Valuation
Maintain BUY but with a reduced target price of
S$0.64, pegged at a 23.5% discount to our RNAV of
S$0.83/share. This is in line with the average discount for
Chinese developers under our coverage.
+ We lower our plot ratio assumption for the San Ya Wan
project to 2.2x from 3x but increase the ASP assumption to
account for the change of use to higher-value
commercial/residential mixed development.
+ Potential catalysts include the monetisation of its retail
assets as well as new growth initiatives from its new CEO.
1Q13 Financial Highlights
+ Net profit more than doubled yoy to Rmb7.5m in 1Q13
despite a 14.6% yoy decline in revenue as the group
recognised less property sales during the quarter. Gross
profit increased 20.2% yoy to Rmb60.7m with gross margin
improving to 58.6% on a larger proportion of higher-margin
rental income.
+ Selling expenses declined 16.9% yoy to Rmb8.2m as most
of the initial operating costs for International Finance Centre
(IFC) mall have stabilised. Finance cost jumped to
Rmb20.9m from Rmb8.0m in 1Q12 as the group has
completed the IFC project and hence, most of the interest
cost had to be expensed in the P&L instead of capitalising it
into the developing properties.
+ As at 31 Mar 13, the group’s net gearing ratio fell from
54.5% in 2012 to 49.5% after redeeming its S$195m
convertible bond but had drawn down more construction
loans.
Our View
+ Results were within expectations as Ying Li can only
recognised the sale of its properties upon completion. We
see strong earnings growth for the year as the group has
collected more than Rmb956m of pre-sales proceeds from
the International Plaza last year.
+ According to management, the main super-structure for
most of blocks of the International Plaza has been
completed and the retail mall has also secured 56.2% of
contracted lease as of 1Q13. Ying Li is confident of launching
the mall this year.
+ For the San Ya Wan project, the company has gotten
approval to increase the plot ratio from 1.6x to 2.2x but is
awaiting the change of use from industrial to commercial/
residential mixed development. Piling and construction
works will start by 3Q13.
+ Although the new CEO Mr Ko has yet to reveal the strategic
outline for Ying Li's future growth, he reassured analysts
during the meeting that he is currently fine tuning the
details before presenting to the new board of directors and
will share with the public in due time.
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