SINGAPORE (Apr 15): Yanlord Land Group is seen by OCBC Investment Research as a beneficiary of improved sentiment in the Chinese property market.
Since the start of the year, the easing credit environment and a dovish Fed have led to more conducive onshore and offshore funding options for developers, says OCBC.
The recent introduction of new hukou -- household registration -- reforms by NDRC (National Development and Reform Commission) was another positive development for the sector, the research house adds.
Based on data from CRIC (China Real Estate Information Corp), overall transaction volume in China increased 82% m-o-m and 1% y-o-y respectively to hit 21.31 million sqm in March.
For Yanlord, 1Q19 contracted sales more than doubled y-o-y to RMB7.06 billion ($1.42 billion) on a gross basis, estimates CRIC.
Yanlord recently announced that its Riverbay Gardens project in Suzhou had achieved 100% sell-out on the first day of its latest launch. Total pre-sales for the 193 units for this project amounted to RMB1.16 billion psm or RMB35,300 psm.
“We believe policies from local governments have become more favourable, and developers have been given higher pricing autonomy with the loosening of pre-sales price curbs for selected Tier 1 and 2 cities,” says analyst Andy Wong.
In addition, although Yanlord’s share price has rebounded 20.5% as at Apr 11 after declining 24.7% for the whole of 2018, this still pales in comparison to the average 43.2% YTD share price appreciation of the A and H shares-listed Chinese developers which OCBC tracks.
“Despite Yanlord’s smaller size relative to its peers, we see Yanlord as a potential laggard play given the right mix of its quality land bank -- 21% exposed to Greater Bay Area and 47% exposed to Yangtze River Delta -- and strong fundamentals,” says Wong.
Based on Yanlord’s closing price of $1.47, it is trading at a cheap FY19F P/E ratio of 4.2x, which is approximately 1.4 standard deviations below its 8-year average forward P/E of 7.6x.
“FY19F price-to-book ratio of 0.51x and dividend yield of 4.8% also make Yanlord an attractive investment proposition, in our view, on top of the more positive industry outlook,” adds Wong.
We maintain our fair value estimate of $1.75, pegged to 5x FY19F core EPS.
As at 9.31am, shares in Yanlord are up 2 cents at $1.52.
