Yanlord Land - Asset Play with Prime Location, Premium

Reiterating Buy/Speculative Risk — We are raising our target to S$2.09 from S$1.21 on higher ASP assumptions for Yanlord’s property projects in Shanghai and on the recent solid recovery in transaction volume in the China property markets. With its focus on prime city-center locations and premium quality offerings, Yanlord should be able to take advantage of the recent recovery in the China property market to return to growth after the pullback in 08. We cut 09 estimate to reflect project completions, and raise 10E on higher ASPs.

More constructive market environment — Based on Soufun property statistics, in the first four weeks of April most cities recorded growth compared with the first four weeks in March, including Beijing, Dalian, Shanghai, Nanjing, Hangzhou, Chongqing and Ningbo; Shenzhen and Guangzhou recorded slight declines. In the 12 cities we track, the average digestion cycle was around 16.5 months as of the beginning of 2009.

Shanghai to become a global financial center and shipping hub by 2020 — In our view, the central government’s plan to accelerate the development of Shanghai should help stimulate the economic and property market sentiment in Shanghai, benefiting Yanlord given its landbank exposure and its experience in the Shanghai property market. Based on our estimates, about 22% of Yanlord’s NAV comes from Shanghai. In addition, Yanlord has been in the Shanghai property market for long. As a reference, according to Yanlord, about 58% of the company’s completed properties in the past came from Shanghai, in terms of total GFA.

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