 Sino's Comments: Re: Canada Land Ltd (CDL) Financial Results For Year Ended 31 March, 1999 Please find attached CDL’s financial results for the year ended 31 March, 1999. The Company reported an after tax loss of approximately A$3.5 million and subsequently, no final dividend was declared. We were disappointed by the greater-than-expected loss. A major component of this loss was a result of reversal of profits on the Canview Building project which the Company had recognised in the last two financial years. In 1997, the Company sold all the commercial space as well as a significant number of lower level apartments to a large government entity as a major anchor tenant which was also a vote of confidence on the property. However, as a condition of the sale, the floor spaces were sold at a significant discount to then market price. Since CDL adopted the percentage on completion accounting method to recognise earnings, an estimated average price on the floor space was used to calculate profit contributions from the Canview Building not withstanding the actual discounted prices received. Given the weakness in the property market in Guangzhou, property prices have fallen significantly which has led CDL to lower the average estimated prices for the remaining residential apartments to be sold. Consequently, the actual difference between the breakeven and selling prices had to be realised and brought up to date. Currently, 40 per cent of the residential apartments in the Canview Building remain to be sold. The remaining apartments are at higher levels with panoramic views of the city and the Pearl River which are expected to command higher selling prices. However, apartment sales have been slow over the past several months because of the weakness in the property market in both Guangzhou and Hong Kong. We expect these property markets to remain weak in the very short term but believe the markets have bottomed. The key to CDL’s earnings recovery for the current financial year, in our opinion, is the sale of memorial plates in the Wong Tai Sin Temple (WTS). The Company has maintained considerable effort in promoting the sale of memorial plates and has dedicated two retail spaces in WTS for such purposes. We believe that once the formal marketing program for promoting the sale of memorial plates is under way and greater awareness of the existence of WTS, which is the newest and largest Wong Tai Sin temple in the world, is achieved, memorial plate sales will be fast-tracked. The impressive number of paid visitors to WTS which averages 2,600 visitors per day and higher on festivity days, since WTS was officially opened to the public in early February, 1999, indicates that entrance fee may become an important contributor to WTS’ total revenue. Furthermore, the recent opening of six retail outlets and the expected opening of the vegetarian restaurant in WTS by year end will further contribute to earnings. In view of this, we remain confident that CDL will achieve profitability in the current financial year ending 31 March, 2000. WTS will provide CDL with a significant and recurring source of earnings over the next several years. We maintain our Strong Buy recommendation on the stock at the current low price which at A$0.11 is trading at 83.9 per cent discount to its reported NTA per share of A$0.685.
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