Major contributions from Shanghai, as expected. Yanlord sold about 347 units of Shanghai Riverside City in 1Q09, out of the 1,100 units unsold as at end-2008 plus a newly launched 130 units in Mar 09. ASP remained stable at Rmb32,000/sq m for the small units and Rmb39,000/sq m for the large units launched in March. Proceeds from Shanghai were around Rmb1.6bn in 1Q09, or about 80% of Yanlord’s total presales.
Cash flow improving. We expect Yanlord’s cash flow to improve in 2009 on the back of stronger presales. In addition, Yanlord will be receiving cash inflow of Rmb1.25bn (S$250m) after the completion of the sale of its 40% stakes in the Suzhou Lakeview Bay and Shanghai Waigaoqiao projects to GIC Real Estate. Cash inflow should cover estimated construction costs of Rmb3bn-4bn (S$600m-800m), a land premium of Rmb5m (S$100m) and short-term debt repayment of Rmb1.75bn (S$350m).
Fine-tuning earnings and NAV estimates. We have revised our completion expectations based on the latest development schedule. We adjusted our earnings forecasts by +3.1% to -3.0% for FY09-11 as we now assume 301k sq m, 387k sq m and 572k sq m of GFA for booking in FY09-11 (previously 239k, 433k and 541k sq m). Our RNAV per share has been lowered from S$2.24 to S$2.20, to reflect changes in the completion schedule and the sale of the 40% stakes in the Suzhou and Shanghai projects to GIC Real Estate.
Maintain NEUTRAL despite higher target price. We maintain our neutral position on the Chinese property sector on the back of pricing pressure and increasing supply. Yanlord’s share price has rebounded 77% since March, which should have captured most of the positives, in our view. In light of its improved presales in 1Q09 and the alleviated pressure on its cash flow, we have narrowed our discount to NAV from 70% to 40%, in line with the current average discount for the property sector. Accordingly, our target price rises to S$1.32 from S$0.67. Maintain NEUTRAL.
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