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To: TobagoJack who wrote (31262)	4/10/2003 9:11:15 PM
From: MSI	Read Replies (1) \| Respond to of 74559

Incredible! Singapore government is installing internet camera at homes of infected folks, calling them at random times so that they will appear in front of the camera to prove they are physically at home. Violators will be electronically collared. As far as the following, let me know if that becomes more than a daydream ! Perhaps we will get to pickup some badly affected property shares at 60% below NAV, 4 x PE, 15% sustainable yield After all, even epidemics, imaginary or not, don't last forever ...

To: TobagoJack who wrote (31262)	4/10/2003 9:25:58 PM
From: TobagoJack	Read Replies (2) \| Respond to of 74559

<<steeling>> Nerves of steel necessary for a punt on property Friday, April 11, 2003 markets.scmp.com NICHOLE CHAN The atypical pneumonia outbreak has delivered a fresh blow to Hong Kong's already long-suffering property companies. Developers have been dumped on worries they will have to offer new discounts to sell flats - if they can sell any at all. Landlords have also taken big hits on fears their office and retail tenants will have to be given discounts or holidays on rents to tide them through the crisis being created by severe acute respiratory syndrome (Sars). Amid the carnage, buying opportunities are being created for investors with nerves of steel, argue some analysts. The key to containing possible further downside as the drama unfolds is buying companies which are likely to maintain high dividend payouts in tough times, analysts say. Plucking up the courage to buy property counters is not easy in the present environment. Investment banks have been queuing up to downgrade the sector and individual companies as they struggle to factor in the Sars outbreak. Morgan Stanley and Goldman Sachs both cut the sector to "cautious" from "in-line" and "neutral", respectively. Deutsche Bank and BOC International reiterated their "underweight" rating and HSBC has cut the sector from "overweight" to "neutral". Meanwhile, Moody's Investors Service has cut ratings outlooks on three landlords. Hysan Development and Singapore-listed Hongkong Land were changed to "negative" from "stable", while Wharf (Holdings) was cut from "positive" to "stable". With investment banks and Moody's effectively giving credence to investors' panic over Sars, the downdraft in the property sector gathered pace yesterday as suspicions grew of institutional investors joining the heavy selling. This led to both New World Development and Henderson Land hitting decade lows, although there were some signs of bargain hunting. New World plunged to HK$2.45 and then rallied to close at $2.475. Henderson hit $18.55 before climbing 1.88 per cent to $18.90. Other property companies have suffered nearly as badly. Over the past four days, Sun Hung Kai Properties has fallen to a 5.5-year low of $35.30, Swire Pacific lost 9.11 per cent to $29.90 and Hang Lung Properties lost 8.21 per cent to $6.70. With a slumping economy, weak consumer confidence and a warning from Standard Chartered Bank director Peter Wong Tung-shun ringing in their ears, developers have had no choice but to push back project launches. The outbreak has come at the worst time. "Traditionally the period between Lunar New Year and Easter is good for residential sales," Morgan Stanley said. "Developers have pre-sold less than 20 per cent of their production next year - below the run rate of 22 per cent for pre-sales this time last year," it said. "They will rush to sell flats for the remainder of this year to meet earnings targets for the financial year ending June 2004. They run the risk of having to offer more price incentives in the event of a rush to sell." With the severity of the outbreak still unclear, investors are unwilling to buy. "There is a general slowdown in mortgage business," Mr Wong said earlier. As for landlords, retail rents have been relatively stable in the past 18 months. However, Sars is certainly going to put a dent in that, with retailers reporting sales down by more than half and pleading for concessions on their lease agreements. Landlords have verbally agreed to review their requests on a case-to-case basis. Some analysts argue that landlords rather than developers are the better bet for the brave who are prepared to buy. "For those companies that derive the bulk of their earnings from rental income, instead of development projects, they should not be heavily impacted," Goldman Sachs analysts said. Most rental leases are fixed for two to three years, so the full impact will only be felt after the second or third year. Meanwhile, they believed landlords would be more willing and able to maintain a high dividend. As a guideline, "we believe property stocks need to offer a minimum 5 per cent to 6 per cent dividend yield to be deemed attractive", the analysts said. They recommend Hysan and Hongkong Land. "Pure property investors should tolerate a payout ratio of 90 per cent or above because there is limited capital expenditure in their existing business, unless an expansion plan is in place," they said. Others on their buy list are Hang Lung Properties, Hang Lung Group and Sun Hung Kai. However, some analysts believe that investors will be no safer with landlords than developers. With declining earnings from retail rental business, landlords might not be able to retain their high dividend payouts, CLSA analyst John Saunders said. Hongkong Land had already cut its dividends, he pointed out. While leases were fixed for two to three years, new contracts would be struck at lower prices, he said. Mr Saunders projected that retail rents would fall by 10 per cent in prime buildings such as Pacific Place and Ocean Terminal. He has revised down net profit expectations by 2 per cent to 10 per cent for leading retail landlords including Hongkong Land, Swire Pacific and Wharf. Most of the negatives had not been priced in on the landlords, he said. He believed developers would outperform landlords in the long term, given the former's much lower valuations. Mr Saunders said that while he remained bearish on the property sector, he would recommend Sun Hung Kai and Henderson Land in light of their low valuations.