19 November 2007

Underestimating potential Vietnam exposure
Company Report
Chong Tjen-San, CFA 603 2030 3042 Rationale for report : Result review


RM1.94 Target Price: RM3.38

YE to Dec EPS (sen) PE (x)

FY06 8.0 24.3

FY07F 10.4 18.7

FY08F 16.8 11.5

FY09F 23.7 8.2

Quick Take

Source : AmResearch

We reiterate our BUY rating on WCT Land with an unchanged target price of RM3.38. This is based on a 5% discount to our estimated NAV/share of RM3.55 and excludes any potential contribution from Vietnam. More than half of our NAV comprises of prime suburban malls where tenancy is supported by non-discretionary household essentials and traffic is more sustainable and less volatile. Besides its buoyant Malaysian operations, we see WCT Land as an excellent proxy to the booming Vietnam property market. Recently the government of Vietnam has relaxed rules for foreign ownership. Individuals with working visas are now allowed to buy homes on renewable leases, effectively making it freehold. Overseas-based foreigners are now also allowed to buy homes of shorter leases. Reaffirming our bullish view on Vietnam, according to the Taiwan based Central Trading and Development Corporation (“CTDC”) which is one of the largest and most significant foreign investment companies in Vietnam and currently the largest property development company in Vietnam, Arab investors are targeting Asia with China, India and Vietnam the three most popular countries for their investment interest. The chairman of the CTDC believes that the next five years will see increasing and substantial financial commitment from the Arab world into property related projects in Vietnam because of the inimitable and almost untapped potential available from the nation’s real estate industry. WCT Land has earmarked three projects in Ho Chi Minh City (“HCMC”), Vietnam. The first which has already received approval in principle but is still awaiting receipt of its investment certificate is a US$700m project in District 1, HCMC. Our back of the envelope calculations is for this project to boost our NAV to RM2.4bn or RM 4.11 per share. This assumes WCT Land’s share of 67%, a development duration of five years and discounting the development profits using a WACC of 12%. We think there is potential upside to its GDV of US$700m which was based on US$1,600 per sq m when management gave guidance in April 2007. Recently CapitaLand’s CapitaLand Vista at HCMC’s District 2 saw average prices of US$1,350 per sq m surge to US$2,665 per sq m within two days. All 450 units were snapped up. According to a recent report by CB Richard Ellis, hot spots within District 1, 2, 3 and 7 where prices can range from US$1,000 per sq m for a mid-tier condo in District 7 to US$4,000 per sq m for high-end units in District 1.
The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice. For AmResearch Sdn Bhd


Azharuddin Nordin Executive Director