Results

1Q14 core PAT rose 54.6% yoy to RM17m, making up 40% and 29% of HLIB and consensus estimates respectively.

Deviations

We had underestimated the stronger earnings contributions from Fraser Residence, which is now 70% completed and slated to handover by July this year. Given the late stage of progress billing, Fraser Residence is driving both strong topline growth (+31% yoy, +21% qoq) and margin expansion (GP margin +17 ppts yoy).

Dividends

None

Highlights

Fraser Residence still the main earnings driver. This project is 70% completed. Moreover, current 85% takeup excludes the bumi units which YNH expects to be released soon. Therefore, we expect it to remain a significant earnings driver thru FY15.

Starting to see new earnings contributions. Kiara 163, which has seen numerous delays in the past, is starting to see earnings contribution, as construction has reached the 20% milestone with earthworks and substructure already done. Despite the challenging environment, YNH has secured 70% sales for its SOVO units at RM800-900psf. The hotel component is 25% sold, at RM1200-1300psf. Also, Puchong South is 10% completed and is now 60% booked, and YNH will be looking to convert to SPA in 2Q.

Risks

Concentration risk from very few active projects; vulnerable to cost escalation and work disruption.

Lack of liquidity.

Forecasts

We upgrade our FY14-15E forecasts by 11-14% to factor in stronger earnings contribution from Fraser Residence and Kiara 163. We have already factored in earnings from Puchong South in our prior forecasts.

Rating

HOLD

Positives: Above-industry-average gross margins; lowcost, sizeable and fully paid-for landbank.

Negatives: Concentration risk from very few active projects, vulnerable to cost escalation.

Valuation

Maintain TP at RM1.76 (60% discount to RNAV), as the bulk of its landbank, although deep in value, is unlikely to be monetised in the near term.

Source: Hong Leong Investment Bank Research - 23 May 2014