Strong yoy growth. 3QFY12 results were largely in line with consensus. Net profit came in at RMB54.6m in 9M12 vs a loss of RMB33.4m in 9M11. The growth is mainly driven by the sale of IFC office units and rental income growth. Sufficient revenue contributors in pipeline, including IFC, Yingli International Plaza, Financial Street project and San Ya Wan Phase 2, give clear earnings visibility for the next three years. Maintain BUY with RNAV derived target price of SGD0.50.

RNAV estimate intact despite slightly slower revenue recognition. Ying Li’s property sales are slightly slower than we expected. But the cash flow from pre-contract sales is largely in line. We believe Ying Li are on the track to meet its pre-sales target for this year, thus the delay in revenue recognition will not significantly impact our RNAV estimate.

Recent SGD100m bank facility provides more flexibility. Ying Li secured SGD100m bank facility from SCB and OCBC in October. This largely eased the potential redemption pressure of its convertible bonds in March 2013. The new bank facility together with existing undrawn loan commitments of RMB521m is sufficient to meet the CB redemption requirements. Thus Ying Li will have more flexibility to keep its IFC offices for rental purpose instead of for sale. With more office units being booked under “investment properties” category, we are likely to see higher revaluation gain in 4Q12.

Deep discount to RNAV. We derived our target price based on 40% discount to our RNAV forecast. Big proportion of Ying Li’s property assets located in the center of Chongqing Jiefangbei CBD and its IFC office is currently still the only new international Grade A office within the Chongqing “Jiefangbei” CBD. Given the prime location and very high-end profile of Ying Li’s assets, we believe this stock deserve a higher valuation than current level.

Source: Maybank Kim Eng Research - 16 Nov 2012