Background: Yanlord Land is a China‐based property developer synonymous with delivering high quality properties. It has a strong track record of achieving higher ASPs than comparables, and has significant exposure in key cities like Shanghai, Chengdu and Tianjin.
Recent development: Despite the challenging conditions in the Chinese property market, Yanlord recently sold 155 of the 257 apartments launched at Yanlord Sunland Gardens in Shanghai on the very first day. It achieved an ASP of RMB 46,500 psm for total contracted presales of RMB1.7b.
Key ratios…
Price‐to‐earnings: 3.5x
Price‐to‐NTA: 0.5x
Dividend per share / yield: S$0.0122 / 1.7%
Net gearing: 0.45x
Share price S$0.71
Issued shares (m) 1,943.8
Market cap (S$m) 1,383.6
Free float (%) 34.5%
Outstanding convertible bonds S$23.8m due 2012, convertible to 9m shares at $2.65/share; S$375m due 2014, convertible to 144.8m shares at $2.62/share
Financial YE 31 Dec
Major shareholders Founder Zhong Sheng Jian (65.4%); Aberdeen Asset Mgt (5.1%)
YTD change ‐57.7%
52‐wk price range S$0.70‐1.88
Source: Company
Our view
Brand premium remains intact. The ASP achieved for Sunland Gardens is substantially higher than the ASP of RMB24,000 psm for the projects in the vicinity, testifying to Yanlord’s superior brand equity as a quality high‐end developer. Based on our estimated breakeven of RMB28,400 psm, pre‐tax margin for the project is approximately 39%.
Total pre‐contracted sales of RMB8.7b. As of 1H11, Yanlord had achieved pre‐contracted sales of RMB6.4b. Together with pre‐sales of RMB572m achieved as of end‐July from Tianjin Yanlord Riverside Gardens and that achieved from Sunland Gardens, the total pre‐contracted sales stand at around RMB8.7b. This will be progressively recognised over the next 1‐2 years.
At trough valuation. The stock currently trades at an all‐time low P/B of 0.51x, after declining by 42% in the past two months. We think the market has priced in an overly bearish scenario with respect to China’s property market, as well as Yanlord’s fundamentals.
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