SINGAPORE (Mar 1): OCBC Investment Research is maintaining its “buy” call on Yanlord Land Group with a lower fair value of $1.75 compared to $2.04 previously, after rolling forward valuations and applying an unchanged P/E target peg of 5 times to core FY19 EPS forecasts.
The move comes as Yanlord missed OCBC’s expectations with a subdued set of 4Q18 results, where revenue slumped 79.4% on-year due to lower gross floor area (GFA) delivered as well as lower average selling prices (ASP).
In a Friday report, analyst Andy Wong says he has opted to adopt a more conservative stance to project contracted sales of RMB35.2 billion for 2019, versus the management’s guidance of about RMB40 billion on expectations of more abundant saleable resources.
This is in view of volatile market conditions and uncertainties surrounding pre-sale permits given by local governments, says Wong.
Further, the analyst is cautious of the group’s high net gearing ratio, which stood at 96.8% as at end-FY18, up from 91.2% a year ago.
“Management acknowledged once again that this was on the high-side relative to historical levels, and thus has an aim on being more prudent on its land acquisitions this year. Coupled with cash inflows from more project launches, Yanlord is hopeful of bringing down its net gearing ratio by end-2019. We cut our FY19 core PATMI forecasts by 15.6% and introduce our FY20 projections,” he adds.
As at 4.08pm, shares in Yanlord are down by 1 cent at $1.38, or 0.5 times FY19F book value.
