The agreement involves the development of approx. 6m sqm GFA of residential, commercial and industrial space, and will be divided up into three phases.
The project, situated on Jiangxinzhou - 6.5km from Nanjing's city centre, is Nanjing's largest foreign collaborative development.
What do we know at this stage? Not much at all as the feasibility study is still in progress. Land costs, and indeed how the consortium will be involved in the development of the project (eg whether it will be building everything or just involved in the land development for part of the project) are still uncertain at this stage.
Yanlord mentioned in the announcement that the agreement is not expected to have a material impact on asset value for the financial year 2009.
So what's the importance? a) This is a key project under the auspices of the Singapore-Jiangsu Cooperation Council. In other words, Yanlord is involved in a major project that is endorsed by both the Singapore and Nanjing governments, with two Singapore government-backed companies as its consortium partners. b) The agreement will provide certain assurance on long-term land replenishment stream at reasonable costs.
Rating. To align with our re-rating of Guangzhou R&F (target price based on a 20% premium to NAV), we have raised Yanlord's price target from S$1.95 to S$2.30 (at par with NAV of S$2.30).
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