Despite the lack of activity in the property market, MCL Land’s earnings for FY08 and FY09 arelikely to remain strong, as it recognises profits from its development projects only uponcompletion. With the Esta having obtained its TOP recently and Mera Springs (completed in3Q08) being more profitable than we had expected, we have raised our FY08 earnings forecastby 18.8% to US$65.2m. Going into FY09, we expect MCL to book in profits from Tierra Vue, theFernhill and Hillcrest Villa.

MCL launched 90 units at the Peak @ Balmeg in September, and based on the URA's figures,44 units (24% of the total 180 units) have been sold at an average price of about $1,000 psf as atend October. We have assumed an average selling price of $950 psf for the entire project.Similarly, MCL has sold 14 units of the 50-unit D’Pavilion at and average price of about $880 psf.Our average selling price assumption for the entire project is $850 psf.

MCL had acquired five sites in 2007-08 totalling about S$535m, yielding a GFA of about 1.2m.This works out to an average of nearly $460 psf ppr. We think that the profitability of these sitesare at risk if current market conditions persist, possibly requiring MCL to write the value of its landbank down by our estimation of about S$40m (about US$28m), principally due to NOB Hill, NimPark and Dynasty Garden Court 1. We have adjusted our ASP assumptions downwards by up to15%. If the provisions are indeed taken in FY09, we estimate earnings will still be US$76.4m nextyear.

We have lowered our target price to $0.89, pegged to a 70%-discount to RNAV for its illiquidityand the risk of potential write-downs. We see few positive catalysts for the company in the near-term. However, we believe that the company is financially sound enough to ride through the next1-2 years of uncertainty based on cash flows from past sales. We are downgrading to a HOLDrecommendation.