Global Stock Writeups

Margins at this Japanese construction company are being squeezed due to labour costs and raw material costs. We expect these trends to continue, hence our decision to switch our holdings into the pure property play, Mitsui Fudosan. Mitsui Fudosan's prospects, by contrast,  look to be blossoming given they have just launched the largest mixed-use development in Tokyo, and with falling office vacancy rates and rising rentals.

As one of the largest players in the Japanese condominium market  Haseko is well positioned to benefit from the upturn in demand. The upturn is already a reality with Haseko having revised up its 1H05 results. Given the present yield on top end Tokyo residential appartments of 6.0% versus a current mortgage rate of 2.6% the investment prospects for the Japanese condominium market and Haseko look fantastic.

Sedol	Type	Price	Date
6414401	Sell	JPY 408.451	07/05/2007
6414401	Buy	JPY 405.897	16/02/2006
6414401	Buy	JPY 410.337	02/11/2005
6414401	Buy	JPY 350.493	20/10/2005

Despite a management change mid-year and assurances that old, loss-making contracts were being worked out, Heijmans was recently forced to announce further provisions on historic contracts, which will effectively wipe out much of the current year's earnings. It appears that most of the problems were due to poor management at the group and internal disputes, rather than well publicised increases in raw materials prices and Dutch red tape. While housing demand in the Netherlands remains buoyant, it will not be enough to offset the problems elsewhere and we decided to cut the stock.

Heijmans. The Dutch construction industry has been in a deep funk since the bursting of the housing bubble in the early 1990s. However, the market is now stirring to life, driven by two factors. First, the government has cut red tape in order to incentivise construction companies to build more houses, given the Netherlands' shortage of dwellings; Heijmans' landbank is sufficient for almost ten years' worth of development. Secondly, public sector construction has started to grow as the government adopts PFI schemes, although margins here are unlikely to rebound rapidly. The market is not pricing in any market improvement. The stock has a free cash flow yield of over 10%, and a prospective dividend yield of over 4%.

Sedol	Type	Price	Date
5075036	Sell	EUR 29.46	12/10/2007
5075036	Buy	EUR 41.658	07/03/2007