YNH Property (ECM Libra Research) hold; target price RM1.70

3QFY10 :Boosted by tax provision reversal

Within expectations
9MFY10 net profit of RM46.5m achieved 80% and 82% of house and consensus full-year estimates respectively. However, we still deem the results to be within expectations as 3QFY10 results were boosted by reversal of tax provisions which is non-recurring and non-operational. As expected, no interim dividends were declared for the current quarter.

Lower revenue y-o-y and q-o-q, but margin improved
3QFY10 revenue has decreased by 35.1% y-o-y, 15.4% q-o-q to RM55.1m due to completion of major projects such as Fraser Place and Ceriaan Kiara. That said, margin has improved y-o-y from 23.8% to 36.7% due to contribution from better margin shoplots in Manjung.

Fraser Residence attracting more interest
Fraser Residence (GDV RM550m) has already commenced construction in June 2010 and has so far attracted 150 units of registrations out of 446 units. We expect these to be converted into firm sales soon once the advertising permit has been obtained from local authorities. Earnings
contribution should commence from FY11.

Maintain HOLD, TP raised to RM1.70
We maintain our hold call as we view YNH is currently fairly valued. Earnings will visibility is still not clear until Kiara 163 (or another project) is launched. Exposure to high-end condominium also exposes the group to lower sales momentum post-implementation of loan-to-value ratio cap of 70%. This is especially so when many of YNH’s buyers are repeat buyers. Nevertheless, we raise our target price from RM1.58 to RM1.70 as we roll forward our 10x P/E valuation (pegged to historical average) to end CY11.


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