Wednesday 8 November 2023

Yanlord Land- Share Price Run Up On China Rumour to Instruct Ping An to Bail Country Garden (Also Bought Ping An Insurance)

Just in a few hours ago, news rumour is that China second largest insurer, non stated owned Ping An Insurance, has been asked to invest cash into Country Garden to save it.

What Happened in the Market

As expected of news of a cash cow stepping in to save property developers, the rising tide lifted all boats. Most property developers experienced a double digit surge in share price on this news. Yanlord didnt up as much but merely a few percentage. 

Personally, I feel the China Property Crisis is over. This is becausey the developers who have not folded are the ones that followed China's 3 Red Line Rules. For example, Country Garden obeyed the communist party regime and followed all the regulatory guidelines, while the owner threw in their own assets as interest free loan as the kitchen sink, however due to mounting foreign debt expenses, Country Garden still folded. Only Evergrande will be the one that collapses, but the domino stops there with the Chinese Authorities stepping in. This means a lot.


With the crisis almost over, I feel Yanlord should start to be revalued closer to its price book value of SGD$3.40. Unlike many other developers, Yanlord is cash rich with the ability to tide over 2 years of liabilities. Yanlord, in the eyes of the authorities, meets all regulatory requirements of the 3 Red Line. Lastly, Yanlord is still profitable because it has been prudent in land purchase and developments are positioned in the high end market (SC Global-like but in China)

Despite the slowing sales, I am confident Yanlord will be revalued to about 0.4 times its price book $1.40. This is based on my comparable to SC Global, a Singapore luxury home developer that was privatised at this P/B metric.

On another note, I have taken the opportunity to purchase 1,000 Ping An shares given its 6% dividend yield and the sell down in share prices, with the view that Ping An would not be taking a controlling stake in Ping An nor taking a terrible deal to help Country Garden.

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