Results

• Below expectations: YNH’s PAT of RM46.2m came below expectations, accounting for 70.4% and 57.7% of ours and consensus estimates.

Deviations

• Lower-than-expected property development revenue.

Dividend

• s

• Proposed final share dividend on the basis of 1 treasury share for every 100 ordinary shares held.

Highlights

• FY14 earnings drivers. YNH’s FY14 performance was mainly derived from progressive sales of Fraser Residence KL, commercial properties in Manjung Point Township, progressive sales of its inventories in Ceriaan Kiaran (Mont Kiara), Taman Pundut Raya and sales of development land.

• 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 substructure works for this project has commenced since FY13.

• Sfera Residensi (GDV: RM418m) located in Puchong South, is expected to contribute over the next 3 years. With piling and substructure already commenced, the group is expecting the project to contribute positively for the next three years.

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

Risks

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

Forecasts

• We tweaked our property development sales downwards from slower progress billings, taking into account challenging business environment as we turned more conservative. As such, FY15-16 EPS is reduced by approximately 16.2-25.5%.

Rating

SELL

Positives

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

Negatives

• Concentration risk from very few activeprojects, vulnerable to cost escalation.

Valuation

• TP reduced by 19.8% to RM1.58 (60% discount to RNAV) from RM1.97 (or 50% discount), which implies 12.1x FY15E P/E. Given total potential downside now is more than 10%, along with its continuous quarters of disappointing results, we downgrade the stock to SELL.

Source: Hong Leong Investment Bank Research - 2 Mar 2015