Yanlord Land Group Limited (Yanlord) reported a solid set of 3Q18 results, with PATMI beating our expectations. Revenue jumped 51.7% YoY to RMB5,711.6m, underpinned by a 40.1% increase in GFA delivered (147.1k sqm) and 3.1% increase in ASP to RMB33,758 psm.

Gross profit increased 66.4% YoY RMB2,616.1m, and this translated into a gross profit margin of 45.8% (+4.0 ppt). For 9M18, Yanlord’s revenue rose 57.1% to RMB22,562.6m, forming 75.5% of our FY18 forecast.

PATMI of RMB3,287.7m represented an increase of 62.4% and this accounted for 87.8% of our full-year projection due largely to lower-than-expected noncontrolling interests (PAT accounted for 78.4% of our FY18 forecast).

Looking ahead, Yanlord has RMB11.3b of accumulated pre-sales pending recognition, as at 30 Sep 2018, with advances received amounting to RMB9.0b. It has a land bank of 7.79m sqm, which is sustainable for development for approximately five years.

If we were to pick one negative from this set of results, it would be the increase in Yanlord’s net gearing ratio from 78.3% in 2Q18 to 91.2%, as at 30 Sep 2018.

We will provide more details after the analyst conference call. For now we have a BUY rating and S$2.13 fair value estimate.

Source: OCBC Research - 14 Nov 2018