Kim Eng on 10 Jul 2012
Biggest winner in Chongqing CBD renewal development. Over the years, Ying Li has proven to be the leading Chongqing CBD urban renewal developer. A track record for high-quality delivery will help Ying Li continue to win urban renewal projects in the future, in our view. We reiterate our BUY call on Ying Li International with target price unchanged at SGD0.50 based on 40% to RNAV post our company visit.
Sentiment will improve on China’s policy easing. A series of recent moves by Chinese government, including cuts in interest rates and bank reserve requirement ratios (RRR) as well as the acceleration of the approval process for infrastructure projects, suggest that China is loosening policy, and there could more measures along these lines to come in the future. This will boost sentiment for developers and marginally lower borrowing costs for the sector, in our view.
Well-positioned to benefit from “Go West” policy. Ying Li will continue to benefit from the Chinese government’s “Go West” policy. The Chongqing municipal government has been very proactive in developing the city into a financial center and trading hub for western China, which will support demand for office, commercial and residential buildings.
Long-term catalyst. Ying Li currently has three main projects, namely Ying Li International Plaza, Wu Yi Road Project and Lu Zu Project, under construction, with total GFA of around 778,000sq m. Around 200,000sq m in total of above-mentioned three projects will be used for commercial malls. Ying Li plans to spin off its investment properties (mainly commercial malls) into a REIT once the portfolio size reaches USD1b. We expect this to materialise in 2014.
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