[Click eStock] "JSND, Establishing Growth Foundation with Abundant Liquidity"

DB Financial Investment Report

[Asia Economy Reporter Minji Lee] DB Financial Investment maintained a buy rating on Jaes & D on the 9th and kept the target price at 14,000 KRW, based on the judgment that abundant liquidity will accelerate growth.

As of the end of the third quarter, Jaes & D has 11 construction sites. Including Gyeongju Jaireune (11.2 to 1 for the first priority) which was sold last month, the number of projects confirmed for new construction is 11. Although eight sites are scheduled to be completed next year, since they are concentrated in the second half and some projects have not yet confirmed their sales timing, the number of construction sites that will include housing development sales next year is expected to be more than double that of this year.

The gross profit margin for housing development in the third quarter was 22.8%, due to the confirmation of the execution cost rate at sites with high sales contribution. In the fourth quarter, settlement gains are expected from the completion of Guui Jaiela, but since the effect of confirming the execution cost rate will decrease, profitability is predicted to return to normal. From the fourth quarter, sales growth rather than profitability improvement is expected to be the key driver of performance improvement.

Going forward, abundant liquidity is expected to be the growth foundation for Jaes & D. As of the end of the third quarter, Jaes & D's cash equivalents (including short-term financial assets) amount to 265 billion KRW. Due to increased profits in the housing sector and a paid-in capital increase, liquidity is excessively abundant compared to net assets of 296 billion KRW.

Yoonho Cho, a researcher at DB Financial Investment, explained, “In the short term, it is expected to become a resource exceeding long-term borrowings (50 billion KRW), and like last year when a gas station site was purchased, it will be possible to secure land for its own projects.” He added, “Depending on the case, it could be used as funds for mergers and acquisitions of companies in the same industry or startups.”

Recently, Jaes & D's stock price has shown a sluggish trend after the paid-in capital increase. This is because the stock valuation has decreased due to dilution, but now is the time to regain interest. The order backlog secured is expected to be converted into revenue starting next year, and the positions of Jaiela and Jaireune in small-scale complex development and maintenance projects are believed to be strengthening.

He said, “Since housing development sales are expected to increase by more than 100 billion KRW next year, the company's liquidity will become even more abundant,” adding, “Based on abundant liquidity, land acquisition and mergers and acquisitions can be expected to enhance growth potential.”