Yanlord Land Group: Awaiting Stimulus; HOLD S$0.725

Yanlord's FY08 net profit ex-exceptionals came right in line with our below-consensus estimates. Though less GFA was delivered, it continued to improve ASPs yoy. We have an eye on further stimulus measures for the macro economy and property market, and we view this as a potential catalyst. Maintain HOLD, TP S$0.96.

Results Right In Line. Yanlord reported FY08 net profit of S$226m (+2% yoy) on revenue of S$1,007m (-18% yoy) due mainly to improved margins/ASPs and a fair value gain on an investment property that obtained completion in FY08 and was revalued up from cost. Stripping out the S$81m revaluation gain, core earnings would have been S$144m, in line with our estimate of S$141m ? which was c.35% below consensus. Dividend of 1.23 ct/shr was declared (FY07: 1.21 ct/shr) and company looks to maintain its 10% payout ratio.

Less GFA Delivered, But Higher ASPs. GFA delivered fell 41% yoy to 286,000 sqm, but this was offset by higher ASPs achieved ? a 33% increase to RMB17,300 psm on average. However, c.55% of revenue was from its Shanghai projects; and the challenge going ahead is to bring its brand equity to other cities. This it plans to do in 2009, with two high-end projects in Tianjin and Nanjing to be launched in 1H09 and 2H09 respectively.

Maintain HOLD, TP S$0.96. Though recent stimulus measures seem to have returned some stability to the market, supply overhang is still a concern. We expect the high-end market to be weak in 2009, and have reduced our GFA delivery assumptions for FY09. We maintain our 25-30% price cut assumptions for first-tier cities. Our RNAV is adjusted to S$2.40 (from S$2.36). We maintain our 60% discount, with TP of S$0.96 (prev S$0.94). Maintain HOLD due to a lack of substantial catalysts for the high-end market at this point.

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