WHAT THE BROKER SAYS
Nomura has maintained its 'buy' rating on Beijing Capital Land (BCL) as prospects for the company look brighter in the second half.
BCL's interim result was unflattering, with net profit down by 83 per cent year on year. But this should have been of little surprise to the market, given the company's profit warning made in June.
The broker says property sales should rebound in the second half with two-thirds of launches for 2005 scheduled and earnings should resume an upward trend from next year with rising completions. The broker thinks the market is over-reacting to old news - earnings disappointment - while overlooking the company's appeal as a key beneficiary of potential further yuan appreciation and its exposure to Beijing, a market where residential land supply - and hence competition - fell year on year in the first half.
The broker has raised its property price increase forecast on expectation of appreciation of the yuan and increased its net asset value (NAV) estimate to $3.80 per share (up 12 per cent). Based on a 40 per cent discount to NAV, the fair-value price is increased to $2.30 (up 15 per cent from $2), implying an upside of 19 per cent.
The counter closed on Friday at $2.025.
