Brokers' take: DBS upgrades Yanlord Land to 'buy' on solid long-term outlook

DBS Group Research on Wednesday (Mar 2) upgraded its call on Yanlord Land Group Z25 from "hold" to "buy", following the property developer's earnings performance for the financial year ended Dec 31, 2021.

In a report, the brokerage increased its Yanlord target price from S$1.25 to S$1.43, based on 4.9 times the forecasted FY2022 price-to-earnings (PE) ratio, which is equivalent to the group's 5-year average forward PE ratio and represents a 20 per cent upside from its Tuesday close price of S$1.19.

Shares of Yanlord were trading at S$1.20, up 0.8 per cent or S$0.01, as at 4.11 pm on Wednesday.

DBS credited the increase in valuation to the property developer's gross margins and pre-sales outlook; it observed that gross margins show signs of bottoming in FY2021, and that the pre-sales outlook is likely to stage a solid pickup relative to peers in FY2022.

The group's pre-sales growth outlook, in particular, is at an inflection point, as the company's liquidity has been largely unaffected by turbulence in the property sector, thanks to its decent cash collection and balance sheet, in the brokerage's view.

DBS added that Yanlord's expected 75 billion yuan (S$16.14 billion) in pre-sales in FY2022, a 26 per cent increase from its FY2021 figure of 59.59 billion yuan, is likely to place it as one of the fastest-growing developers of 2022, particularly as most of its peers are likely to scale back operations.

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As for the group's distribution practice, DBS projects that the property developer's dividend per share of S$0.068, unchanged for the 5th consecutive year, is likely to continue despite uncertainties in the property sector.

This is due to Yanlord's "disciplined financial management", said DBS, noting that in addition to its strong balance sheet and liquidity position, the group does not face refinancing pressure as its offshore bonds are not due until at least April 2023, unlike many of its peers.

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