Landbanking is the key catalyst, in our view. Post recent fundraising, we estimate that the company has about S$1.8B 'war-chest' that could be potentially deployed for landbank replenishment and land acquisition in key cities would be the key catalyst to propel a further re-rating of the stock. Assuming Yanlord was to be able to acquire at 30% gross margin (minimum targeted return), the full deployment of the existing capital would add another S$0.25/share to our RNAV estimates.
Management emphasizing prudence. With land prices having run up significantly in China, management indicated that they have sufficient landbank to sustain their growth in the near term and would be rather rational in making the acquisition decisions. Given most of Yanlord's major launches are done for the year, we believe that the stock is likely to be range bound in the near term.
We retain our Neutral rating on Yanlord, with our Jun-2010 price target unchanged at S$2.80/share, on par with our RNAV estimates. Key risks to our rating and price target include a substantial increase in ASP achieved and a quicker-than-expected deployment of the 'war-chest'. A key downside risk would be potential measures from the government.
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