SINGAPORE (March 2): DBS Vickers Securities is maintaining its “buy” call on Yanlord Land Group with a higher target price of $2.21 compared to $1.46 previously, after the China-based property developer posted a strong FY16 set of results last Friday.
In a Monday report, DBS notes a rebound in FY16 margins to 31% from 28% in the previous year, a trend they believe should continue into the current financial year with its strong average selling price (ASP) growth in its recent sales.
Yanlord’s management has also raised the group’s dividend payout ratio from 10% previously to 15% in FY16.
Additionally, the team notes a conservative 2017 sales target set by Yanlord’s management, which it says is “supported by ample saleable resources” as sales should pick up in March when the group resume its project launches in Nanjing and Tianjin.
“Yanlord plans to spend c.RMB15 billion on land banking this year, on top of the c.RMB18 billion spent in 2016. With a strong balance sheet (16% net gearing and RMB18 billion cash-on-hand), we believe the acquisition budget is reasonable,” says the team, although it cautions that land bank replacement in Shanghai is likely to face higher competition and more challenges from the city’s rising land costs.
“While management will maintain its focus on key Tier 1/2 cities for new projects, it mainly acquires new projects through mergers and acquisitions (M&A) or joint ventures (JVs) with other investors to lower the average land costs. Apart from that, Yanlord has also invested in primary development in Chengdu, Nanjing and Zhongshan which could help source more quality lands at reasonable costs,” it adds.
As at 10.11am, shares of Yanlord are trading 6% higher at $1.59.
