DBS Group Research has maintained its "buy" call on Yanloard Land Group. However, with lowered earnings forecast, analysts Jason Lam, Ken He, Dexter Chun and Ben Wong have cut their target price from $1.43 to $1.06.
The China-based but Singapore-listed developer surprised shareholders recently when it refrained from declaring a dividend following its FY2022 earnings.
In previous years, the company has been paying 6.8 cents per share.
Yanlord on Feb 28 reported earnings of RMB1.5 billion for the year ended Dec 31 2022, a drop from earnings of RMB2.7 billion reported for FY2021. Revenue in the same period was down from RMB34.8 billion in FY2021 to RMB28.7 billion for FY2022.
In their March 20 report, the DBS analysts see signs of a turnaround, given Yanlord's sizeable unbooked sales of some RMB57 billion as of Dec 2022, offering "decent" revenue booking visibility for the current FY2023 despite China's ongoing property downturn.
The DBS analysts note that Yanlord by suspending its dividend and also scaling back on land acquisition, is "playing it safe" as the company prioritise making repayments in the near term with certain tranches of debt maturing.
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"It intends to take a conservative approach to manage cash outflows to prepare for the repayment peak in FY23-24," write the analysts.
The revised target price, following a 4% cut in earnings estimate, is pegged to 4.1x FY2023 earnings, which was the average 1-year forward PE of the company since 2H21, when the property market started to trend down.
In contrast, smaller Chinese developers have been valued at a lower multiple of 3.2x over the same period.
See also: Macquarie revises Singapore earnings growth for FY2024 to 7% from 3%
"We believe Yanlord deserves an above-peers valuation given its better liquidity management track record and solidified market reputation," the analysts write.
Yanlord, as at 11.53am, traded at 88 cents, up 1.73% for the day.
