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12 September 2011

LOCAL Indonesians are still a force to reckon with in ericong@kimeng.com the high-end property segment. This, despite all the brouhaha about rich mainland buyers of Hot stock Singapore property, Indonesians actually Bukit Sembawang Estates (BS SP, $3.98, NOT RATED) accounted for 4.8% of the $5m and above It has a land bank like no other with over 2.6m sq ft segment, vs 3.5% for Chinese, in 2011 YTD. of unsold GFA zoned for landed housing, a segment of the property market that developers are still positive Platinum privileges on, judging from the strong interest in a recent land Meet the CEO ARA Asset Management (15 tender in Serangoon Gardens. Net gearing for the September 2011): With an AUM of $18.8b, ARA company is at a low of <20%. The estimated $900m in Asset Management Limited (ARA) has developed revenue from sold units provides good earnings a sustainable platform that generates strong visibility. Remaining unsold land bank is valued at recurring earnings for shareholders. Meet CEO, $3.6b. Mr John Lim, as he shares with you his strategy ooiyitung@kimeng.com for the next phase of growth. 1-2pm. 39F Boardroom, Suntec Tower 2. Please register for Overnight market snapshots the session through your trading representative.
Dow Jones Nasdaq FTSE 100 CAC 40 DAX Index 10,992.13 2,467.99 5,214.65 2,974.59 5,189.93 -303.7 -61.2 -125.7 -111.2 -218.5

Yangzijiang Shipbuilding (YZJ SP, $1.05, TP $1.15, HOLD) We are downgrading Yangzijiang Shipbuilding (YZJ) to a HOLD rating on worries that the outlook for shipping may deteriorate further amid global economic uncertainty. On top of that, investors continued to take issue with the groups growing investment in its non-core financing business. Despite its undemanding valuation, we do not see any potential stock catalysts in the near-tem given the lingering headwinds and fierce competition among the regional shipyards.

OVERNIGHT European troubles again plagued US stocks, with the euro trading to a six-month low against the US dollar. In particular, investors focused on Greeces debt crisis and the resignation of the ECBs chief economist. The Dow lost almost 304 points or nearly 3%, its first fall in more than three weeks.

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SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

WHATS COOKING
Event
We are downgrading Yangzijiang Shipbuilding (YZJ) to a HOLD rating on worries that the outlook for shipping may deteriorate further amid global economic uncertainty. On top of that, investors continued to take issue with the groups growing investment in its non-core financing business. Despite its undemanding valuation, we do not see any potential stock catalysts in the near-tem given the lingering headwinds and fierce competition among the regional shipyards.

Yangzijiang Shipbuilding
Analyst: Eric ONG 65-64321857 ericong@kimeng.com

we are increasingly negative on the shipbuilding outlook in general with heightened risks of prolonged downcycle especially if global economy goes into a deep recession. Even while newbuild contract dry up, the group may also have to offer longer vessel delivery schedule to existing buyers to avoid order cancelation.

YZJ recently acquired a 31.5% equity stake in Wuxi Runyuan Technology Microfinance Co. Ltd for a total cost of RMB94.5m. The latter is a company licensed to provide microcredit to small and medium technology enterprises. Despite market scepticism, we think this is in Our View fact, a deliberate move by the management to Operationally, YZJ is sitting on comfortable diversify more into its financing business given order book of US$5.5b, which will keep its yard the less-than-favourable shipbuilding outlook. busy till 2013. With the remaining two units of Action & Recommendation 10,000 TEU containerships being made effective, the contract for all seven vessels have been Following a sharp de-rating of Chinese converted to firm orders after the collection of shipbuilders, we are cutting our P/E multiple for initial deposit. Recall that Seaspan still has an the groups shipyard business from 12x to 8x, outstanding option for 18 units of similar vessels, pegged in line with its sector peers. Accordingly, which is likely to confirm within the next 12 our target price has been lowered to $1.15, still based on SOTP valuation. Downgrade to HOLD. months.

Granted, YZJ is recognised for its execution track record and leadership in cost control. But
Summary Financials Year End Dec 31 Sales (RMB m) Pre-tax (RMB m) Net profit (RMB m) EPS (fen) EPS growth (%) PER (x) EV/EBITDA (x) Yield (%)

2009 10,623.6 2,549.6 2,290.0 59.7 45.0 9.3 7.1 3.3

2010 12,922.8 3,629.4 2,952.3 77.0 29.1 7.2 5.6 4.3

2011F 14,614.6 4,411.8 3,617.6 94.3 22.4 5.9 5.0 5.2

2012F 17,027.5 4,294.8 3,521.7 91.8 -2.7 6.0 4.8 5.2

2013F 19,517.9 4,044.4 3,316.4 86.4 -5.8 6.4 4.8 5.2

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Bukit Sembawang Estates

Analyst: OOI Yi Tung 65-6433 5712 ooiyitung@kimeng.com

Company background: Bukit Sembawang Estates began as a leading rubber company in 1911. The company started development of landed property in the 1950s, and got listed in 1968. Tapping on its large legacy land bank from its rubber plantations in the old days, it has, for over half a century, been building Latest launch is Julys best selling project. 283some of Singapores most well-known residential unit Skyline Residence, the redevelopment of estates such as Seletar Hills and Sembawang Hills. Fairways, achieved a 60% take-up in July 2011 and an Key ratios ASP of $1,900 psf. The project is located near the Price-to-earnings: 5.8 upcoming Telok Blangah MRT Station, which will Price-to-NTA: 1.01 begin operation in October. With an ASP assumption Dividend per share / yield: 12 cts / 3.0% of $1,900 psf, pre-tax profits from the project is Source: Bloomberg, based on historical data estimated to be above $200m.

Luxus Hills snapped up, four times. Luxus Hills, its landed project in Seletar, has released 198 units in 4 phases since July 2009. In every phase, units were almost fully sold in the first month, achieving prices from $1,000-$1,200 psf versus its estimated cost of $410 psf. We estimate the company made about $265m pre-tax profits from the first 4 phases.

Everything else
Share price (S$) Issued shares (m) Market cap (S$ m) Free float (%) Recent fundraising activities Financial YE Major shareholders YTD change 52 week px range
Source: Company

3.98 258.9 1,030.5 52.8 Feb 09: $246m from 1-for-1 rights issue at $2.30 March Singapore Investments 13.4% Selat (Pte) Ltd 11.4% Aberdeen Assets 8.7% -15.25% S$3.60-S$4.86

Lowly geared, highly undervalued. The company has been repaying its debts. Net gearing is now at a low of <20%. The estimated $900m in revenue from sold units to be gradually recognised from 2Q FYMar11 gives the company strong earnings visibility. GDV of its unsold land bank is valued at $3.6b.

Land bank
Project Landed Luxus Hill Phase 1-4 Luxus Hill Nim Road Phase 1 Nim Road Phase 2 Nim Road Watercove Ville Non-landed Parc Mondrian Paterson Suites Paterson Road Verdure The Vermont St Thomas Walk Skyline Residences
Source: Company, *Estimated

Units 198 746 167 *155 65 80 100 102 88 75 158 221 283

GFA (sq ft) 490,968 1,484,657 487,415 430,650 41,441 202,256 121,827 199,823 142,601 113,969 218,326 302,748 347,333

Sold % 100 100 73 100 56 59

Est. GDV $m 435.9 1,187.7 389.9 344.5 33.2 161.8 73.5 503.6 359.4 143.6 461.8 544.9 593.9

Our View
A land bank like no other. Its land bank far surpasses all other developers, in our view. It has 2.6m sq ft of unsold GFA zoned for landed housing, making it Singapores largest landed property developer. In a recent land tender for landed housing in Serangoon Gardens, a total of 16 bids were received, a sign that developers remain positive on the landed segment of the property market.
Summary Financials Year End March 31 Sales (S$ m) Pre-tax (S$ m) Net profit (S$ m) EPS (S cts) EPS growth (%) PER (x) Yield (%) 2009 62.6 -46.6 -48.4 -44.0 na na 0.5

2010 66.0 54.9 53.0 22.7 na 17.5 1.0

2011 500.0 198.8 170.5 68.8 203.0 5.8 3.0

1Q2012 120.9 51.7 44.4 na na na na

1Q2011 34.0 14.6 12.5 na na na na

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12 September 2011

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