• Strong 10M15 sales momentum continued in Nov; full-year sales may reach Rmb25-26bn
• Management is looking to raise ASP further for upcoming new launches
• Seeking to replenish land through JV
• Maintain BUY, TP S$1.35
FY15 sales may hit Rmb25-26bn
Yanlord achieved strong sales of Rmb22.2bn in 10M15 which was 183% higher y-o-y and exceeded its sales target. Nov sales should come in strong with Rmb3.4bn sales locked in from the new launches in Shanghai and Nanjing in the first week of Nov. As such, FY15 sales will likely hit Rmb25-26bn which is better than the market expected. Management is still finalising the sales plan for 2016, we believe its 2016 sales growth will be supported by later phases of existing projects. Riding on the strong upgrader market in Shanghai, the brand new project, Yanlord On the Park, was well received with 82% units sold on the first day. With an ASP of Rmb86.3k/sm, we expect its GP margins to reach close to 50%. Management is also seeking to raise ASP in its coming launches which may support margins in FY16/17.
More active in land replenishment
Management is putting more focus on land replenishment in existing cities and is looking at projects in Suzhou and Tianjin. Management will keep its high-end focus and is targeting above 30% GP margins for new projects. It also plans to improve efficiency by shortening development cycle and forming JV for new projects. We believe the quality of the new projects will be key for sales growth beyond 2016.
9M15 results above expectations with better financial strength
Revenue and core earnings increased by 49%/53% from the low base last year, locking in 47%/34% of our full-year estimates (vs 36%/32% lock-in last year). GP margin was 30.9% which is in line with our full-year estimate. Net gearing dropped by 10ppts from Jun- 15 to 22% and cash-on-hand also went up by 52% to Rmb12bn, giving it a deeper war chest for new land acquisitions.
Yanlord is trading at 46% NAV discount, 7.0x 16 PE and 0.5x P/BV (vs its historical 10.5x PE and 1.2x P/BV). We believe the valuation is undemanding given the good sales outlook for its upgrader products. We maintain BUY, TP S$1.35 based on unchanged 9x FY16 PE. (Read Report)