Broker's take: KGI initiates coverage on Yanlord with 'outperform' on resilient China property market

KGI Securities on Monday initiated coverage on Chinese property developer Yanlord Land Group with an "outperform" call and target price of S$1.30 - based on a sum-of-parts valuation between the group's development and rental businesses.

As at 11.16am on Monday, Yanlord shares were trading S$0.01 or 0.9 per cent higher to S$1.17 on a cum-dividend basis

Although the Covid-19 outbreak has taken a toll on the global economy, the property sectors in a few Asian countries have largely mounted a V-shaped rebound, buoyed by lower borrowing costs while acting as a safe haven for capital amid volatile financial markets.

China is one such country where residential property average selling prices (ASP) continue a multi-year uptrend despite a prior lockdown and economic disruption, KGI analyst Kenny Tan said in a research note.

He added that Yanlord's target market segment has been "relatively unaffected", as luxury home purchases continue to rise.

Yanlord develops luxury residential properties with one of the highest ASP among major listed Chinese developers, Mr Tan observed.

Moreover, Yanlord's expansion into Singapore may be helpful for local investors to gain a better understanding of the company, he said.

The group privatised United Engineers and made a direct property purchase and redevelopment of a condominium together with a Hongkong Land subsidiary.

"We think this will help with Yanlord's branding amongst local investors, as the company is currently sitting at an attractive dividend rate versus peers," Mr Tan noted.

The group currently has the highest dividend yield across Singapore-listed property developers and a "very fair" dividend payout ratio, according to the research note.