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NRA Capital Pte Ltd

Written by: Jacky Lee

Thursday 22 Jan 2015

China Yuanbang – Press release

Announcement on investigation

Downgrade to Neutral on weak market sentiment and negative influence from the investigation case

China Yuanbang Property has announced that the Company was recently notified by the spouse of the Company’s Executive Chairman, Mr Chen Jianfeng that Mr Chen is required by Shenzhen City People’s Procuratorate of the People’s Republic of China to stay at a designated residence since 29 December 2014 to assist the Authority in its investigation in certain private matters of Mr Chen that are not connected with the Group.

The Company has not received any legal documents in connection with the Investigation from any government authority. Save for the aforesaid information provided by the spouse of Mr Chen, the Directors are not aware of any other information on the Investigation. As at the date of this Announcement, there is no information or evidence that the Investigation is related to the Group.

In the interim, the day-to-day operations of the Group are being managed by the Company's CEO, Mr Zhou Xiaoxiong, who is further supported by the senior management team.

The Company will keep shareholders informed of any material developments on this matter.

Our View:

After contacting the management, we understand the investigation is most likely to do with the executive chairman's personal affairs. Management confirmed that to date, it is nothing related to or impacting the company.

We keep our earnings forecasts unchanged and believe 2Q15 will turn profitable as compared to 1Q15. We expect sales mainly from the Ming Yue Shui An (明月水岸), Shan Qing Shui Xiu and Aqua Lake Grand City projects. However, we downgrade recommendation to Neutral and lower our fair value from S$0.33 to S$0.24 after increasing our 30% discount to RNAV to 50%, factoring in the prolonged weak market sentiment and negative influence from the investigation case.

Ming Yue Shui An phase III is expecting to launch at end according to its 2Q13 results release. We should have a better view or sense then on how big is the impact on of the downturn on Guangdong property in general.


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