Ying Li International Real Estate

- Issuing S$200mil convertible bond

Phillip Securities Research Pte Ltd

25 January 2010

Market Singapore Stock Exchange

Sector Real Estate Operations

Reuters YING.SI

Bloomberg YINGLI LI SP

BUY

(Unchanged)

Closing Price

S$0.580

12-month Target Price

S$1.150 (+98.3%)

Last Price 0.58

52w k High (9/25/2009) 0.92

52w k Low (3/4/2009) 0.06

Shares Outstanding (mil) 2162.492

Market Cap (S$ mil) 1254.25

Avg. Daily Turnover (mil) 20.80

Free float (%) 28.23

PE (X) 4.48

PB (X) 3.91

1M 3M 6M

Absolute

Relative -7.9% -30.1% 107.1%-7.7% -35.2% 92.2%

Price performance %

Price

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0.6

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0.8

0.9

1

11/01/2009 11/05/2009 11/09/200 11/01/2010

0

500

1000

1500

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3500

Major Shareholders %

1 Newest Luck Holding 42.86

2 Leap Forward Holdings 18.94

3 Phillip Securities Pte Ltd 9.98

Source: Bloomberg

Analyst

Brandon Ng Chenhao

Tel: +65 6531-1792

Fax: +65 6536-4435

Email: brandonngch@phillip.com.sg

Web: www.poems.com.sg

MICA (P) 153/01/2010

Ref No: SG2010_0026

Yingli announced that they have successfully priced a S$200mil convertible

bond issuance to global institutional investors

•

into new Yingli shares at a price of $0.8029 per share.5-year convertible bonds will have a coupon rate of 4.00% per annum and are convertible

•

acquisitions, strategic joint ventures and alliances and the rest for working capital.More than 90% of the estimated net proceeds of S$192mil will be used to fund land

•

CBsConvertible bond is slightly cheaper than bank rates but expensive as compared to recent

• Funds raised to develop Lu Zu commercial projects

•

RNAV of S$1.150. We maintain our BUY recommendation.We tweak our valuation model to assume full S$200mil bond conversion to reach a diluted

Yingli announced that they have successfully priced a S$200mil convertible

bond issuance to global institutional investors

The 5-year convertible bonds will have a coupon rate of 4.00% per annum and are

convertible into new Yingli shares at a price of $0.8029 per share. This is a 30.6% conversion

premium to its closing price on 21 Jan 2010, the day before the announcement. The

management adds that the conversion premium of 30.6% is the highest ever for an Asian

Real Estate Issuer in the last 23 months and is a testament of strong institutional investors’

confidence in the company’s resilient growth potential. More than 90% of the estimated net

proceeds of S$192mil will be used to fund land acquisitions, strategic joint ventures and

alliances and the rest for working capital. The convertible bond will have an upsize option of

an additional S$75mil pursuant to the exercise of such option by the Lead Manager, J.P.

Morgan.

Convertible bond is slightly cheaper than bank rates but expensive as compared to

recent CBs

The current CB has an annual coupon rate of 4.0% and the company will redeem each CB at

114.496% of its principal amount. As such, the reported yield to maturity calculated on a

semi-annual basis is 6.5%. But after we account for the estimated expenses of S$8mil, the

real interest cost to the company is approximately 7.48%. This is slightly lower than the

7.78% interest on the 10-year RMB 450mil loan Yingli secured from the China Construction

Bank in November 2009 but higher as compared to the recent convertible bonds issued. We

believe this is to compensate for the high conversion premium of 30.6%.

Conso' Profits EPS DPS BV ROE P/E Yield P/BV

Ending (RMB mil) (RMB) (RMB) (RMB) (%) (X) (%) (x)

12/06 A 26.9 0.01 NA 0.06 21.88 231.12 NA 50.56

12/07 A 680.1 0.31 NA 0.37 86.02 9.15 NA 7.87

12/08 A 357.4 0.17 NA 0.59 34.42 17.42 NA 4.84

12/09 E 38.3 0.02 NA 1.01 2.21 147.25 NA 2.80

12/10 E 567.6 0.26 NA 1.27 23.04 10.42 NA 2.22

Target price: $1.20 (maintained) Previous day closing price: $0.575

Convertible bond issue provides funding for landbanking

Ying Li issued a S$200m, 5-year convertible bond (CB) with a conversion price S$0.8029 and upsize option of S$75m. The CB has coupon rate of 4% p.a. payable semi-annually and yield-to-maturity of 6.5%. Net proceeds of S$192m will be used to acquire two land parcels along Wuyi Road in the prime area of Yuzhong district in Chongqing. JP Morgan is the lead manager and sole bookrunner of this deal.

Dilution to be minimal

The CB will mature on 3 March 2015. The issue and bondholders have the option to redeem early on 3 March 2013. The number of shares to be issued upon full conversion of the CBs is 249.1m, representing 11.5% of the total share capital of the Group. We estimate a net gearing of 0.34x by the end of 2010.

Strong interest in bond issue, but company reaps greater benefits

According to management, the CB issue received strong interest from global institutional investors, comprising existing as well as new investors. The terms of the CB is beneficial for the Group, in our view, given that the yield-to-maturity (cost of debt) of the bond is lower than the interest rate of existing loans (8-9%). Moreover, the CB is not immediately dilutive.

Anticipated projects likely to be RNAV-accretive

With this source of funding, Ying Li will be able to deliver on its plan to acquire the two parcels of land along Wuyi Road. We keep our estimates unchanged, pending details of the project. Ying Li is likely to retain a large portion for rental. Assuming an average base rental rate of RMB200psm/mth for retail and commercial space and cap rate of 7%, we estimate RNAV-accretion of $0.14/share.

Short-term catalysts aplenty. Reiterate Buy



http://www.remisiers.org/research//mb%2025%20Jan.pdf

 

With the financing overhang removed, Ying Li should perform in the longer term. We anticipate more positive newsflow involving the signing of tenancy agreements at the upcoming IFC and acquisition of land parcels. Management is also open to exploring options to obtain better valuations. Reiterate Buy at target price of $1.20. Year End Dec 31	2007	2008	2009F	2010F	2011F
Sales (RMB m)	na	86.7	140.6	378.6	2,237.0
Pre-tax (RMB m)	na	26.0	85.4	241.7	1,263.0
Net profit (RMB m)	na	355.6	28.0	90.8	719.6
EPS (RMB cents)	na	63.2	1.4	4.2	33.3
EPS growth (%)	na	na	-97.8	195.4	692.6
PER (x)	na	4.3	191.4	64.8	8.2
EV/EBITDA (x)	na	4.0	16.0	10.3	2.0
Yield (%)	na	0.0	0.0	0.0	0.0

issuance out of Singapore in 20101 - first convertible bond

·

tightening environment and volatile financial market – issue was multiple times

oversubscribedStrong demand from global Institutional Investors in the midst of a credit

Fair value: S$1.150

•

investorsYingli announced that they have successfully priced a S$200mil convertible bond issuance to global institutional

•

price of $0.8029 per share.5-year convertible bonds will have a coupon rate of 4.00% per annum and are convertible into new Yingli shares at a

•

ventures and alliances and the rest for working capital.More than 90% of the estimated net proceeds of S$192mil will be used to fund land acquisitions, strategic joint

•

maintain our BUY recommendation.