YNHP’s 9MFY10 annualised net profit came slightly above our estimates and consensus expectation. 9MFY10 y-o-y turnover dipped 4% (q-o-q: -15%) but net profit improved by 6% (q-o-q: -2%) on better margins as the share of earnings contribution from its higher-margin development arm increased relative to the other divisions. Management is on track to launch its Fraser Residence and Kiara 163 by early next year. Leaving our earnings forecast unchanged for now, we are maintaining our TP of RM3.03 on the stock, based on 1.5x CY11 P/NTA, which is equivalent to about 1.5σ above its 6-year historical mean. Maintain BUY.
Losing momentum. 9MFY10 y-o-y turnover fell by 4% (q-o-q: -15%) but net profit improved by 6% (q-o-q: -2%) on better margins as the share of earnings contribution from its higher-margin development arm increased relative to the other divisions. The falling q-oq topline numbers reaffirm our belief that YNHP may continue to report weaker quarters ahead, until the launch and commencement of construction works on its upcoming Fraser Residence and Kiara 163 projects in early year 2011. Its latest unbilled sales stood at RM805m, comprising Manjung projects (RM85m), Ceriaan Kiara (RM40m), Kiara 163 (RM300m), Menara YNH retail podium (RM300m) and Pantai Hospital (RM80m).
Earnings growth recovery postponed to FY11. We mentioned before that YNHP’s earnings growth recovery would take place in FY10. However, we think this is likely to be delayed to FY11 instead as YNHP thinks that it would only be able to launch its Fraser Residence (GDV: RM533m) by 1Q11 and Kiara 163 (in different phases, worth a GDV of RM875m) very soon after, versus the previously guided mid- to late-2010. As we have already taken these changes into account in our forecasts during the previous quarter, we are leaving our FY11 earnings forecasts unchanged for now. If the guidance for the launches of these two projects were to materialise, YNHP would likely register a commendable y-o-y earnings growth of 28% in FY11. Note, however, that we continue to discount any earnings contribution from Menara YNH (although management says that it has sold off the project’s upcoming retail podium for RM300m), as we are unsure of when the construction on the tower will commence.
Maintain BUY. We believe that the Malaysian mid-to-high end residential property market is on the cusp of a positive re-rating soon. Although we recognise that the heydays for Klang Valley high-end condos market are over, the coming upcycle will inevitably spill over to this particular resident asset class soon. Coupled with the anticipated stronger earnings growth ahead on the launches of its two huge property development projects ahead, we continue to value the stock at RM3.03 based on 1.5x CY11 P/NTA, which is equivalent to about 1.5σ above its 6-year historical mean. During the peak in 2007, the P/NTA of the stock traded at 2.0σ above its 6-year historical mean (or 1.7x P/NTA). Maintain BUY.
