Yanlord

Yanlord: 1Q13 results below estimates. Revenue at Rmb 1.68b (13.3% of FY13e consensus), +260% yoy, due to the higher GFA delivered, partly offset by a lower ASP per sm arising from change in pdt mix. Gross margin rose by 2.8 ppt yoy to 39.4%. However net profit at Rmb 67.3m (5.5% of FY13e consensus), -50% yoy, due to big jump in income tax (+383% yoy to Rmb 231.8m) arising from higher land appreciation tax, and higher contribution from non-controlling interests (Rmb 98.5m from negligible in 1Q12). Projects delivered include: - Yanlord Yangtze Riverbay Town Phase 2 in Nanjing (32.0% of sales) - Yanlord Sunland Gardens Phase 1 in Shanghai (12.4%) - Yanlord Riverside Gardens Phase 1 in Tianjin (12.3%) - Yanlord New City Gardens Phase 2 – Section 2 in Zhuhai (10.3%) - Yanlord Lakeview Bay – Land Parcel A6 in Suzhou (18.1%) Mgt notes mkt sentiments in China’s property sector remain volatile in the near term, following the latest reiteration of austerity measures in the “New National Five Rules” promulgated by the PRC central govt in Feb ’13. However the group remains confident about the long term potential of the PRC real estate sector. Based on existing sales contracts of the pre-sold units, the total pre-contracted sales amounts to Rmb 6.9b as at end 1Q13, and is expected to be progressively recognized as revenue in the subsequent quarters. This compares with the advances for pre-sold properties (under Other payables) amounting to Rmb 5.16b. The group will continue to launch new batches of existing projects in 2Q13, namely Yanlord Riverbay Phase 1 in Chengdu, Bayside Gardens in Shanghai, Yanlord Lakeview Bay Land Parcels A2 and A6 in Suzhou and Yanlord Riverside Gardens Phase 2 in Tianjin. Mgt is confident of the group’s performance relative to the industry for 2Q and over the next 12 mths based on the no. of units pre-sold to-date, expected delivery schedules and on-schedule construction works in progress. Yanlord’s net gearing is at 45.5%. At last close at $1.49, the stock trades at 0.9x P/B, 54.0x annualized 1Q13 P/E (less relevant due to lumpiness in earnings).