Stock Name: YNHPROP
Company Name: YNH PROPERTY BHD
Research House: ECMLIBRA
YNH Property Bhd
(May 5, RM1.76)
Reiterate sell at RM1.77, target price reduced to RM1.40: Following a post-1QFY10 results briefing last week, we gathered further information from the management. Although earnings visibility for FY10 exceeds our earlier expectation as a result of better-than-expected sales of completed inventories, we are still concerned about earnings visibility from FY11 onwards.
Unbilled sales as at 1QFY10 were RM825 million. However, stripping away unbilled sales of Kiara 163 (RM300 million) and the retail portion of Menara YNH (RM300 million), which are still subject to uncertainty, adjusted unbilled sales amount to only RM225 million which is less than one year's revenue.
Contributions from Ceriaan Kiara is expected to cease in 1HFY10 following its completion. Although Fraser Residence will pick up some of the slack when it is launched in June, we are not bullish on Kiara 163 and Menara YNH which may be delayed due to a building plan revision and negotiation with potential new partners respectively.
We have revised our earnings estimate for FY10 (+47.7%) and FY11 (-28.0%) as well as introduce FY12 numbers. Our revision has taken into account (1)
higher-than-expected sale of inventory in FY10; and (2) the launching of Fraser Residence in June.
We reiterate our sell call as we continued to be concerned of YNH earnings visibility as planned projects face risks of further delay.
Although the stock is trading at steep discount to its revised net asset value (RNAV) of RM2.96 (previously RM3.14), the valuation gap is unlikely to narrow anytime soon, given risk of further project delay. Furthermore, with the new accounting standard IFRIC 15 being implemented from FY11, YNH may even record an accounting loss until Fraser Residence is completed in FY13 or FY14. This will further dampen investors' confidence in the stock.
Our target price, pegged to 10 times of average FY10 and FY11 earnings per share (EPS), has been revised from RM1.43 to RM1.40. We believe our target price is fair as it would trade closer to average price-to-earnings (P/E) of 9.1 times compared to the current P/E of 12.1 times which is higher than the one time standard deviation above the average P/E in the past.
At the current valuation, YNH is more expensive than Sunrise Bhd, one of our top picks for the property sector. - ECM Libra Investment Research, May 5
This article appeared in The Edge Financial Daily, May 6, 2010.
Company Name: YNH PROPERTY BHD
Research House: ECMLIBRA
YNH Property Bhd
(May 5, RM1.76)
Reiterate sell at RM1.77, target price reduced to RM1.40: Following a post-1QFY10 results briefing last week, we gathered further information from the management. Although earnings visibility for FY10 exceeds our earlier expectation as a result of better-than-expected sales of completed inventories, we are still concerned about earnings visibility from FY11 onwards.
Unbilled sales as at 1QFY10 were RM825 million. However, stripping away unbilled sales of Kiara 163 (RM300 million) and the retail portion of Menara YNH (RM300 million), which are still subject to uncertainty, adjusted unbilled sales amount to only RM225 million which is less than one year's revenue.
Contributions from Ceriaan Kiara is expected to cease in 1HFY10 following its completion. Although Fraser Residence will pick up some of the slack when it is launched in June, we are not bullish on Kiara 163 and Menara YNH which may be delayed due to a building plan revision and negotiation with potential new partners respectively.
We have revised our earnings estimate for FY10 (+47.7%) and FY11 (-28.0%) as well as introduce FY12 numbers. Our revision has taken into account (1)
higher-than-expected sale of inventory in FY10; and (2) the launching of Fraser Residence in June.
We reiterate our sell call as we continued to be concerned of YNH earnings visibility as planned projects face risks of further delay.
Although the stock is trading at steep discount to its revised net asset value (RNAV) of RM2.96 (previously RM3.14), the valuation gap is unlikely to narrow anytime soon, given risk of further project delay. Furthermore, with the new accounting standard IFRIC 15 being implemented from FY11, YNH may even record an accounting loss until Fraser Residence is completed in FY13 or FY14. This will further dampen investors' confidence in the stock.
Our target price, pegged to 10 times of average FY10 and FY11 earnings per share (EPS), has been revised from RM1.43 to RM1.40. We believe our target price is fair as it would trade closer to average price-to-earnings (P/E) of 9.1 times compared to the current P/E of 12.1 times which is higher than the one time standard deviation above the average P/E in the past.
At the current valuation, YNH is more expensive than Sunrise Bhd, one of our top picks for the property sector. - ECM Libra Investment Research, May 5
This article appeared in The Edge Financial Daily, May 6, 2010.
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