Upside potential for YNH shares


PETALING JAYA: The share price of YNH Property Bhd (YNH) has, over the last 12 months, appreciated some 165% at yesterday’s close of RM3.34 but analysts remain optimistic of further upside in the stock.

Based on OSK Investment Bank’s earnings per share estimate of 26.7 sen for fiscal year ending Dec 31, and yesterday’s closing price, the shares are currently trading at an attractive price-to-earnings of 12.5 times.

A foreign research house, which has a target price of RM4.40 on the property developer, said in a recent report its estimate was based on “our bullish view that YNH will sustain high earnings before income tax and amortisation margins as it aggressively develops its prime land bank.”

With land costs representing less than 20% of a project’s gross development value (GDV), YNH could price its prime properties competitively without compromising on its high margins, which could average about 39%, it said.

The foreign house expects YNH’s earnings to expand on a compounded average growth rate of 24% from FY07 to FY09, buoyed by new high-end projects and ongoing developments.

The company intends to roll out six new projects with a total estimated GDV of RM2.5bil over the next three years. This excludes its ongoing projects worth RM2.8bil in GDV.

Meanwhile, OSK, which included YNH in its list of Top Malaysian Small Companies (The 100 Jewels), has a target price of RM3.78 on the stock, with its growth prospects underpinned by its niche projects in the Klang Valley.

These include Radiant Kiara, Wisma YNH, land behind Renaissance Hotel in Jalan Sultan Ismail and parcels of land in Mont’ Kiara.

Radiant Kiara in Mont’ Kiara comprises 238 high-end condominiums worth a GDV of RM160mil, with an average selling price of RM360 per sq ft.

Another 18 acres in the same area were earmarked for service apartments and condominiums, OSK said, adding that it expected the project to be launched from 2009 onwards.

Wisma YNH is a 60:40 joint venture with CapitaLand Ltd and has a GDV of RM1bil.

Construction of the office and retail space was likely to start in the second half of the year for completion by 2011, the brokerage added.

It said YNH had also earmarked land behind Renaissance Hotel for condominiums and service apartments, which were expected to be launched next year.

The company is also set to benefit from the string of incentives announced in the first half of the year to boost the property sector.

A bank-backed brokerage said the authorities were likely to announce more goodies in the second half to entice buyers such as the restructuring of EPF depositors’ accounts to allow more withdrawals, a reduction in or waiver of stamp duty tax, and a reduction or waiver of withholding tax on real estate investment trusts.

YNH has pledged to pay at least 30% of its profit after tax as dividend to shareholders.

For the year ended Dec 31, 2006, it paid out a total dividend of 10 sen per share. As the company’s earnings grow, YNH shareholders can expect better dividend payouts.

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