SINGAPORE (May 18): Macquarie is maintaining its “outperform” call on Yanlord as it expects more consensus upgrades ahead and the potential share buyback to support the share price.
Macquarie believes Yanlord’s quality landbank, which is mainly located in China’s T1 and core T2 cities, is bearing fruit.
“We forecast a 33% CAGR core profit growth in FY17-18E. Despite weak contracted sales this year, we believe the sizeable unbooked revenue of RMB24 billion at a much higher GPM (>40%) than FY16 (31.2%) is sufficient to offset any negative impact and thus drive profit growth,” says lead analyst Wilson Ho in a Tuesday report.
Macquarie is incorporating Yanlord’s strong 1Q17 beat with 49.5% gross profit margin, 487% core profit growth and higher ASP forecasts.
However, in view of a slower launch schedule as a result of the government’s price restrictions in some T1/2 cities, the broker has cut its FY17E contracted sales forecast to RMB32 billion from RMB35 billion, but raised the FY18E forecast to RMB37 billion from RMB33 billion after its land replenishment.
During a recent conference call, management said it still aims to achieve the sales target of RMB32 billion, and will launch more projects in 2H17, even though there would be no relaxation in price limit.
Macquarie is raising its NAV by 28% to HK$3.34 and its target price by 34% to HK$2.34 after raising gross margin forecasts by 8pp to 40% for FY17E and FY18E.
At 12.23pm, shares of Yanlord are down 1 cent at $1.82.
