Zhong Sheng Jian, chairman and CEO of China-based developer Yanlord Land Group, spent nearly $8.5 million over three days in March to snap up his company’s shares in the open market.
On March 18, he acquired nearly 2.8 million shares for $2,464,562; on March 19, he acquired another 2.99 million shares for $3,561,920 and on March 22, he acquired just below 2.1 million shares for $2,452,059. The daily average unit prices Zhong paid ranged between just below $1.19 to just below $1.20.
Zhong now holds a direct stake of just over 89.6 million shares, equivalent to 4.64%. In addition, he has an indirect interest of nearly 1.28 billion shares, or 66.185%. In total, he now controls nearly 1.37 billion shares, or 70.825%, from 70.719% previously.
Before the open market purchases, Zhong last bought two million shares on Dec 17 for $2.2 million or $1.10 each.
On March 18, credit rating agency S&P Global Ratings revised its outlook on Yanlord to stable from negative. At the same time, S&P affirmed its “BB–” long-term issuer credit rating on Yanlord and its “B+” long-term issue rating on the company’s guaranteed senior unsecured notes.
“The stable outlook reflects our view that Yanlord will moderately grow its contracted sales and accelerate project delivery, while better managing its debt-funded land replenishments over the next 12-24 months,” says S&P.
“Yanlord’s good market standing with a focus on the higher-end residential segment in higher-tier cities will support its operating cash flow,” the rating agency adds.
S&P’s improved view on Yanlord came in the wake of a similar outlook given by Moody’s Investors Service, which rated the company’s Ba2 corporate family rating and the Ba3 backed senior unsecured rating on the bonds issued by Yanlord’s Hong Kong-based subsidiary but guaranteed by Yanlord.
Meanwhile, Moody’s has changed the outlook to stable from negative. “The change in outlook to stable from negative reflects our expectation that Yanlord’s credit metrics will continue to improve over the next 12–18 months, supported by its strong revenue growth and controlled debt increase,” says Cedric Lai, Moody’s senior analyst.
Specifically, Yanlord’s revenue growth will be driven by its strong sales execution over the past two years. Its total contracted sales grew 41% y-o-y to RMB78.5 billion ($16.1 billion) in 2020, despite the negative impact from the coronavirus outbreak. This comes after the company’s contracted sales grew 103% year over year to RMB55.5 billion in 2019.
“At the same time, the rating affirmation reflects our expectation that the company will maintain its financial discipline and good liquidity position over the next 12–18 months,” adds Moody’s Lai.
On Feb 27, Yanlord reported 2HFY2020 ended December 2020 earnings of RMB2.1 billion, down 3% y-o-y. Revenue in the same period was up 35% y-o-y to RMB14.8 billion.
For the whole of FY2020, Yanlord reported earnings of RMB2.6 billion, down 23%. Revenue was up 28% to RMB23.9 billion. The company explains that the lower bottom line was partly because it booked lower fair value gains of RMB811.5 million for 2HFY2020, versus RMB1.09 billion booked for 2HFY2019.
Despite the lower full-year earnings, Yanlord plans to pay a dividend of 6.8 cents, the same as what it paid out in FY2019.
In the earnings commentary, Zhong notes that while the pandemic has hit the global economy last year, China, the company’s key market, is one of the few major economies to see growth instead.
As of Dec 31, 2020, cash and equivalents rose 24.5% to RMB17.2 billion, Yanlord’s net debt to total equity ratio also fell 16.8 percentage points to 63.2%.
Moody’s view is that this cash balance covered 2.1 times Yanlord’s short-term debt as of the end of 2020. Moody’s expects the company’s cash holdings, together with operating cash inflow, will be able to cover its maturing short-term debt, unpaid committed land purchases and dividend payments over the next 12-18 months.
As of Dec 31 2020, Yanlord’s NAV was RMB16.16, or $3.32, up from RMB14.62 as of Dec 31, 2019.
