Yanlord (Not-Rated) is a high-end property developer focused on high-growth cities in China
Established in 1993, Yanlord is a real estate developer focused on the development of high-end residential, commercial and integrated development projects in strategically selected high-growth cities in China.
Yanlord has a presence in 20 cities in China, with an established track record of developing premium and luxury property developments in prime locations within affluent cities of China.
In recent years, Yanlord has also diversified into the Singapore market with the completion of residential projects Leedon Green and Dairy Farm residences.
Total GFA of 7.6 mn sqm with 59% of land bank located in Tier 1 and New Tier 1 cities in China
As at June 2024, Yanlord has a total GFA of 7.6 mn sqm across completed projects (1.79 mn sqm), projects under development (5.29 mn sqm) and landbank for future development (0.54 mn sqm).
59% of its land bank is located in Tier 1 and New Tier 1 cities in China, 30% in Tier 2 cities and only 8.7% in Tier 3 cities, with Singapore representing the remaining 2% of landbank.
With an established presence in the Yangtze River Delta region at 61% of its landbank, the group plans to expand into new cities within the six major economic regions of China.
Further property stimulus measures could bolster industry sentiment
On 26 September, China’s Politburo called for further stimulus measures to promote the stabilisation of the real estate market.
A survey by the China index Academy suggested that home sales during the “Golden Week” holiday rose 23% YoY by floor area, boosted by improved consumer sentiment amid expectations of further policy support to boost economic growth and employment.
Official sales data to be released in the coming weeks could further lift property sentiment, alongside further details on the stimulus measures to enhance “counter-cyclical adjustments” as first announced by the Finance Ministry on 12 October.
Loss in 1H24 financial results impacted by exceptional items
At its recent 1H24 financial results, Yanlord reported a loss attributable to shareholders of RMB486 mn, even as revenues rose 35% YoY to RMB19.95 bn.
This was largely driven by a write-down of properties for sale amounting to RMB730 mn and net impairment losses on financial assets amounting to RMB369 mn.
Nonetheless, future revenue recognition from 2H24 onwards is supported by RMB 53.6 bn of contracted pre-sales (including Associates and JVs) totalling 1.6 mn sqm of GFA as at June 2024.
Improving credit profile with net gearing at 45%
While the Chinese real estate industry is characterised by high leverage and tight liquidity, Yanlord continues to exhibit an improving credit profile, where the group’s total debt declined 10% to RMB30.0 bn with net gearing down 1.4 percentage points to 45.3% as of June 2024.
Resilience from diversification into property investment and management
In recent years, Yanlord has been diversifying both its business and geographic operations, acquiring high-quality commercial and integrated properties for long-term recurring income while providing property management services for both its residential and commercial properties, while expanding its operations to Singapore and Malaysia.
This has provided additional earnings resilience to the group, as evinced by its recent 1H24 results where property investment, property management and other services represented 51% of group profits before tax.
Key risks
A slowdown in China’s economy notwithstanding the prospects of additional fiscal stimulus could negatively impact the demand for residential properties.
Weaker than expected property sales data could also impact consumer confidence in the recovery of the residential property market in China.
Trading at a depressed 78% discount to NAV
Despite an almost doubling in share price from an all-time low of S$0.375, valuations of Yanlord remains undemanding at 0.22x P/B or a 78% discount to NAV.
This compares favourably to China property developers listed in HK at an average P/B of 0.38x.
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