With some RMB8.6 billion in unrestricted cash on hand as of June and the continued sell-down of its projects, with some RMB30 billion in saleable resources planned for launch in the current FY2025, Yanlord appears well positioned to pay down debts and emerge from the multi-year deleveraging phase, says DBS.
However, in the near term, no thanks to the ongoing down cycle in China's property market, Yanlord's development business will continue to cloud its earnings outlook. In the most recent 1HFY2025, gross profit margin was a better-than-expected 32.3%, versus the industry average of 15%, mainly due to a shift in the mix of projects delivered.
DBS warns that the seemingly high margin is not sustainable, particularly with continued ASP declines since 2Q25 and lack of new project contributions will likely weigh on the margin outlook in 2HFY2025 alongside further inventory impairment risks.
On the other hand, its recurring businesses, including rental and property management, remain resilient.
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The DBS analysts have raised their FY2025 and FY2026 earnings forecasts to reflect better margin assumptions. However, these two years are likely to remain loss-making.
From an earlier target price of 50 cents, DBS has raised the target price to 58 cents, which is pegged to a 0.2x one-year forward PB, in line with the average level seen during Dec 22 - Feb 24 when Yanlord repurchased its offshore notes.
Yanlord shares changed hands at 64 cents as at 10.51 am, up 2.42% for the day and but down 3.79% year to date.
