Results on track. Ying Li delivered a set of decent FY12 results. Although revenue recognition was slower than expected, full-year net profit of RMB377m was largely in line with market expectation, helped by fair value gains on investment properties. IFC, Ying Li International Plaza and San Ya Wan phase 2 provide good earnings visibility for FY13 to FY15. We believe Ying Li can capitalize on Chongqing’s growth opportunity and be a big beneficiary of China’s “Go West” policy. We continue to like Ying Li’s high-quality assets and undemanding valuation and reiterate our BUY call. We also raised our target price to SGD0.61, pegged to 25% discount to RNAV.

More details. Revenue from property sales achieved RMB501m, with 80% of which coming from IFC office sales. We expect IFC office sales recognition to continue in FY13. Pre-sale of Ying Li International Plaza has reached RMB914m, which will support the revenue recognitions from FY14 onwards. Full year rental income increased by 81% yoy to RMB84m as more shops and office units in IFC were leased out in FY12.

Redemption of CB will be a short term catalyst. Ying Li secured a SGD100m bank facility from SCB and OCBC in October 2012. We expect Ying Li to use bank loans and its existing cash balance to fully redeem its convertible bonds soon. This will benefit the company in two aspects. Firstly, Ying Li will build up more flexibility to keep its IFC office units for rental purpose thus have more recurring income sources. Secondly, if more office units are categorized as “investment properties”, we are likely to see higher revaluation gain in FY13.

RNAV accretion from plot ratio increase in SYW phase 2. Pending final approval, the blended plot ratio in Ying Li’s San Ya Wan project will be increased from 1.5x to 1.9x. However, as SYW phase 1 and phase 1A have been completed and fully sold, all the additional GFA will be constructed in phase 2, which will lift phase 2 plot ratio to around 3x on our estimates. Potential RNAV accretion is expected to be around 4%.

Source: Maybank Kim Eng Research - 28 Feb 2013