Results

• Below expectations: Y NH’s PAT of RM5.2m came below expectations, accounting for only 9.7% and 7.3% of ours and consensus estimates.

Deviations

• Lower-than-expected property development revenue.

• Higher-than-expected costs of sales as well as selling and marketing expenses.

Dividends

• None.

Highlights

• 1QFY14. The group registered earnings of RM5.2m, showing a yoy decline of 69.6%, due to the completion of Fraser Residence Kuala Lumpur project.

• FY14 earnings drivers. YNH’s 1QFY15 performance was mainly derived from progressive sales of unsold units in Fraser Residence Kuala Lumpur, progressive sales of its inventories in Ceriaan Kiaran (Mont Kiara) and sales of development land.

• Kiara 163. Despite the challenging environment, YNH has managed to secure healthy sales for Kiara 163 (overall GDV: RM1.0bn), 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.

• Sfera Residensi (GDV: RM418m) located in Puchong South, is expected to contribute over the next 3 years. With piling and substructure al ready 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

• Unchanged for now, pending further information from management.

Rating

SELL

• Posi tives: Above-industry-average gross margins; low-cost, sizeable and fully paid-for landbank.

Negatives

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

Valuation

• TP remained unchanged at RM1.58 (60% discount to RNAV), which implies 12.1x FY15E P/E. Given total potential downside is still more than 10%, along with its continuous quarters of disappointing results, we are maintaining our SELL call on the stock.

Source: Hong Leong Investment Bank Research - 27 May 2015