Yanlord: HSBC initiates Neutral on co at $1.03. Yanlord is thinly covered and house believes operations are somewhat misunderstood, with superior margins coming from cheaper land acquisition instead of the misplaced belief that margins were from strength of its brand. Expects margin compression in 2011 to continue.
Given that Yanlord is only slightly above trough valuation, downside appears limited with its reasonable state of cashflows and is also supported by access to funding, r/s to financially strong partners and brand equity. However growth opportunities appears limited as well.
HSBC prices Yanlord at 58% discount to 12 mth fwd NAV, one std dev below the mean and expects stock to trade range-bound under existing macro situation. Upside risks include improvement to economic conditions and continued share purchases by well-known investors. Downside risks include continued deterioriation in contract sales performance and liquidity issues due to volatility in the capital mkts coupled with refinancing convertibles in 2012.
Co has a long-term strategic r/s with GIC and recent buyers included Wilmar’s Kuok Khoon Hong, Peter Lim and UOB's Wee Ee Chao.
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