Yanlord Land Group - OCBC Investment 2022-03-04: Firm Outlook Notwithstanding Industry Pressures

YANLORD LAND GROUP LIMITED (SGX:Z25)

Yanlord Land Group - Firm Outlook Notwithstanding Industry Pressures

Yanlord Land Group (SGX:Z25)’s FY21 revenue jumped 45.6% to RMB34.8b but gross profit grew at a much smaller magnitude of 2.6% to RMB8.9b as its gross profit margin compressed by 10.8 percentage points to 25.6%. PATMI rose 2.5% to RMB2.7b, but core PATMI increased at a faster clip of 54.4% to RMB2.5b, exceeding our RMB1.6b forecast significantly due to stronger-than-expected revenue recognition and lower-than-expected finance costs.
Yanlord Land declared a first and final dividend per share (DPS) of 6.8 cents, and this has been constant since FY17. We expect this level of dividend to be at least maintained in the foreseeable future given Yanlord Land’s solid liquidity position.

Yanlord Land’s contracted sales from residential and commercial units and car parks (together with its JVs and associates) fell 24.0% to RMB59.6b in 2021 (attributable ratio of ~54%), and this was due to a decline in both contracted GFA and ASP of 12.7% and 13.0% to 1,868,568 sqm and RMB31,889 per sqm, respectively.
Looking ahead, management is targeting contracted sales to rebound to RMB75b in 2022, which would imply a growth of 25.9% if met. This would be supported by ample saleable resources of RMB120b, of which ~70% is in the Yangtze River Delta region. This includes projects in Shanghai and Shenzhen, which should help to bolster Yanlord Land’s ASPs.
Attributable ratio for Yanlord Land’s contracted sales target is expected to range between 50% to 55%. For the month of Jan 2022, Yanlord Land’s contracted sales jumped 87.7% y-o-y to RMB9.8b.

In terms of financial position, Yanlord Land’s net gearing ratio declined meaningfully from 63.2% in FY20 to 49.0% in FY21, while average borrowing costs dipped 30 bps to 4.9%. After raising our forecasts and keeping our P/E target multiple of 5.6x, our fair value estimate for Yanlord Land increases from S$1.16 to S$1.44.
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OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2022-03-04

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