Yanlord Land Group: Start Spreading The News, Buy

1Q09 In Line, Pre-Sales Strong. Yanlord’s 1Q09 net profit jumped 161% yoy to S$24.3m on a 60% increase in topline to S$186.4m. While this forms 25% of our FY09 forecast (and c.13% of consensus), we have increased our FY09 forecasts by 89% due to strong pre-sales by the company, particularly in April. In a conference call with analysts, the company shared that an additional RMB1.9bn of sales was booked in April alone, which nearly matched the RMB2bn achieved in 1Q09. In total, these formed about 80% of FY08 sales.

Spreading from Shanghai. Once again, its Riverside City project in Shanghai was the key earnings driver, accounting for 80% of 1Q09 revenue. Going forward, Riverside Plaza in Tianjin and Yangtze Riverside City in Nanjing are scheduled for launch in 2Q09 and 3Q09 respectively. This is Yanlord’s maiden foray into the Tianjin market. Good ASPs and sales will be a catalyst, as it would further cement its ability to replicate its success in the Yangtze River Delta to other regions in China.

Upgrade to BUY, TP S$2.09. The pre-sales achieved by the company have not come at the expense of any substantial decline in ASP, a testimony of Yanlord’s brand equity in China. With this, we adjust our ASP assumptions closer to current levels for launched projects and reduce our ASP decline assumptions for landbank projects. Its success in asset turning its inventory, coupled with our eye on a recovery in the Chinese economy, also allows us to reduce our discount to RNAV. Upgrade to BUY, TP S$2.09 based on 30% discount (prev 60%) to RNAV of S$2.99 (prev S$2.40).

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