Relatively unscathed by China property tightening. Ying Li’s share price dropped to SGD0.42 from the peak of SGD0.53 after the Chinese government announced the latest round of property cooling measures including a 20 percent capital gains tax and higher downpayments for second-time home buyers. In our view, the market’s negative reaction is overdone because we believe Ying Li will be less affected by the recent property cooling measures. Reiterate BUY with target price of SGD0.61, pegged to 25% discount to RNAV.

Ying Li’s residential property portfolio. China announced further residential property curbs on 1 March 2013. Ying Li’s residential portfolio mainly includes Ying Li International Plaza Block 2 to 5 and San Ya Wan Phase 2, which only accounts for a small proportion of the total portfolio. Among these, Ying Li International Plaza Block 2 to 5 have been largely sold out and San Ya Wan Phase 2 will only be delivered after 2015. In our view, there will be very little immediate effect from the latest property cooling measures.

New CEO, new opportunities. Ying Li recently appointed Mr Ko Kheng Hwa as CEO. Mr Ko’s rich experience in Singapore and China could open up new opportunities for Ying Li. It is possible to even explore other business models such as the integrated township projects that Mr Ko used to lead in his previous company. We note that there are several township projects currently under planning in Chongqing Liangjiang New Area, that Ying Li could participate in.

Reiterate BUY for robust growth. We are projecting an average 40% EPS growth in the next three years on the back of strong pipeline of assets. We like Ying Li’s prime asset quality and its exposure to highend commercial property sector in Chongqing. We believe that Ying Li offers the most direct exposure to Chongqing’s fast-growing economy and stands to benefit from Chongqing’s ambition to be a commercial and manufacturing hub in west China. Maintain BUY and target price of SGD0.61, pegged to 25% discount to RNAV.

Source: Maybank Kim Eng Research - 1 Apr 2013