KUALA LUMPUR: ECM Libra Research is maintaining its Hold recommendation on YNH Property and target price of RM1.81, which is based on 10 times price-to-earnings (P/E) on FY10 earnings per share (EPS).

YNH had on Aug 25 posted net profit of RM15.45 million for the second quarter ended June 30 while for the first half, earnings came in at RM30.62 million.

ECM Libra Research said on Aug 26 YNH's 1HFY09 results came in within house and market expectations.

It added the annualised 1HFY09 net profit was spot on against its full-year estimates while coming in 6.3% lower than consensus estimates. YNH declared an interim dividend by way of distribution of treasury shares on a 1-for-60 basis.

Based on the Aug 25 closing price, the dividend-in-specie translates into a net yield of 1.7%. The ex-date is on Oct 22, 2009.

The research house said 1HFY09 revenue was 41.9% lower at RM136.9 million due to fewer launches and sales.

Earnings before interest and tax (EBIT) margin remained firm at 33.7% which was 1.2 percentage points higher than the 1HFY08. Correspondingly, net profit declined by rather similar rate as revenue to RM30.6 million.

"Although YNH has massive unbilled sales of RM980 million (excluding office block sold to Kuwait Finance House for RM920 million) vis-à-vis its annual revenue, substantial amount of these unbilled sales relate to projects which have not taken off yet and/or pending finalisation of sales agreements.

"Unbilled sales for on-going projects amount to only RM260 million which will only support earnings in FY09 and FY10 with minimal growth prospects," it said.

ECM Libra Research said its expectation of earnings growth resumption in FY11 would hinge very much on the launch of Kiara 163 in Mont Kiara and Fraser Residence in downtown Kuala Lumpur (behind Renaissance Hotel).

Kiara 163, which has secured RM280 million sales of retail and office space, will see its serviced apartment component being launched by end 2009. With a four-year delivery timeline from end 2008, there is no hurry to start CONSTRUCTION [ registerQuotes("CONSTRUCTION", "CONSTRUCTION_span"); ] before registering more sales. The drawback, however, is that earnings contribution will only come in from late FY10 onwards.

It added Fraser Residence will also be launched by end 2009. This project has seen its initial gross development value of RM200 million being revised to RM550 million.

"We have not imputed the earnings of this project into our model at this juncture, as we prefer to see some solid milestone being achieved first," it said.

On Menara YNH, the sale of office block to Kuwait Finance House is still pending but management has guided that there will be closure by end 2009. Otherwise, YNH will sell the building to other buyers instead.