value of S$1.43

  • In terms of financial position, Yanlord’s net gearing ratio increased from 65.2% (end-2Q19) to 72.9%. It will remain cautious on land acquisitions ahead, with a preference for cities with stronger inflow of migrants.
  • With regards to UNITED ENGINEERS (SGX:U04), Yanlord recently raised its General Offer price from S$2.60 per share to S$2.70, and does not intend to revise it further. Yanlord currently owns 41.55% of United Engineers’s ordinary shares, and hopes to use United Engineers as a platform to expand internationally.
  • We lower our FY19F and FY20F PATMI forecasts by 25.7% and 15.3%, respectively. Despite Yanlord’s stronger pre-sales outlook, we expect leakage to non-controlling interests to be larger than our initial expectations.
  • Rolling forward our valuation to 5x FY20F EPS, we derive a lower fair value of S$1.43 (previously S$1.56). See Yanlord Share Price; Yanlord Target Price.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-11-14
SGX Stock Analyst Report BUY MAINTAIN BUY 1.43 DOWN 1.560