Yanlord Land - May contract sales - Rmb1.4bn

FY09 earnings largely locked in. Yanlord achieved Rmb1.4bn contract sales in May based on our latest conversation with management. This brings the company's YTD contract sales to Rmb5.3bn, surpassing its 2008 full-year sales of Rmb4.8bn. We note that sales for markets other than Shanghai have picked up in May, which contributed to 48% of the total monthly sales. Together with Rmb1.1.bn sales carried over from last year, we estimate that more than 80% of the group's FY09E earnings have been locked in.

Inventory has been largely cleared. With contract sales running at an extremely high rate for the last two months (Rmb1.9bn for April and Rmb1.4bn for May), Yanlord has cleared a substantial amount of its inventory carried over from 2008, with little inventory left in Yanlord Riverside City in Shanghai (the completed portion) and Nanjing Bamboo Garden.

Development margin likely to peak this year. We estimate that Yanlord’s development margin (post LAT) will be at a high of 42% in 2009, thanks to Yanlord Riverside City project in Shanghai. With only 90,000sqm of GFA left for sale in this project, we expect development margin (post LAT) to start to decline in 2010 (39% on our estimates), with a larger scale drop likely in 2011 (31% on our estimates).

Eye on Tianjing launch in July. Yanlord has postponed the launch of Tianjing Yanlord Riverside Plaza slightly from June to July. As no more major launches are expected this month, we are looking out for a quieter June, unless management decided to push out more units from Yanlord Riverside City in Shanghai for pre-sale. Yanlord Yangtze Riverside City in Nanjing is likely to be launched on schedule in August this year.

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