Highlights

We met with the management of YNH to get some updates on its projects and future earnings outlook.

Future potential REIT. Although YNH did not provide a clear timeline for the development of Menara YNH, management hinted at setting up a REIT in 5 years’ time. Other than Menara YNH, other incomegenerating assets in its stable include: (1) The AEON mall at Seri Manjung; (2) The Pantai Hospital in Manjung; and (3) The future retail mall portion of Kiara 163 (350k sft).

Manjung township updates. Given strong growth in activity in the area with Vale’s iron ore distribution center and SK Petro’s fabrication yard, YNH will be building an international school with a build and lease agreement.

Fraser Residence nearing its tail end. This project is >70% completed and 90% sold. We expect it to remain a significant earnings driver thru FY15.

KL projects moving slowly. Kiara 163 (GDV: RM1.3bn), which has seen numerous delays in the past, is now slated to officially launch by end-2014. The serviced apartments are indicatively priced at RM1,300 psf while the SOVO units are priced at RM800 psf. Puchong South (GDV: RM500m) was previously scheduled to officially launch in 2Q but now has been deferred to 4Q, with Block 1 currently 40% booked. Bangsar South will most likely be launched only in 2015.

Genting Highlands updates. Recall YNH purchased 95 acres in Genting Highlands for less than RM4.00 psf in 2009. YNH is planning to start with 3,000 units under Phase 1, likely in 2-3 years’ time to coincide with the opening of the new Twentieth Century Fox theme park.

Risks

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

Forecasts

Maintained, as we have already incorporated the above into our 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

We raise our TP from RM1.76 to RM2.22 (reduce discount to RNAV from 60% to 50%), which implies 15x FY15E P/E. This reflects the fact that YNH remains deep in value, but will take time to eventually monetise its valuable landbank.

Source: Hong Leong Investment Bank Research - 24 Jul 2014