DBSVickers Report - 21 Jan 2008

Yanlord Land Group Demand for high-end residences remains strong

Story: We hosted Yanlord at our recent Pulse of Asia Conference. The management remains confident of the outlook for high-end residences in China, with their most recent launch of another batch of apartments in Yanlord Riverside City (Phase 2) over the first two weekends of January experiencing high take-up rates and healthy ASP growth.

Point: This came on the back of some concern about a perceived softening of the PRC real estate market. The media had reported lower property transaction volumes and declining prices for developments towards the end of 2007, as the mortgage policy on second homes tightens.

Relevance: While we have incorporated the development surplus on their most recent site acquisitions, our target price has been revised downwards slightly to S$4.21 (at par to RNAV) as we factor in higher Land Appreciate Tax (LAT) charges. With an upside of 52% on this stock at current price levels, we see value emerging. This also translates into PE of around 14x and 11x on FY08F and FY09F EPS respectively. Maintain BUY.

Ascendas REIT (AREIT SP)
Slowly and steadily

A-REIT reported 15% higher net income available for distribution yoy at S$47.2, on the back of 13% increase in gross revenues to S$80.2m. This was mainly due to additional rental income from completed acquisitions and positive rental reversions from its high-tech industrials and business as well as science parks. Average occupancy levels rose to 98.7% as at 31 Dec 07 compared to 96.1% a year ago. Leverage at 38.6%. As at end Dec 07, AREIT had an aggregate gearing of 38.6%, which was 88% fixed at 3.39% and an average weighted term of 3.92 years. Interest cover ratio was 5.32x.