As one of the larger S-chips (China-based companies listed in Singapore), Ying Li International Real Estate (SGX: 5DM) is a S$630 million property developer from Chongqing, China.
With the downturn in the Chinese property market and the market’s general distrust of S-Chips, the company’s share price has fallen over the past 12 months from a high of S$0.49 to its current price of S$0.285, just a tad higher than its 52-week low of S$0.27.
Has the slowdown in China’s property market been greatly exaggerated? Is Ying Li actually doing better than what investors might think?
What the Chinese government is actually saying
According to the People’s Daily, China’s main newspaper, the government believes that the property market in the country is in a “normal adjustment period” with housing prices in the country dropping. In the meantime, the government will maintain a balance between two extremes: It will prevent the property market from collapsing completely yet at the same time prevent the formation of an overly-speculative property market with excessively high prices.
If we view the results of Ying Li, the slowdown in China’s property market can certainly be felt. For instance, in 2013, the company’s operating profit had dropped by 43.4% to RMB292.3 million. Furthermore, if we remove Ying Li’s fair value gains (from the revaluation of the firm’s investment properties), the company only earned RMB32.7 million in operating profit for the year.
However, Ying Li is not just passively sitting around waiting for China’s property market to rebound. It still has more than 865,000 square metres of gross floor area that’s under development. And, property development isn’t the only thing Ying Li is busy with – the company has also expanded its portfolio of investment properties annually since 2009. As of the end of 2013, it has about RMB3.8 billion worth of investment properties on its balance sheet, a figure which has grown at a compounded annual rate of 28% from RMB1.45 billion in 2009.
Trouble at the helm
Despite the initiatives Ying Li has taken to counter the downturn in China’s property market, there’s one matter to note: Since the beginning of the year, the company has seen a number of important managers resign.
In January 2014, Ying Li’s Chief Executive Officer, Mr. Ko Kheng Hwa, resigned without a successor in place. This caused the company’s Chairman, Mr. Fang Ming, who’s also a major shareholder of Ying Li, to step into the role. Then just last month, the joint company secretary, Mr. Ng Joo Khin, and Chief Operating Officer, Mr. Tan Kiang Hwee, announced their resignations. It is worrying for investors especially in Mr. Tan’s case as he has only been with the company for less than a year, joining the firm only in July 2013.
With new management in place and other positive business developments, can Ying Li be brought to the next level? Or does the resignation of a number of Ying Li’s top management in quick succession signal some potentially deeper problems that lie within? Investors should dig deeper before investing.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.