Ying Li International

Kim Eng on 15 Aug 2012

Strong yoy growth as expected. Ying Li International announced its 2QFY12 results yesterday. Net profit came in at RMB40m in 2Q12 vs a loss of RMB17m in 2Q11. The growth is mainly driven by the sale of IFC office units as well as rental income growth. 2H revenue will continue to be supported by IFC. Earnings visibility is good for the next two years given the pre-sales base from its Ying Li International Plaza. Maintain BUY with target price of SGD0.50.

Sale of office units at IFC. RMB125m of revenue was recognized from the sale of IFC office units in 2Q12 vs RMB108m in 1Q12. Ying Li is on the track of meeting its sales target of 20,000 sqm in this year with ASP expected to be around RMB25,000/sqm.

On Track, on target. 1) Ying Li IFC’s leasing activity is also going smoothly. It has already secured several big international and domestic tenants such as Deloitte, CapitaLand, DBS, GIC, Goldman Sachs, Kang Tai Insurance. 2) Construction on International Plaza is on schedule and the whole project expected to complete in 2014. Block 3 was launched for sales in late July and well-received by the market. 75% of total units have been sold and RMB200m pre-sales have achieved already. Their remaining Block 1 and 2 will be open to market in 4Q12. Pre-sales from International Plaza will support the revenue for 2013 and 2014.

Future sales proceeds to boost cash flow. Although net gearing rose to 58% in 2Q12 mainly due to the borrowing for International Plaza project and loan repayment, we are confident that the continuous sales of IFC and launch of International Plaza Block 1, 2 and 3 will generate sufficient cash flow to cover the debt burden.

Deep discount to RNAV. We derived our target price based on 40% discount to our RNAV forecast. Given the prime location and very high-end profile of Ying Li’s assets, we believe this stock deserve a higher valuation than current level.