Results

1H14 PAT increased 19% yoy to RM30.1m, making up 50% and 44% of HLIB and consensus estimates respectively.

Deviations

None.

Dividends

YNH has announced it will distribute treasury shares to the entitled shareholders at the ratio of one treasury shares for every 130 ordinary shares. Based on current market price, we estimate this to be equivalent to 1.6 sen DPS.

The entitlement date and distribution date on the treasury shares are on 28th Oct 2014 and 28th Nov 2014 respectively.

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 progressively. Therefore, we expect it to remain a significant earnings driver thru FY15.

Preparing for the future. Earnings visibility for the next 2-3 years will be secured from its three upcoming projects in Klang Valley, namely Kiara 163 @ Mont Kiara, Sierra Residence @ Puchong South and Bangsar South.

Kiara 163. Despite the challenging environment, YNH has managed to secure healthy sales for Kiara 163 (overall GDV: RM1.2bn), with the SOVO units >70% sold at RM800-900psf, while the hotel component is 30% sold, at RM1200-1300psf. Earnings contribution is minimal this year as it is still at substructure phase.

Puchong South (GDV: RM500m) is now 10% completed and 60% booked, therefore earnings contribution remains minimal at this stage.

Bangsar South (GDV: RM650m) remains in the planning stage, and YNH is looking to launch in 2015.

Risks

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

Forecasts

We maintain our FY14-15E forecasts, and raise our FY16E forecast by 57% to factor in sustained earnings visibility from its three Klang Valley projects.

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 RM2.22 (50% discount to RNAV), which implies 15x FY15E P/E to reflect that YNH remains deep in value, but will take time to eventually monetise its valuable landbank.

Source: Hong Leong Investment Bank Research- 29 Aug 2014