Results

• Below expectations: Despite 9MFY14 revenue went ahead of forecasts, PATAMI came below expectations, accounting for 70.4% and 57.7% of ours and consensus estimates.

Deviations

• Higher-than-expected property development revenue.
• Higher-than-expected tax rate.

Dividends

• None.

Highlights

Fraser Re sidence still the main earnings driver. The project is expected to reach completion in 4QFY14 and will remain the focus of the group. Demand on the project remained encouraging.

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: RM1.1bn), with 60% of the GDV comprising of service apartments which are planned to be sold fully furnished. The retail shopping mall will also be one of the main attractions. Piling and sub structure works for this project has commenced since last year.

Sfera Residen s i (GDV: RM 322m) located in Puchong South, is expected to contribute over the next 3 years. With piling and substructure already commenced, its soft launch is expected to be in 4QFY 14.

Menara YNH with GDV of RM2.1bn has already obtained approval on development order, which will comprise of office tower and shopping mall.

Risks

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

Forecasts

• We tweaked our property development sales upwards from faster progress billings but lowered down our margins taking into account challenging business environment as we turned more conservative. As such, FY14-16 EPS is reduced by approximately 7%.

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

• TP reduced to RM1.97 (50% discount to RNAV), from RM2.22, which implies 12.6x FY15E P/E to reflect that YNH remains deep in value, but will take time to eventually monetise its valuable landbank.
• Maintain HOLD.

Source: Hong Leong Investment Bank Research - 1 Dec 2014