Yanlord Land Group - DBS Research 2020-02-28: Lacking Upside Catalysts

YANLORD LAND GROUP LIMITED (SGX:Z25) | SGinvestors.io YANLORD LAND GROUP LIMITED (SGX:Z25)

Yanlord Land Group - Lacking Upside Catalysts

  • Yanlord's FY19 results were below our and consensus estimates on weaker-than-expected development margins and project deliveries.
  • Dividend was kept flat at Rmb0.34/share, which came as a pleasant surprise.
  • Gross margin to remain pressured on recognition of lower-margin projects; presales outlook for 2020 remains uncertain amid the COVID-2019 outbreak.
  • Maintain HOLD with a lower Target Price of S$1.10.



Ongoing margin pressure and uncertain presales outlook to weigh on share price performance

  • We have identified gross margin trend and presales outlook as critical factors that drive Yanlord’s share price and valuation multiple.
  • Yanlord Land Group (SGX:Z25) will likely continue to face pressure on the profitability front given rising contributions from lower-margin projects located in Tier 2/3 cities. The ongoing COVID-2019 outbreak has also delayed construction works and halted most property sales activities, in turn posing a challenge towards Yanlord’s execution capability to deal with uncertainties. Thus, we do not foresee plenty of room for share price increments and valuation expansion at this point.


Where we differ?



Valuation:

  • Our new Target Price of S$1.10 is based on a lower 4.5x FY20F PE (vs 6.0x previously), which is equivalent to its 3-year historical average of forward PE from FY17-19 to reflect uncertainties on Yanlord’s presales outlook in 2020 and pressured margins.





Danielle WANG CFA DBS Group Research | Ken HE CFA DBS Research | Jason LAM DBS Research | https://www.dbsvickers.com/ 2020-02-28
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.10 DOWN 1.470



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