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?
- We foresee significant downside in consensus earnings estimates. While Yanlord had achieved stellar presales growth of 116% to Rmb55.7bn in 2019, we believe meaningful revenue and earnings contribution from these presales will only come through after 2020.
- Our FY20/FY21 earnings forecasts are 34%/32% lower than market consensus estimates.
- See Yanlord Share Price; Yanlord Target Price; Yanlord Analyst Reports; Yanlord Dividend History; Yanlord Announcements; Yanlord Latest News.
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
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Ken HE CFA
DBS Research
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Jason LAM
DBS Research
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https://www.dbsvickers.com/
2020-02-28
SGX Stock
Analyst Report
1.10
DOWN
1.470
