Yanlord

3Q16 net profit for the Chinese property developer surged 10-fold to Rmb564.2m, taking its 9M16 earnings to Rmb1.15b (+374%) or 77% of full year street estimate.

Quarterly revenue jumped 83.9% to Rmb5.51b on higher GFA delivery of 224,985 sqm (+70.1%) as well as higher average selling price of Rmb24,187/sqm (+18.6%).

During the quarter, it launched two new projects, namely, Oasis New Island Gardens (Phase 1) in Nanjing and Yanlord Marina Peninsula Gardens (Phase 1) in Zhuhai, which accounted for 47.5% and 18% of its gross revenue respectively.

Gross margin expanded to 27.2% (+3.3ppts), mainly due to a shift in its product mix as its Oasis New Island (Phase 1) development enjoyed much higher margins.

Bottom line was further buoyed by net interest income of Rmb12.5m (3Q15: Rmb20.4 loss) as well as a Rmb203.2m FX swing to Rmb9.6m gain. This was mainly due to the stronger greenback, which resulted in a translation loss on its USD-debt in 3Q15.

Despite the strong quarterly performance, operating cash flow contracted to Rmb2.15b (-59.8%) on sharply lower working capital inflow of Rmb1.91b (-66.5%). Net gearing stood at 10.3% (2Q16: 2%) as it drew down debt to facilitate the development of various projects.

Looking ahead, management opines that China's property sector will continue to be supported by healthy demand for residential properties. It notes that prices for housing rose faster in first and second tier cities such as Nanjing (+40.6%), Shenzhen (+34.1%) and Shanghai (+32.7%) driven by declines in supply levels.

As at 30 Sep '16, the group has received advances for pre-sale properties amounting close to Rmb25b (2Q16: Rmb24.44b) with accumulated pre-sales of Rmb29.36b (2Q16: Rmb28.88b).

Post 3Q16, Yanlord launched its latest batch of apartment units in Yanlord Eastern Gardens in Shanghai, which attracted strong buyer support with 142 out of 177 (80%) units snapped in one day, drawing Rmb1.07b worth of new pre-sales.

Moving into 4Q16, Yanlord plans to launch new projects and phases of existing projects in Nanjing, Tianjin, Shanghai, Zhuhai and Sanya.

Yanlord currently trades at 8.9x forward P/E and 0.6x P/B. The street is fairly bullish on its prospects with 5 Buy and 1 Hold ratings on the counter and a consensus TP of $1.46.