Yanlord Land

Kim Eng on 17 Sept 2012

Sole large high-end PRC residential property developer on the SGX. Yanlord Land is a PRC-based real estate developer focused on high-end residential, commercial and integrated property developments in strategically selected key high-growth cities. It is the only sizeable high-end PRC residential property developer listed on the SGX.

Historically a symbol of quality. With an established track record for developing high-end residential property in prime locations within affluent cities such as Shanghai, Suzhou and Nanjing, the “Yanlord” name has become a premium brand synonymous with quality within the property development industry. Thus Yanlord has been able to charge a premium over its peers; also, its selling prices have stayed resilient even amid the Chinese government’s property tightening policy.

Mixed picture of the Chinpese residential property market. On the positive side, we saw property prices rebound and bank lending increasing recently. On the negative side, discounts on mortgage rates have either been cancelled or reduced by some banks. All the above suggest that Beijing is still trying to find a way to balance economic growth and property price increases.

Adopting a conservative strategy. With the uncertainty in Chinese property policy, the company seems to have been quite conservative this year. In contrast to bigger developers such as Vanke and Poly Real Estate who have been aggressively expanding their land banks, Yanlord has no plans to acquire new land this year. Since its current land bank is sufficient to support the revenue for the next two years, we think it is wise to avoid competing for land with bigger peers in the current tight credit environment.

Trading at discount. Yanlord is now trading at 0.8x PB, close to historical low. In near term, funding burden remains quite heavy for the company. In our view new funding source could be a catalyst for the company.