Yanlord shares get a boost from Moody's report

The group's earnings were helped by a robust property market in China, where its portfolio includes Yanlord Garden (left) in Shanghai. Moody's says Yanlord's strong profit margin and liquidity support its Ba2 credit rating and stable outlook. Macquar
The group's earnings were helped by a robust property market in China, where its portfolio includes Yanlord Garden (left) in Shanghai. Moody's says Yanlord's strong profit margin and liquidity support its Ba2 credit rating and stable outlook. Macquarie has an outperform call on the stock.PHOTO: YANLORD

Shares of Yanlord Land Group rose yesterday after a favourable report from a credit ratings agency.

The counter added as much as 1.1 per cent during the trading session, before closing up 0.9 per cent or 1.5 cents at $1.775.

Investors were likely to have been swayed after Moody's Investors Service noted that the Chinese property developer's strong profit margin and liquidity supported its Ba2 rating and stable outlook.

Yanlord posted second-quarter earnings of 462.5 million yuan (S$94.5 million) on Monday, up 43 per cent from a year earlier, owing to a larger share of projects with higher profit margins, as well as more revenue from carpark sales.

Moody's last upgraded the developer's rating on April 25, from Ba3 to Ba2, after its earnings drew strength from the robust Chinese property market last year.

Its cash balance totalled 16 billion yuan, covering 2.6 times its short-term debt, as of end-June, said Mr Anthony Lee, Moody's lead analyst for Yanlord, on Wednesday.

On the other hand, the agency noted, the company's debt leverage had risen because of the high level of spending on land acquisitions.

"Nevertheless, we believe that Yanlord's high debt leverage is temporary, and will return to a level commensurate with its Ba2 rating, based on the fact that we expect to see some moderation in its land-banking activities, and an acceleration in revenue growth over the next six to 12 months," added Mr Lee.

Moody's expects that Yanlord will keep its total spending on land this year within its budget of 15 bilion yuan to 20 billion yuan, which should in turn control debt growth.

The developer is likely to lift revenue over the next 12 months, supported by unrecognised turnover of 27.8 billion yuan as at June 30, said Mr Lee.

Macquarie, which has an "outperform" call on the stock, said share buybacks might resume after the close of the takeover bid for United Engineers by a consortium led by Yanlord and Perennial Real Estate. The offer closes on Aug 29.

"According to Singapore Exchange listing rules, share buybacks are not allowed during the period of making a general offer. Thus, there have been no share buybacks since March 28. We believe the company might resume buybacks once the deal is completed," said Macquarie analyst Wilson Ho.

A version of this article appeared in the print edition of The Straits Times on August 19, 2017, with the headline 'Yanlord shares get a boost from Moody's report'. Print Edition | Subscribe