Saizen REIT (listed on Singapore Exchange) – S$0.

16 (Aug 2010)
Our analysis of the most likely scenario suggests that Saizen is likely to be able to yield about
10% within the next year. Also, gearing will be reasonable at about 30% and the company is
trading at about 45% discount to our RNAV.

Investment Positives:

 Very stable rents and occupany of apartments even during crisis; thus assuring of
stable cash flows. (Residential rent in Japan has been stable over the last 20 years,
growing at an average of 1% p.a. The rental rates of Saizen REIT’s properties have
been consistent at around S$2 psf/mth and occupancy rates maintained at about
90%.)
 Persistent insider buying (Executive director, CEO and key related parties).
 No loans expiring in the immediate future after YK Shintoku is refinanced.
 One third of its real estate portfolio is unemcumbered by debt, so it has assets which it
can geared up against.

Challenges:

 Small cap, unlikely to be relevant to institutional investors.

 Sponsor related entities have charged fairly high fees to recap REIT previously.
 Stuck in the REIT trap of high yield; so unable to inject any substantial large new
assets.
 Comparables trading in Japan are also trading at sharp discounts (ave 30%) to NAV.
So Saizen may not produce any capital gains.

Catalyst:

 Reinstatement of distribution in Sept 2010. Whilst initial payout will be a token sum,
unitholders will benefit more in 2011.
 Refinancing of YK Shintoku debt which brings down default interest rate of 7% to
4% as Japanese banks have started to loosen credit.