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YNH Property
4QFY10 : Improving earnings clarity
· Within expectations
FY10 net profit of RM57.0m achieved 98% and 95% of house and consensus full-year estimates respectively. A final net dividend of 3 sen was declared, bringing full year dividend to 6 sen. This is a pleasant surprise as it exceeds our expectation of 5.1 sen.
· 4QFY10 was a blip…
4QFY10 net profit of RM10.6m was 32.7% lower q-o-q as most major projects have already been completed. Results would have been lower if not for higher operating income of RM18.4m (+1236%) which was mainly due to reversal of provision previously made for sales termination in Ceriaan Kiara.
· …but earnings visibility will improve in FY11
Fraser Residence (GDV RM750m) has secured 50-60% bookings (RM350m) which will be converted into sales over next 2 months. Despite hefty ASP of RM1,100 – RM1,200 psf, there are already 1,500 registrants for the 440 units available. Since the piling works have already commenced last year, earnings contribution should start in 2HFY11.
Another major positive is the building of a new hypermarket in Manjung which has a positive spillover effect. YTD, YNH has sold half of the shophouses in the vicinity of the hypermarket which are worth RM100m. In view of the strong momentum, launches will be stepped up to RM300m this year.
Management also affirmed plans to launch Kiara 163 (GDV RM1.2bn) in 2HFY11 and Menara YNH (RM2.1bn) in end FY11. On the latter, management is also open to outright land sale given the “right” price. There was market talk that a bid of RM3,000 psf was submitted but rejected as management is asking for RM6,000 psf. If a deal is struck at RM3,000 psf, accretion to each share is 74 sen. · Maintain HOLD, TP raised to RM2.07 We upgrade our earnings to mainly factor in earnings from Fraser Residence and Manjung projects. Target price has also been raised from RM1.70 to RM2.07 as we continue to peg historical average 10x P/E to FY11 earnings. However, with recent share price rally, possibly in reaction
to the potential sale of Menara YNH, upside from current level is limited. We maintain HOLD. Key risks include
(1) more lending restriction by BNM,
(2) rising interest rate,
(3) slower than expected demand, and
(4) delay in launches.
