HONG KONG Cheung Kong Property 1113 HK Outperform Portfolio management, in a global context Price (at 08:09, 12 Aug 2016 GMT) HK$54.85

Valuation HK$ 91.84 Event - DCF 12-month target HK$ 67.00 . Same investment philosophy, but now entering into a global spectrum. Upside/Downside % +22.2 Unlike most of its local peers, CK Property (CKOP) has one of the most 12-month TSR % +25.4 sophisticated and experienced management teams concerning overseas Volatility Index Medium investment. With an ample war-chest of HK$50bn and net gearing of ~3%, GICS sector Real Estate CKOP has been actively pursuing overseas investments, in order to enhance Market cap HK$m 210,898 its growth visibility. For example, Cheung Kong consortium’s bid for London Market cap US$m 27,191 City Airport at a ~£2bn valuation in February this year, albeit unsuccessful, Free float % 70 shows its intention to increase its global footprint. 30-day avg turnover US$m 42.9 . Solid in China/HK business. China offered the biggest surprise with better- Number shares on issue m 3,845 than-expected 1H16 contracted sales of HK$21.5bn (2015A: HK$25bn). Investment fundamentals China saleable resources should be more than enough to sustain sales for the Year end 31 Dec 2015A 2016E 2017E 2018E next six years, offsetting the potential slippage in HK due to limited land bank Revenue m 57,280 66,412 70,831 73,127 EBIT m 21,610 26,744 29,552 28,994 replenishment. The rental business remains largely resilient, but EBIT growth % 7.2 23.8 10.5 -1.9 hotel still faces challenges. We raise our TP by 1.0% to HK$67.0 to reflect Reported profit m 17,113 19,813 20,576 19,086 Adjusted profit m 15,568 19,250 19,948 19,037 better-than-expected China sales. Reiterate Outperform. EPS rep HK$ 4.43 5.14 5.34 4.96 EPS rep growth % -67.7 15.9 3.9 -7.1 Impact EPS adj HK$ 4.03 4.99 5.18 4.95 EPS adj growth % -6.7 23.8 3.7 -4.4 . Harvesting in China. We raise our 2016E China contracted sales by 30% to PER rep x 12.4 10.7 10.3 11.1 HK$35bn (1H16A: HK$22bn) from our earlier bullish assumption of HK$27bn. PER adj x 13.6 11.0 10.6 11.1 Total DPS HK$ 1.40 1.75 1.87 1.88 Its diversified portfolios in tier 1/2 cities continue to deliver in line with the Total DPS growth % nmf 25.1 6.6 0.7 China physical market recovery. Key contributors are Nanjing Emerald City Total div yield % 2.6 3.2 3.4 3.4 ROA % 5.5 7.2 7.7 7.2 (HK$3.7bn), Qingdao The Harbourfront (HK$3.4bn), Beijing La Grande Ville ROE % 6.4 7.1 7.0 6.4 (HK$2.9bn), and Dongguan Laguna Verona (HK$2.8bn). EV/EBITDA x 9.7 7.7 7.0 7.1 Net debt/equity % 5.6 -1.4 -11.2 -16.2 . What can we expect in new business opportunities? The new business P/BV x 0.8 0.8 0.7 0.7 opportunities underpin the following investment criteria: 1) generating stable 1113 HK rel HSI performance, & rec income and providing a steady stream of liquidity in the long term; 2) providing history income in the short to medium term, and enhancing overall profitability; and 3) strengthening further the Group’s dividend distribution capability. It will meet the objective of generating revenue from different sources to balance the cyclical impact on cash flows associated with property development. . 2016E dividend yield of 3.2% based on 35% payout. During the group restructuring announcement in Jan-15, the company said it expects FY16 payout ratio to be higher than FY15 (2015A: 34.7%). However, we believe some investors are confused about its 2016E dividend as consensus’ 1H16

Note: Recommendation timeline - if not a continuous line, then there was no estimates vary between HK$1.40 and HK$2.00; CKOP increased its interim Macquarie coverage at the time or there was an embargo period. dividend by 8.6% YoY to HK$0.38/sh in 1H16. Source: FactSet, Macquarie Research, August 2016 (all figures in HKD unless noted) Earnings and target price revision

. Adjusted earnings: FY17E +5.7%. TP increased by 1.0% to HK$67.00 and NAV increased by 3.6% to HK$91.84/sh to reflect higher ASPs and sales assumptions of China projects Analyst(s) Raymond Liu, CFA Price catalyst +852 3922 3629 [email protected] David Ng, CFA . 12-month price target: HK$67.00 based on a Sum of Parts methodology. +852 3922 1291 [email protected] Catherine Li . Catalyst: Successful overseas expansion and disposal of en bloc project +852 3922 1161 [email protected] Action and recommendation 15 August 2016 Macquarie Capital Limited . CKOP is one of our top picks in HK property. It trades at 10.6x FY17E PE, 0.8x PB and a 40% NAV discount. Maintain Outperform. Please refer to page 20 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures.

Macquarie Research Cheung Kong Property

NAV discount at 40% (25-56% range) CK Property trades at a NAV discount of 40%, based on our estimate of HK$91.84/sh, in contrast to the 36% NAV discount of Sun Hung Kai Properties (16 HK, HK$111.30, Outperform, TP: HK$132.00). Its highest NAV discount was 56% in February 2016 and the lowest was 25% in June 2015, post the group restructuring last year. As a secondary reference, CK Property released its NAV estimate of HK$98.64/sh during Cheung Kong Group’s restructuring in early 2015. NAV discount of Sun Hung Kai Properties the best proxy We believe the NAV discount of Sun Hung Kai Properties is the best proxy for CK Property. Both are leading property companies in Hong Kong and their valuations now largely pertain to their property businesses. CKOP has a very short history since its spin-off as a pure property play from Cheung Kong Hutchison (1 HK, HK$95.75, Outperform, TP: HK$100.63, David Ng) in May 2015. Historical NAV pattern of Cheung Kong (1 HK) no longer a good reference Before 2012, Cheung Kong generally traded at a higher discount to Sun Hung Kai due to its associate Hutchison Whampoa’s 10-15% discount. But as the Hutchison business has improved and the restructuring got underway, Cheung Kong has traded at a lower discount (since late 2012).

Fig 1 NAV discounts of CK Property and Sun Hung Kai move largely in tandem post restructuring since May 2015

40% CK Property (1113 HK) NAV discount: 40% Sun Hung Kai (16 HK) 20% NAV discount: 36% 10-year average: 23% -1 S.D. : 39% +1 S.D.: 7% 0%

-20%

-40%

Apr 03 Oct 08 -60% 48% NAV discount 45% NAV discount Aug 98 66% NAV discount -80% Dec 88 Dec 90 Dec 92 Dec 94 Dec 96 Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12 Dec 14 Sun Hung Kai (16 HK) Avg -1 S.D. +1 S.D. Cheung Kong (1 HK, before restructuring) CK Property (1113 HK) Source: Bloomberg, Macquarie Research, August 2016

Fig 2 Share price performances of CK’s sister companies since Jun-15 (CK Hutchison, CK Infrastructure and CK Property)

130%

120%

110%

100% Brexit event in Jun 2016 90%

80%

70%

60%

50% May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul 16

CK Hutchison (1 HK) CK Property (1113 HK) CK Infrastructure (1038 HK)

Source: Bloomberg; Macquarie Research, August 2016; Index base of 100% by the end of May 2015

15 August 2016 2 Macquarie Research Cheung Kong Property

Stable and increasing dividends Investors looking for dividend yield and conviction In an ultra low interest rate environment amid an influx of liquidity, investors are actively looking for a sustainable business with stable and reasonable yields. We believe CKOP’s inconsistent dividend yields and consensus’ wide range of 2016 estimates (HK$1.40-2.00/sh, 2.6-3.6% yields) cause some investor concerns, which we believe are unjustified. 2016E dividend payout ratio of 35% We expect the company’s 2016E DPS to be HK$1.75, or a 3.2% dividend yield based on a 35% payout ratio. We expect its payout ratio to increase gradually in coming years. The company increased its interim dividend by 8.6% YoY to HK$0.38/sh in 1H16. An unjustified range: consensus’ 2016E DPS range is HK$1.40-2.00 Bloomberg consensus’ estimates indicate that its major peers’ dividend ranges are much smaller, with Sun Hung Kai Properties at HK$3.45-3.83/sh (3.1-3.4% yield) and Wharf at HK$1.90-2.03/sh (3.5-3.7% yield). CK Property’s dividend policy: Payout ratios to rise At the announcement of group restructuring in Jan-15, the company stipulated a clear dividend policy: “For FY2016 and after, subject to business conditions and maintenance of a strong credit profile, each of CKH Holdings and CK Property expects its dividend policy to result in a higher dividend payout ratio than that in financial year 2015.” Dividend payout ratio in 2015 was 34.7%.

Fig 3 DPS for previous Cheung Kong holders in 2014- Fig 4 Macquarie estimates of CKOP DPS in 2016-19E, 15 based on a 35-38% payout ratio

HK$/sh 4.50 3.950 2.50 44% 4.00 3.654 1.99 42% 2.00 1.87 1.88 3.50 1.75 1.400 40% 3.00 1.50 2.50 38%

2.00 36% 3.654 1.00 1.50 2.550 34% 1.00 0.50 32% 0.50

- - 30% 2014 2015 2016E 2017E 2018E 2019E

Cheung Kong CK Hutch/CK Property DPS (HK$/sh, LHS) Payout ratio (%, RHS)

Source: Company data, Macquarie Research, August 2016 Source:, Macquarie Research, August 2016

Fig 5 Before restructuring, both Cheung Kong and Hutchison Whampoa had a policy of stable payout ratio of 24-33% 2010 2011 2012 2013 2014 Cheung Kong (previous 1 HK) Payout ratio based on recurring earnings 32% 30% 27% 24% 30% DPS – normal (HK$/sh) 2.95▲ 3.16 3.16 3.48▲ 3.65▲ DPS – special (HK$/sh) - - - - 7.00 EPS (HK$/sh) 11.55 19.84 13.83 15.22 23.26 Recurring earnings per share (HK$/sh) 9.28 10.66 11.72 14.45 12.21 No.of shares (m) 2,316 2,316 2,316 2,316 2,316

Hutchison Whampoa (previous 13 HK) Payout ratio based on recurring earnings 50% 40% 33% 32% 32% DPS – normal (HK$/sh) 1.92 2.08▲ 2.08 ▲ 2.30 ▲ 2.42 ▲ DPS – special (HK$/sh) - - - - 7.00 EPS (HK$/sh) 4.69 13.09 6.07 7.30 15.75 Recurring earnings per share (HK$/sh) 3.86 5.24 6.23 7.28 7.51 No. of shares (m) 4,263 4,263 4,263 4,263 4,263 Source: Company data, Macquarie Research, August 2016

15 August 2016 3 Macquarie Research Cheung Kong Property

1H16 result snapshot Fig 6 CK Property’s financial performance summary 2014 2015 1H15 2H15 1H16 % HoH chg % YoY chg

Revenue 46,606 57,280 17,740 39,540 27,252 -31% 54% Cost of sales (24,131) (33,095) (11,379) (21,716) (14,432) -34% 27% Gross profit 22,475 24,185 6,361 17,824 12,820 -28% 102% Gross margin (%) 48.2% 42.2% 35.9% 45.1% 47.0% 2.0ppt 11.2ppt - - - - - Selling and marketing expenses (892) (357) (357) - - Administrative expenses (2,341) (2,475) (437) (2,038) (1,885) Other op. income/expenses 925 257 273 (16) 118 Profit from operations (EBIT) 20,167 21,610 5,840 15,770 11,053 -30% 89%

Interest expenses (2,360) (549) (252) (297) (318) Interest income 75 - - - - Share of results of associates 1,045 378 278 100 130 Other non-op. income/expenses - - 1,366 (1,366) - Pre-tax exceptional items 38,864 2,774 1,291 1,483 228 Profit before tax 57,791 24,213 8,523 15,690 11,093 -29% 30%

Income tax (3,739) (6,305) (1,253) (5,052) (2,314) Profit before minority interests 54,052 17,908 7,270 10,638 8,779 - - - - - Minority interests (1,065) (795) (380) (415) (173) Post-tax exceptional items - - - - - Net profit 52,987 17,113 6,890 10,223 8,606 Net margin (%) 113.7% 29.9% 38.8% 25.4% 31.6% 6.2ppt -7.3ppt Underlying profit 16,684 15,568 5,536 10,032 8,339 -17% 51% Underlying profit margin (%) 35.8% 27.2% 31.2% 25.4% 30.6%

EPS (basic) 13.73 4.43 1.79 2.65 2.23 -16% 25% EPS (adjusted) 4.32 4.03 1.43 2.60 2.16 -17% 51%

Dividends - 5,404 1,351 4,053 1,461 DPS n/a 1.40 0.35 1.05 0.38 n/a 8.6% Payout ratio (%) n/a 34.7% 24.4% 40.4% 17.5% Source: Company data, Macquarie Research, August 2016

1H16 results highlights . Revenue grew 54% YoY from HK$17.7bn to HK$27.3bn, while underlying profit grew 51% from HK$5.5bn to HK$8.3bn. . Interim dividend was HK$0.38/sh, up 8.6% YoY, equivalent to a 17.5% payout ratio. . Gross margin reached 47.0%, up 2.0ppt HoH or 11.2ppt YoY. . Book value increased by 1.3% HoH to HK$69.07/sh. . The Hong Kong business accounted for 51% of revenue and 67% of operating profit. . Net gearing improved by 3.1ppt HoH to 2.6%, while net debt dipped from HK$15.1bn to HK$6.9bn. Bank balances and deposits increased by 9.6% HoH to HK$50.3bn. . Office rental income increased by 2.6% HoH to HK$1.5bn, thanks to the positive rental reversion in Central. . Retail rental income was still largely resilient at HK$1.4bn over 2H15 and is likely to see upside from the mall, given the opening of the Extension line. . Hotel and serviced suits operations’ revenue declined by 11% HoH to HK$2.3bn with EBIT margin contracting by 2.3ppt to 27.6%. The margin compression trend seems to have stabilized but has yet to find a bottom.

15 August 2016 4 Macquarie Research Cheung Kong Property

Views on the property development business China contracted sales to stay robust at ~HK$35bn in 2016-18E We raise our 2016E China contracted sales by 30% to HK$35bn (1H16A: HK$22bn) from our earlier bullish assumption of HK$27bn. Its diversified portfolios in tier 1/2 cities continue to deliver in line with the China physical market recovery. Key contributors would be Nanjing Emerald City (HK$3.7bn), Qingdao The Harbourfront (HK$3.4bn), Beijing La Grande Ville (HK$2.9bn), Dongguan Laguna Verona (HK$2.8bn) and Wuhan Millennium Waterfront (HK$2.6bn).

Fig 7 CK Property’s contracted sales in Hong Kong and China

Hong Kong China

40 35.5 35.1 34.8 35 33.0 29.5 30 26.0 25.1 23.7 24.0 25 23.0 20.1 20 16.2 13.8 15

10 4.8 5

0 2012 2013 2014 2015 2016E 2017E 2018E Source: Company data, Macquarie Research, August 2016; excluding sales in SG and the UK

Hong Kong sales: Total saleable resources of HK$86bn We estimate CKOP will achieve HK$13.8bn sales in 2016E (1H16A: HK$4.9bn), compared with HK$29.5bn achieved last year. The sales pattern will be similar to that of 2013, in our view, as CKOP has a good sales mix between Hong Kong and China from an overall portfolio basis. In the coming six months, we expect CKOP to launch The Zumurud, a mid-end residential project, and TW5 Bayside, a mass market project.

Fig 8 Summary of upcoming major launches in Hong Kong Stake Year of ASP Sales (HK$bn) Gross Projects District (%) launch Type (HK$ k psf) 2016E 2017E 2018E 2019E margin (%)

Stars by the Harbour (維港‧星岸) 100% Jul-15 Luxury 23,400 5.0 - - - 34% Yuccie Square (世宙) Yuen Long 100% Dec-15 Mass market 12,300 3.1 - - - 42% La Mansion (41 villas 娉廷) Yuen Long 100% Feb-16 House 10,800 0.3 0.2 0.2 - 13% The Zumurud (君柏) Tong 80% Oct-16 Mid-end 18,000 3.2 3.0 - - 12% TW5 Bayside project Phase I Tsuen Wan 100% 2017 Mass market 12,000 - 5.2 2.2 - 32% Ngau Tam Mei project Yuen Long 100% 2017 House 11,000 - 0.5 0.3 0.2 6% Oil Street Project 100% 2017 Luxury 20,000 - 4.8 2.1 - 30% Borrett Road project (Phase I, 115 units) Mid-Levels 100% 2017 Luxury 40,000 - 4.5 3.0 - 13% Lok Wo Sha project Ma On Shan 100% 2017 Mid-end 13,000 - 4.8 2.1 - 31% 90 Repulse Bay Repulse Bay 100% 2017 House 55,000 - 1.0 1.0 1.3 65% Graham Street project Central 100% 2018 Luxury 19,500 - - 1.6 1.1 21% TW5 Bayside project Phase II Tsuen Wan 100% 2018 Mass market 12,000 - - 7.8 3.3 32% URA Hai Tan street project Shum Shui Po 100% 2019 Mass market 13,000 - - - 4.5 53% Lohas Park P8 Tseung Kwan O 100% 2019 Mass market 9,500 - - - 8.0 30% Borrett Road project (Phase II) Mid-Levels 100% 2019 Luxury 40,000 - - - 4.5 13% Others 2.2 - - - 13.8 24.0 20.1 22.9 Source: Company data, Macquarie Research, August 2016

15 August 2016 5 Macquarie Research Cheung Kong Property

Property development revenue was up 35% YoY to HK$21.3bn, and its operating margin expanded by 8.0ppt to 32.2%. Key contributors were from high margin projects booked in Hong Kong that delivered a blended average operating profit margin of 40.0%, compared to 26.3% achieved in 1H15. Key projects recognized in 1H16 include Heung Yip Road commercial project (~HK$1.8bn operating profit) and Stars by the Harbour (~HK$0.8bn) in Hong Kong. Millennium Waterfront in Wuhan (~HK$1.2bn) and Laguna Verona in Dongguan (~HK$0.6bn) were the contributors in China.

Fig 9 Property sales (including share of JVs) 1H14 2H14 1H15 2H15 1H16 % HoH

Revenue (HK$m) 12,520 13,828 15,765 33,294 21,296 -36% Hong Kong 9,539 9,868 10,328 5,596 8,663 55% Mainland 2,966 2,765 5,313 24,092 12,628 -48% Overseas (SG & UK) 15 1,195 124 3,606 5 -100%

Operating profit (HK$m) 4,673 3,828 3,816 11,706 6,856 -41% Hong Kong 3,810 2,899 2,715 2,054 3,464 69% Mainland 867 534 1,059 9,034 3,431 -62% Overseas (SG & UK) -4 395 42 618 -39 -106%

Operating profit margin (%) 37.3% 27.7% 24.2% 35.2% 32.2% -3.0ppt Hong Kong 39.9% 29.4% 26.3% 36.7% 40.0% 3.3ppt Mainland 29.2% 19.3% 19.9% 37.5% 27.2% -10.3ppt Overseas (SG & UK) -26.7% 33.1% 33.9% 17.1% -780.0% n/a Source: Company data, Macquarie Research, August 2016

Major land purchases happened in 2011-12 The company did not purchase any land in the first seven months of 2016, compared with two projects at a value of HK$2.9bn in 2014 and one project at HK$3.0bn in 2015. In recent years, CKOP has acquired the most properties in 2011, with 10 projects at a value of HK$26.2bn, of which 84% was related to purchases in Hong Kong.

Fig 10 Land purchase summary of CK Property since 2011 Time Stake Site area GFA Plot ratio Land value AV Project (s) (%) Type k sqft k sqft (x) HK$m HK$k psf^

Hong Kong The Spectra (On Ning St) Mar-11 100% Resid 133 664 5.0 2,410 3.6 Ngau Tam Mei project May-11 100% Resid 253 101 0.4 662 6.5 Borrett Road project Jun-11 100% Resid 113 435 3.9 11,650 26.8 La Mansion (Ping Kwai Rd) Jun-11 100% Resid 65 65 1.0 300 4.6 La Lumiere (Lee Kung St) Jun-11 100% Resid 14 105 7.5 801 7.6 Oil Street project Aug-11 100% Resid/Hotel 85 756 8.9 6,267 8.3 URA Graham St project May-12 100% Resid 18 191 10.5 1,600 8.4 MTRC TW5 Bayside project Aug-12 100% Resid 461 2,235 4.8 9,631 4.3 Lok Wo Sha project Nov-12 100% Resid 155 562 3.6 2,901 5.2 URA Hai Tan St project Dec-14 100% Resid 81 618 7.6 1,280 2.1 Lohas Park Phase 8 Oct-15 100% Resid 179 1,044 5.8 2,955 2.8 40,457 Singapore Stars of Kovan (Upper Serangoon Rd) Nov-14 100% Resid 109 326 3.0 1,605 4.9 1,605 China^ Changchun Regency Cove Jun-11 100% Resid/Comm 1,710 2,548 1.5 543 2.0 Dalian Xigang project Aug-11 100% Resid/Comm 1,540 5,436 3.5 2,223 3.8 Foshan Emerald Cove (Chancheng) Nov-11 100% Resid 806 1,989 2.5 1,042 4.8 Shenzhen Futian Land Lots G/M and H Dec-11 50% Comm 148 436 3.0 333 7.0 Shanghai Riviera Palace (Qingpu) May-12 100% Resid 1,555 1,495 1.0 1,648 10.1 5,788 Source: Company data, , URA, MTRC Corp, Lands Bureau of the local government, Macquarie Research, August 2016; ^ in Rmb psm for China projects

15 August 2016 6 Macquarie Research Cheung Kong Property

Views on the property rental business CK Property has a diversified asset portfolio, providing a resilient and relatively stable rental income. The office segment accounted for ~42% of total rental revenue in 1H16 and retail ~38%. With ~3.2m sqft of floor space, CKOP is the second largest landlord in Central after Hongkong Land, and should enjoy a positive rental reversion in the coming 1-2 years, thanks to favourable low vacancy and structural demand from mainland Chinese institutions. We believe these would largely offset the slowdown in retail sales due to lower overseas tourism spending. 1H16 rental revenue rose 2.3% HoH to HK$3.7bn 1H16 rental income was resilient with 2.3% HoH growth to HK$3.7bn. Overall operating profit margin expanded by 3.0ppt HoH to 91.6%. Looking into different asset classes, we note office (42% of rental income) was the major driver for rental income growth. . Office rental income increased by 2.6% HoH to HK$1.5bn, thanks to the positive rental reversion in Central. . Retail rental income stayed largely resilient at HK$1.4bn versus 2H15 and is likely to see upside from the Whampoa Garden mall, given the opening of the Kwun Tong Extension line.

Fig 11 Property rental business (including share of JVs) 1H14 2H14 1H15 2H15 1H16 % HoH

By regions Revenue (HK$m) 1,147 1,184 1,550 3,588 3,670 2%

Operating profit (HK$m) 1,015 1,054 1,331 3,182 3,363 6% Hong Kong 895 940 1,230 2,965 3,115 5% Mainland 113 112 92 180 209 16% Overseas 7 2 9 37 39 5%

Operating profit margin (%) 88.5% 89.0% 85.9% 88.7% 91.6% 3.0ppt

By asset class Revenue (HK$m) n/a n/a 1,550 3,588 3,670 2.3% Office n/a n/a 605 1,502 1,541 2.6% Retail n/a n/a 698 1,409 1,395 -1% Industrial n/a n/a 78 334 404 21% Others n/a n/a 171 343 330 -4% Source: Company data, Macquarie Research, August 2016

Potential disposal of more commercial assets serves as a good share price catalyst: We view the company’s disposal of non-core commercial projects as another share price catalyst. According to HKEJ, a potential Chinese buyer is looking to acquire the Centre office project in Central (GFA of 1.218m sqft), at HK$30bn or ASP of HK$24.6k psf. It is 39% above our estimate of HK$21.6bn.

Fig 12 Summary of CK Property’s Hong Kong major investment properties ex-hotels (HK$m) 2014A effective rent 2014A 2016E Value Stake GFA (HK$ occupancy income Value (HK$k Project District (%) (k sqft) Type psf/month) % (HK$m) (HK$m) psf)

The Centre Central 100% 1,218 Office 58 97% 917 21,576 17.9 Cheung Kong Centre Central 100% 1,263 Office 108 98% 1,560 31,929 28.3 Hutchison House Central 100% 504 Office 63 87% 364 7,911 18.4 China Building Central 100% 259 Office 98 98% 259 5,110 23.2 Aberdeen Centre Aberdeen 100% 345 Retail 62 97% 236 4,454 14.7 1881 Heritage Yau Tsim Mong 100% 86 Retail 426 100% 866 14,119 181.5 Victoria Mall Yau Tsim Mong 85% 168 Retail 34 66% 84 951 7.1 Whampoa Garden Hung Hom 100% 1,714 Retail 37 95% 520 11,488 9.4 Hunghom Bay Centre Hung Hom 100% 80 Retail 42 81% 38 703 10 The Harbourfront (Office Tower 1) Hung Hom 100% 432 Office 22 99% 143 2,961 7.2 The Harbourfront (Office Tower 2) Hung Hom 100% 431 Office 23 98% 143 2,956 7.2 Source: Company data, Macquarie Research, August 2016

15 August 2016 7 Macquarie Research Cheung Kong Property

Hotel business: outlook still challenging CK Property is one of the largest hotel and serviced suites operators in Hong Kong with 23 hotels in total (19 under operation and four under development), providing 16k completed hotel/suites rooms where 79% of hotel rooms are in Hong Kong. In contrast to most of its hotel peers, CKOP’s portfolio is balanced with hotels (short stay in general) and serviced apartments (long stay in general) in Hong Kong. The company tried unsuccessfully to spin off four hotels with total 4.8k rooms for a separate listing in 2012. 7M16 visitor arrivals declined by 6% to 32.2m We continue to see the hotel business segment facing challenges given a slowdown in the tourism business. For the first seven months of 2016, Hong Kong visitor arrivals declined 6% to 32.2m. While there is a slight improvement in July 2016 with visitor arrival growth 2.6% YoY, the first positive figure since June 2016, the outlook for hospitality remains challenging. 2015 visitor arrivals were down 2.5% YoY to 59.3m. We are cautious on the hotel business owing to the slowdown in outbound visitors as: 1) outbound travel other than Hong Kong could rise benefiting from cheaper forex; 2) launch of the import tariff cut pilot scheme in China in May 2015; and, 3) the spread of anti-mainland sentiment in Hong Kong.

Fig 13 Summary of CK Property’s hotel portfolio No. of hotel(s) No. of rooms Attrib. no of rooms

Completed Hong Kong 14 12,652 12,158 China 4 2,193 1,241 The Bahamas 1 1,271 1,271 19 16,116 14,670 Under development Hong Kong 1 840 840 China 3 1,884 506 4 2,724 1,346 Total 23 18,840 16,016 Source: Company data, Macquarie Research, August 2016

1H16 margin contracted by 2.3ppt to 27.6% 1H16 overall income was down 11% HoH to HK$2.3bn, while operating profit was down 18% HoH to HK$633m, implying operating profit margin contracted by 2.3ppt to 27.6%. The margin compression trend seems to have stabilised but yet to find a bottom. Key drag was Bahama Grand Lucayan hotel. On a YoY comparison (excluding seasonality), its average hotel room rate was down 8.5% to HK$721/night and occupancy by 26.1ppt to 55.1%. Annualised yield of CK Property’s hotel and serviced suite operations on the carrying amount was 14.4% in 1H16, down from 16.2% in 2015.

Fig 14 Average hotel room rate (HK$) Fig 15 Average hotel occupancy (%)

2015 1H15 1H16 2015 1H15 1H16 100% 900 831 88.2% 786 769 788 90% 85.2%84.4% 800 81.2% 725 726 721 80% 700 650 624 70% 600 61.2% 59.5% 60% 56.5% 55.1% 500 48.8% 50% 400 40% 300 30% 200 20% 100 10%

0 0% Hong Kong Mainland The Bahamas Hong Kong Mainland The Bahamas Source: Company data, Macquarie Research, August 2016 Source: Company data, Macquarie Research, August 2016

15 August 2016 8 Macquarie Research Cheung Kong Property

Valuation breakdown We estimate CK Prop’s total GAV is HK$320bn, comprising HK$113bn from its portfolio of 13m sqm of developable land bank, HK$151bn from 1.6m sqm of investment properties (including Hui Xian REIT’s portfolio, which is treated as an associate) and HK$56bn from 16k hotel rooms. Including the stakes of its listed affiliates (Prosperity REIT, Fortune REIT and ARA) valued at HK$8bn net of HK$25bn cash, we estimate CKOP’s NAV at HK$353bn, or HK$91.84/sh. Fig 16 GAV breakdown of CK Property

Source: Company data, Macquarie Research, August 2016

Fig 17 Summary of CKOP property portfolio End June 16 Land bank (m sqm) End-2017E GAV (HK$m) DEV INV INV - Hotels Total % of total DEV INV INV - Hotels Total % of total m sqm m sqm m sqm m sqm HK$bn HK$bn HK$bn HK$bn

Hong Kong 0.7 1.3 0.6 2.6 17% 33.1 121.8 52.5 207.4 65% China 12.0 0.2 0.1 12.3 80% 51.7 28.4 3.1 83.2 26% Overseas Singapore 0.1 - - 0.1 0.6% 1.0 - - 1.0 0.3% UK 0.3 0.0 - 0.3 2% 27.9 0.1 - 28.0 9% The Bahamas - - 0.1 0.1 0.6% - - 0.8 0.8 0.2% 13.1 1.5 0.8 15.4 100% 113.7 150.3 56.3 320.4 100% % of total 85% 10% 5% 100% 35% 47% 18% 100% Source: Company data, Macquarie Research, August 2016

Fig 18 Summary of Listed REITs and asset management firms owned by CK Property (HK$m) Company Hui Xian REIT Fortune REIT Prosperity REIT ARA Asset Management Ticker 87001 HK FRT SP 808 HK ARA SP

Business focus China: HK: HK: Manager of REITs Office/Retail/Hotels/Serviced Retail Office/Industrial suites Asset portfolio Beijing Oriental Plaza, Sofitel Retail malls of 18 private 8 properties management of public-listed Shenyang Lido & Chongqing housing estates REITs and private real estate Metropolitan Plaza funds Exposure China (Beijing, Shenyang & Hong Kong Hong Kong Diversified (Hong Kong, Chongqing) China, Singapore, Malaysia, Korea and Australia) Market cap (US$m) 2,754 2,408 650 999 Unitholding (%) 32.3% 27.8% 19.0% 7.8% 2015A distribution yield (%) 8.0% 4.8% 6.3% 3.6% 2016E distribution yield (%) 8.3% 4.8% 5.5% 3.7% NAV (US$m) 2,925 1,816 1,344^ 1,443 Discount to NAV -34% -35% -40% Location of Exchange HKEx SGX/HKEx HKEx SGX Timing of listing Apr 2011 SG: Aug 2003; Dec 2005 Nov 07 HK: Apr 2010

Major asset injection since IPO 2012: Shenyang Sheraton 2012: Belvedere Garden & 2014: Chong Yip St Lido Hotel (Rmb980m) Provident Centre (HK$1,003m) (HK$1,932m) 2015: Chongqing Metropolitan 2013: Kingswood Ginza Plaza (HK$4,910m) (HK$5,672m) Source: Company data, Macquarie Research, August 2016;^ NAV of Prosperity REIT based on company data

15 August 2016 9 Macquarie Research Cheung Kong Property

What has changed? We have increased our price target by 0.6% and our NAV by 0.5% due to the following changes in our assumptions: . Increase in ASP and sales assumptions of China residential projects; . Lower sales assumptions of Hong Kong projects in 2016; . Higher ASP assumptions of Chelsea Waterfront and Convoys Wharf; and, . Change in CNYHKD FX rate from 1.20 to 1.17.

Fig 19 Estimate changes versus consensus (HK$m) Price target NAV Revenue Underlying profit* HK$ HK$ 2016E 2017E 2016E 2017E

New 67.00 91.84 66,412 70,831 19,250 19,948 Old 66.34 88.67 62,836 71,066 19,269 18,867 Difference (%) 1.0% 3.6% 5.7% -0.3% -0.1% 5.7%

Consensus 61,522 70,432 18,121 19,140 Difference (%) 7.9% 0.6% 6.2% 4.2% * Adjusted for revaluation gains of investment properties and net of deferred tax. Source: Bloomberg, Macquarie Research, August 2016

Valuation methodology Our end-2017 NAV estimate of HK$91.84 includes HK$29.56 of development properties for sale, HK$53.73 of investment properties for lease and HK$8.55 of net cash and other liabilities. Our new target price of HK$67.00 is at a 27% discount to our end-FY17E NAV. Our NAV estimate is the sum of GAV (gross asset value, before deducting net debt and other working capital) of individual projects plus net cash, net working capital and other investments of the whole company. Non-real estate assets and investments are stated at the latest reported book value. GAV is the sum of all projects' free cash flows (FCF) over the next 10 years, as shown in the table below. We assume all rental assets will be disposed of in 2025, and there is no terminal value. We assume property prices in Hong Kong to correct by 5% in 2017. For mainland China, we assume property prices to increase by 5% for the luxury segment in tier-one cities and 5-10% in tier 1-2 cities in 2016E, but to be flattish in 2017E. The discount rate we use is based on a risk-free rate of 1.5%, an equity risk premium of 6.0% and a historical beta of 1.05. For projects with negative total free cash flows, especially investment properties, we keep a floor value at the costs already incurred and carried on the book. Our target price is an adjusted version of NAV. For our target price calculation, we factor in only the next three years of FCF derived from a bottom-up project launch projection, but followed by FCF based on top-down company-wide volume and price growth or decline assumptions in the remaining seven years, without considering individual project performance. The three stages of FCF are: 1) near-term (30% of total GAV), based on the current land bank without factoring in any new acquisitions between 2016 and 2018; 2) medium-term (16% of total GAV), based on continuous replenishment to keep the land bank size unchanged over 2019-21; and 3) long-term (54% of total GAV) based on a gradually depleting land bank after 2021 without acquisitions. Our target price values non-real estate assets using P/E, P/B or EV/EBITDA multiples. A subjective forward beta of 1.10 is used for our target price instead of historical beta of 1.05 for NAV to account for higher management execution risks and future market volatilities affecting the valuation of assets. NAV reflects the value of the land bank and tends to be higher than reported book value (HK$69.07/sh at Jun 2016). In our view, the latter does not give sufficient credit or discount to the company’s market positioning, growth aspirations and execution track record. We believe our target price captures all of these aspects and it is heavily influenced by our judgment of management’s quality, as reflected in our choice of beta and our medium-term assumptions for the company’s overall volume, price and cost growth. A detailed valuation breakdown is shown in Figure 21.

15 August 2016 10 Macquarie Research Cheung Kong Property

Fig 20 Target price derivation HKD/share

DCF for development properties 24.13 A / shares GAV for investment properties 34.93 B / shares Net cash 8.46 C / shares Other assets (0.51) D / shares Target price 67.00 (A+B+C+D) / shares HK$ m 299,460 A + B Total development properties (DCF) 92,794 A Near term from 2014 to 2016 27,888 Medium term from 2017 to 2019 14,597 Long term beyond 2019 50,309 Total investment properties (NAV) 206,665 B Hotel 55,289 Retail for Lease 52,449 Office for Lease 96,724 Residential for Lease 685 Carparks 1,518 Source: Macquarie Research, August 2016

Fig 21 NAV derivation HKD/share

NAV/share 91.84 E / shares

HK$ m - NAV 353,224 E = F + X + Y +Z Total gross asset value 320,352 F = G + H Net cash 32,533 X Net working capital (7,376) Y Other investments 7,715 Z Total development properties 113,686 G Residential 112,624 Retail for Sale 840 Office for Sale 223 Total investment properties 206,665 H Hotel 55,289 Residential for Lease 685 Retail for Lease 52,449 Office for Lease 96,724 Carparks 1,518 No. of outstanding shares (m) 3,846 Source: Macquarie Research, August 2016

Fig 22 Enterprise free cash flows Near term Medium term Long term (in HK$ bn) fiscal year 30% of GAV 16% of GAV 54% of GAV 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F

Cash flows of development properties only (based on existing land bank, attributable basis unless specified) Contracted sales (Gross) 51.6 62.2 58.3 69.8 52.7 43.0 40.7 21.6 5.0 - Cash sales 46.9 60.7 56.4 65.5 50.8 42.6 41.9 21.2 4.9 - Land purchase - - - - (0.0) (0.0) (0.0) - - - Construction capex (16.9) (15.8) (13.0) (11.8) (9.7) (10.4) (12.3) (6.3) (0.0) - SGA outflows (2.3) (3.0) (2.8) (3.3) (2.5) (2.1) (2.1) (1.1) (0.2) - Taxes and other outflows (7.6) (8.9) (10.2) (15.3) (10.3) (11.0) (10.4) (9.0) (5.1) (1.3) #1 Free cash flows 20.1 32.9 30.3 35.1 28.3 19.0 17.1 4.8 (0.4) (1.3) Cash flows of investment properties only (attributable) Rental income of operating assets 13.7 14.1 14.8 15.4 15.7 15.9 16.0 16.2 16.2 16.2 Related expenses (6.8) (7.1) (7.4) (7.8) (7.8) (7.9) (7.9) (8.1) (8.0) (8.0) Total capex (2.5) (2.5) (2.2) (0.6) (0.3) (0.9) (0.7) - - - #2 Free cash flows 4.4 4.5 5.2 7.1 7.6 7.2 7.4 8.1 8.2 8.2 Attributable free cash flow (including both development properties and investment properties) 24.4 37.5 35.5 42.2 35.9 26.2 24.5 12.9 7.8 6.9 For valuation purposes of development properties: existing land bank + land bank replenishment during medium term (attributable) Cash sales 46.9 60.7 56.4 39.0 27.4 19.2 19.2 19.2 19.2 19.2 Total capex 26.8 27.8 26.1 30.0 21.3 16.2 10.2 10.2 10.2 10.2 #3 Free cash flows 20.1 32.9 30.3 9.0 6.0 3.0 9.1 9.1 9.1 9.1 Source: Macquarie Research, August 2016

15 August 2016 11 Macquarie Research Cheung Kong Property

Fig 23 Financial summary (HK$ m) Summary 2014 2015F 2016F 2017F 2018F

Revenue 46,606 57,280 66,412 70,831 73,127 Cost of sales (24,131) (33,095) (35,456) (37,013) (39,824) Gross profit 22,475 24,185 30,956 33,818 33,302 Adjusted net profit 16,684 15,568 19,250 19,948 19,037 Gross margin 48% 42% 47% 48% 46% Underlying profit margin 36% 27% 29% 28% 26% Financial stability Net gearing^ 6% 6% -1% -11% -17% Interest coverage 7.4 15.9 16.3 19.8 19.4 Associates/Net profit 6% 2% 5% 5% 5% SGA/Revenue 7% 5% 6% 6% 6% Tax/Pre-tax income 7% 26% 28% 32% 34% Net operating cash flow 25,863 5,251 28,843 41,454 27,564 Net investing cash flow 6,654 (418) (4,311) (4,564) (2,662) Net financing cash flow (14,298) 9,513 (15,552) (7,369) (7,997) Source: Company data, Macquarie Research, August 2016

Fig 24 CKOP revenue growth, FY13–18E Fig 25 CKOP adjusted earnings growth, FY13–18E

80 25.0 HKD bn 73.1 HKD bn 70.8 69.2 70 66.4 20.7 19.9 19.3 20.0 19.0 60 57.3 16.7 15.8 15.6 50 46.6 15.0

40

30 10.0 23.7

20 5.0 10

- - 2013 2014 2015 2016E 2017E 2018E 2019E 2013 2014 2015 2016E 2017E 2018E 2019E

Source: Company data, Macquarie Research, August 2016 Source: Company data, Macquarie Research, August 2016

Fig 26 Property-related revenue breakdown and contributions of associates (HK$ m) Revenue 2016E 2017E 2018E Share of associates 2016E 2017E 2018E

Residential for Sale 49,277 58,245 59,797 Residential for Sale - - - Retail for Sale 4,900 - - Retail for Sale - - - Office for Sale - - - Office for Sale 65 86 - Development properties 54,177 58,245 59,797 Development properties 65 86 -

Hotel 4,894 4,997 5,113 Hotel 136 137 137 Residential for Lease 28 28 28 Residential for Lease 30 30 30 Retail for Lease 2,375 2,426 2,521 Retail for Lease 427 434 434 Office for Lease 4,425 4,600 5,108 Office for Lease 236 318 370 Investment properties 11,723 12,051 12,771 Investment properties 829 919 971

Car parks 53 53 53 Car parks - - - Total 65,953 70,349 72,621 Total 894 1,005 971 China and others 28,340 45,555 40,680 China and others 808 920 886 Hong Kong 37,613 24,794 31,941 Hong Kong 86 85 85

Total 65,953 70,349 72,621 Total 894 1,005 971 Source: Company data, Macquarie Research, August 2016

15 August 2016 12 Macquarie Research Cheung Kong Property

Fig 27 Revenue breakdown of development projects by ASP (HK$ psm)

50 HKD bn

45 5.5 9.5 40 8.1 15.2 35 19.0 3.7 30 12.4 25 4.0 8.0 13.1 23.2 20 10.1 7.5 15 13.5 5.4 10 14.4 13.9 13.1 5 8.5 9.5 - 2016E 2017E 2018E 2019E 2020E

Below 22000 22,000 - 36,000 36,000 - 100,000 100,000 - 175,000

Source: Macquarie Research, August 2016

Fig 28 Breakdown of contracted sales by gross margin (%) – forecasts

2019E 0% 11% 17% 5% 4% 35% 28%

2018E 1%12% 27% 7% 4% 20% 31%

2017E 1% 15% 25% 6% 11% 14% 28%

2016E0% 10% 5% 16% 26% 18% 25%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

<00% 0-15% 15-25% 25-35% 35-45% 45-55% >55%

Source: Macquarie Research, August 2016

Fig 29 Breakdown of property sales and GFA completion In reported currency, fiscal year 2016E 2017E 2018E 2019E 2020E

Development and investment properties, gross, before sharing (000 sqm) GFA Completed 1,118 1,492 1,761 1,382 1,391 For sales (development properties) 843 1,314 1,428 1,227 1,341 For rent (investment properties) 276 178 333 156 50 Development properties, gross, before sharing (000 sqm) GFA sold by contract 1,640 1,749 1,664 1,633 1,360 GFA inventory 1,214 745 490 282 185 Attributable GFA sold by contract, after sharing (000 sqm) 1,567 1,656 1,562 1,477 1,288

Development properties of subsidiaries, after sharing GFA Booked (000 sqm) 1,320 1,760 1,677 1,429 1,372 Previous years' inventory sold this year 890 671 483 354 228 Pre-sold last year, completed this year 277 636 698 700 692 Sold and completed this year 153 453 496 375 452 Revenue (m) 54,177 58,245 59,797 55,159 44,049 Previous year's inventory sold this year 23,509 18,404 17,233 15,774 15,346 Pre-sold last year, completed this year 19,584 16,017 21,769 19,315 17,105 Sold and completed this year 11,085 23,823 20,795 20,069 11,597

Gross contracted sales, including 100% associates, before sharing (m, reported currency) Total amount 50,106 64,923 59,214 68,234 52,778 Consolidated amount of subsidiaries after sharing 48,866 63,407 58,237 61,723 52,778

Breakdown of booked sales (Rmb/sqm) Average selling price, after sharing 35,072 28,280 30,480 32,999 27,442 Average construction cost, after sharing 10,044 7,929 7,744 8,973 7,253 Average land cost, after sharing 8,617 6,411 9,063 7,866 5,262 Source: Company data, Macquarie Research, August 2016

15 August 2016 13 Macquarie Research Cheung Kong Property

Fig 30 Major revenue contribution by development properties in upcoming years (HK$m) Revenue City 2016F 2017F 2018F 2019F 2020F

Yuccie Square Yuen Long 6,830 0 0 0 0 Stars by the Harbour Hung Hom 5,007 0 0 0 0 The Beaumount II Tseung Kwan O 4,941 0 0 0 0 Hupan Mingdi Shanghai 3,677 2,949 1,732 666 0 The Harbourfront Qingdao 3,391 1,353 1,969 3,928 566 La Grande Ville Beijing 0 7,123 1,819 0 0 Emerald City Nanjing 1,726 5,176 0 0 0 Lok Wo Sha project Ma On Shan 0 4,811 2,062 0 0 Oil Street Project North Point 0 4,793 2,054 0 0 Laguna Verona Dongguan 2,766 4,343 3,766 2,276 3,033 Borrett Road project Mid-Levels 0 0 7,444 4,466 2,977 TW5 Bayside project Tsuen Wan 0 0 7,013 10,519 0 Upper West Shanghai 1,905 3,598 3,392 3,399 1,700 The Greenwich Beijing 170 170 3,261 1,030 4,140 Shisanling Beijing 0 0 2,506 3,133 3,133 Hai Tan street project Shum Shui Po 0 0 0 4,496 1,499 Chelsea Waterfront London 979 3,089 1,680 3,946 5,427 Le Parc Chengdu 1,153 1,153 2,409 2,409 2,402 Millennium Waterfront Wuhan 2,555 1,246 830 2,070 0 Regal Lake 御湖名邸 Guangzhou 619 1,271 1,316 1,569 336 Stars of Kovan Singapore 0 0 0 0 3,813 Lohas Park Tseung Kwan O 0 0 0 0 2,009 Xigang project Dalian 0 0 0 0 1,747 Qiao Horizon Costa Zhuhai 0 0 0 0 1,651 The South Bay Dalian 0 499 1,252 1,357 1,357 Others 18,458 16,671 15,291 9,895 8,260 Total 54,177 58,245 59,797 55,159 44,049 Source: Company data, Macquarie Research, August 2016

Fig 31 Major gross contracted sale contribution in coming years (HK$m) Contracted sale 2016F 2017F 2018F 2019F 2020F

Stars by the Harbour Hung Hom 5,007 0 0 0 0 Emerald City Nanjing 3,659 999 0 0 0 The Harbourfront Qingdao 3,391 2,830 3,438 1,407 142 The Zumurud 3,194 3,034 0 0 0 Yuccie Square Yuen Long 3,074 0 0 0 0 TW5 Bayside project Tsuen Wan 0 5,167 9,965 3,322 0 Lok Wo Sha project Ma On Shan 0 4,811 2,062 0 0 Oil Street Project North Point 0 4,793 2,054 0 0 Borrett Road project Mid-Levels 0 4,466 2,977 4,466 2,977 Laguna Verona Dongguan 2,766 4,343 3,766 2,276 3,033 Upper West Shanghai 1,905 3,598 3,392 3,399 1,700 The Greenwich Beijing 170 170 3,261 4,135 3,924 Le Parc Chengdu 1,153 2,358 3,012 2,404 600 Shisanling Beijing 0 1,566 2,506 3,133 3,133 Millennium Waterfront Wuhan 2,555 1,246 2,072 828 0 Convoys Wharf London 0 0 0 11,076 15,823 Lohas Park Tseung Kwan O 0 0 0 8,034 0 Hai Tan street project Shum Shui Po 0 0 0 4,496 1,499 Chelsea Waterfront London 1,320 1,973 1,680 3,946 5,427 The Metropolis Guangzhou 550 550 1,310 1,702 2,014 Xigang project Dalian 0 0 0 1,048 1,747 Qiao Horizon Costa Zhuhai 0 0 0 1,032 1,649 The South Bay Dalian 0 1,178 1,252 1,357 1,356 Silver Cove Jiangmen 0 0 547 873 1,086 Regency Hills Chongqing 758 976 1,055 1,055 1,055 Others 22,074 18,175 13,954 9,797 5,506 Total 51,576 62,232 58,305 69,786 52,669 Source: Company data, Macquarie Research, August 2016

15 August 2016 14

15 August August 201615 Research Macquarie Fig 32 Summary of development properties (HK$m) – 2016E

Own Time of Cost^ of Current GFA sold During the year Projected Attributable free cash flows Disc Gross asset value Development properties City (%) GFA* Sales Delivery Land Const. Price^ margin year-end Revenue Asso 2016 2017 2018 2019 2020 2021 2022 2023 2024 Rate 2016 2017 2018

Yuccie Square (1,129 units 世宙) Yuen 100% 52 Dec 15 Aug 16 3,299 3,804 12,300 42% 100% 6,830 - 1,851 (157) ------6.8% (152) - - Long/HK Stars by the Harbour Hung 100% 31 Jul 15 Dec 15 10,663 4,891 23,400 34% 100% 5,007 - 3,963 (190) ------6.8% (184) - -

Hom/HK The Beaumount II Tseung Kwan 100% 46 May 15 Sep 16 3,181 3,261 10,000 36% 100% 4,941 - (481) ------6.8% - - - O/HK 41 Heung Yip Road (Commercial) South/HK 100% 30 Sep 14 Jan 16 1,501 3,044 10,186 55% 100% 3,300 - (31) ------6.8% - - - The Zumurud Kowloon 80% 33 Jun 16 Mar 16 11,554 4,348 18,000 12% 50% 3,194 - 1,969 1,965 (5) ------6.8% 1,897 (5) - Tong/HK Upper West (915 apartments) P2A Shanghai 60% 62 Jul 16 Dec 16 3,050 10,000 50,000 74% 50% 1,905 - 689 532 (322) ------7.6% 225 (310) - Emerald City (Nanhe 涟城) P4 Nanjing 100% 50 Sep 15 Jan 16 8,850 6,000 29,500 50% 100% 1,726 - (215) ------7.6% - - - The Laguna Mall Hung 100% 12 Jun 16 Sep 00 2,174 2,065 12,678 67% 100% 1,600 - 1,299 (117) ------6.8% (113) - - Hom/HK Millennium Waterfront (世纪江尚中心) Wuhan 100% 65 Mar 16 Dec 15 2,160 8,000 20,000 49% 100% 1,597 - 1,194 (201) ------7.6% (193) - - P4 Hupan Mingdi (湖畔天下) P4 Shanghai 100% 64 Sep 14 Jan 16 3,524 10,000 21,000 36% 100% 1,565 - (57) ------7.6% - - - Hupan Mingdi (Villa 湖畔天下) P2 Shanghai 100% 51 Mar 16 Jul 16 3,520 10,000 30,000 55% 80% 1,492 - 1,011 43 (59) ------7.6% (11) (57) - La Lumiere Hung 100% 9 Mar 15 Jan 16 8,659 5,000 15,900 14% 100% 1,471 - (28) ------6.8% - - - Hom/HK Regency Garden (御沁园) P4 Shanghai 85% 36 Mar 15 Jan 16 3,420 8,000 34,000 66% 100% 1,431 - (271) ------7.6% - - - The Harbourfront (Lot 6-2) P6 Qingdao 90% 78 Mar 16 Dec 15 2,340 6,000 18,000 54% 75% 1,353 - 910 107 (65) ------7.6% 45 (63) - Laguna Verona P6 Dongguan 100% 74 Sep 16 Dec 15 500 6,000 19,500 67% 70% 1,300 - 970 104 (133) ------7.6% (19) (129) - The Harbourfront (Lot 6-1) P5 Qingdao 90% 70 Sep 15 Dec 15 2,340 6,000 18,000 54% 100% 1,135 - 704 (157) ------7.6% (151) - - Chelsea Waterfront London 95% 5 Sep 15 Dec 16 8,902 50,000 174,799 66% 100% 979 - (50) (28) ------7.6% (27) - - (Chartwell/Claydon House) P1 Millennium Waterfront (世纪江尚中心) Wuhan 100% 65 Sep 15 Dec 15 2,160 8,000 20,000 49% 100% 958 - 642 (117) ------7.6% (113) - - P3 Kerry Everbright City Phase III (Office) Shanghai 25% 60 Mar 15 Mar 15 2,800 10,000 45,000 72% 60% - 65 116 175 (77) ------7.6% 99 (74) - The Harbourfront (Lot 6-2) P7 Qingdao 90% 78 Jun 16 Dec 15 2,340 6,000 18,000 54% 50% 902 - 607 477 (130) ------7.6% 343 (125) - Qingpu Riviera Palace (Lot 16 泷湾苑) Shanghai 100% 35 Jun 15 Sep 15 10,210 6,000 23,000 30% 100% 889 - 661 (33) ------7.6% (32) - - P1 Qingpu Riviera Palace (Lot 16) P2 Shanghai 100% 35 Mar 16 Sep 15 10,208 6,000 25,000 35% 80% 859 - 642 106 (14) ------7.6% 90 (13) - Laguna Verona P7 Dongguan 100% 87 Sep 16 Sep 16 500 6,000 19,500 67% 30% 658 - 295 988 (368) ------7.6% 622 (355) - Panyu Cape Coral (Phase 4A 珊瑚天 Guangzhou 100% 77 Sep 14 Dec 15 1,500 4,000 16,500 67% 100% 624 - 295 (135) ------7.6% (130) - - 峰) P3 Hupan Mingdi (Villa 湖畔天下) P1 Shanghai 100% 56 Sep 13 Dec 15 3,520 10,000 30,000 55% 100% 620 - 374 (94) ------7.6% (90) - - Others 7,841 - Sub-total 54,177 65 Source: Company data, Macquarie Research, August 2016; *Refers to ‘000 sqm. ^ China: Rmb/sqm. HK: HK$/sqft/ # reported currency mn

Cheung Kong PropertyCheung

15

15 August August 201615 Research Macquarie Fig 33 Summary of development properties (HK$m) – 2017E

Own Time of Cost^ of Current GFA sold During the year Projected Attributable free cash flows Disc Gross asset value Development properties City (%) GFA* Sales Delivery Land Const. Price^ margin year-end Revenue Asso 2016 2017 2018 2019 2020 2021 2022 2023 2024 Rate 2016 2017 2018

2017 La Grande Ville P3 Beijing 100% 151 Sep 13 Jan 17 3,350 10,000 28,500 53% 50% 4,942 - (550) 1,934 (346) ------7.6% 1,555 (333) - Lok Wo Sha project (454 units) Ma On Shan/HK 100% 52 Sep 17 Oct 17 5,212 3,804 13,000 31% 0% 4,811 - (869) 3,185 1,535 (60) - - - - - 6.8% 4,421 1,431 (58)

Oil Street Project (Residential) North Point/HK 100% 33 Jun 17 Dec 17 10,256 3,804 20,000 30% 0% 4,793 - (469) 3,424 1,540 (55) - - - - - 6.8% 4,662 1,441 (53) The Zumurud Kowloon 80% 33 Jun 16 Mar 16 11,554 4,348 18,000 12% 50% 3,034 - 1,969 1,965 (5) ------6.8% 1,897 (5) - Tong/HK Chelsea Waterfront (Lots Road) P2 London 95% 10 Sep 16 Jun 17 8,902 50,000 174,79 66% 50% 2,232 - 681 615 (157) ------7.6% 452 (151) - 9 La Grande Ville P4 Beijing 100% 57 Sep 15 Sep 17 3,350 12,000 32,000 52% 50% 2,180 - 364 548 (151) ------7.6% 393 (146) - Upper West (915 apartments) P2A Shanghai 60% 62 Jul 16 Dec 16 3,050 10,000 50,000 74% 50% 1,905 - 689 532 (322) ------7.6% 225 (310) - The Metropolitan (Residential 都会轩, 3 Wuhan 100% 81 Apr 15 Jan 17 2,550 6,000 19,000 55% 100% 1,850 - 302 (132) ------7.6% (127) - - towers) P1 Emerald City (Nanhe 涟城) P5 Nanjing 100% 50 Sep 15 Jan 17 8,850 6,000 29,500 50% 100% 1,847 - 795 (189) ------7.6% (182) - - The Greenwich P4B Xian 100% 150 Sep 15 Jan 17 964 3,500 9,400 53% 100% 1,802 - 477 (188) ------7.6% (182) - - Regency Garden (御沁园) P5 Shanghai 85% 42 Sep 15 Sep 17 3,420 8,000 35,000 67% 55% 1,782 - 168 341 (160) ------7.6% 186 (154) - Upper West (915 apartments) P2B Shanghai 60% 55 Sep 17 Sep 17 3,050 10,000 50,000 74% 0% 1,693 - (166) 636 473 (286) - - - - - 7.6% 799 200 (275) Emerald City (Nanhe 涟城) P6 Nanjing 100% 50 Sep 16 Jun 17 8,850 6,000 26,000 43% 70% 1,673 - 704 161 (55) ------7.6% 106 (53) - Emerald City (Nanhe 涟城) P6 Nanjing 100% 50 Sep 16 Sep 17 8,852 6,000 26,000 43% 70% 1,656 - 718 133 (55) ------7.6% 79 (53) - Hupan Mingdi (湖畔天下) P5 Shanghai 100% 64 Sep 16 Sep 17 3,524 10,000 21,000 36% 50% 1,643 - 295 321 (55) ------7.6% 261 (53) - Laguna Verona P7 Dongguan 100% 87 Sep 16 Sep 16 500 6,000 19,500 67% 30% 1,535 - 295 988 (368) ------7.6% 622 (355) - Laguna Verona P8 Dongguan 100% 119 Sep 17 Sep 17 500 6,000 19,500 67% 0% 1,490 - (356) 846 754 (357) - - - - - 7.6% 1,193 407 (344) Kerry Everbright City Phase III (Office) Shanghai 25% 60 Mar 15 Mar 15 2,800 10,000 45,000 72% 60% - 86 116 175 (77) ------7.6% 99 (74) - Millennium Waterfront (世纪江尚中心) P5 Wuhan 100% 65 Mar 17 Jun 16 2,160 8,000 26,000 61% 0% 1,246 - (80) 931 386 (157) - - - - - 7.6% 1,113 232 (151) The Metropolis (都會新城 2B & 2C-1) P3 Guangzhou 60% 99 Mar 16 Mar 17 1,990 5,000 15,000 53% 30% 1,100 - 97 161 280 (65) - - - - - 7.6% 352 212 (63) 90 Repulse Bay (11 houses) Repulse Bay/HK 100% 6 Dec 17 Dec 16 14,061 5,435 55,000 65% 0% 1,003 - (149) 815 736 1,007 (105) - - - - 6.8% 2,225 1,535 879 Hupan Mingdi (Villa 湖畔天下) P3 Shanghai 100% 51 Mar 17 Dec 17 3,520 10,000 30,000 55% 0% 933 - (217) 408 271 190 (59) - - - - 7.6% 749 382 130 Regal Lake 御湖名邸 P3 Guangzhou 80% 42 Aug 16 Aug 17 2,050 5,000 22,000 68% 50% 908 - 255 40 71 (43) - - - - - 7.6% 66 30 (42) The Harbourfront (Lot 6-2) P7 Qingdao 90% 78 Jun 16 Dec 15 2,340 6,000 18,000 54% 50% 902 - 607 477 (130) ------7.6% 343 (125) - Chelsea Waterfront (Lots Road) P3 London 95% 6 Sep 17 Dec 17 8,902 50,000 174,79 66% 0% 856 - (83) 578 163 (51) - - - - - 7.6% 660 111 (49) 9 Others 10,428 - Sub-total 58,245 86 Source: Company data, Macquarie Research, August 2016; *Refers to ‘000 sqm. ^ China: Rmb/sqm. HK: HK$/sqft/ # reported currency mn

Cheung Kong PropertyCheung

16

Macquarie Research Cheung Kong Property

Companies mentioned in the report: Cheung Kong Infrastructure (1038 HK, HK$68.95, Outperform, TP: HK$78.60, Alan Hon) Cheung Kong Hutchison (1 HK, HK$95.75, Outperform, TP: HK$100.63, David Ng) Wharf Holding (4 HK, HK$54.50, Neutral, TP: HK$47.00, David Ng) Hongkong Land (HKL SP, US$6.57, Outperform, TP: US$8.40, David Ng) Sun Hung Kai Properties (16 HK, HK$111.30, Outperform, TP: HK$132.00)

15 August 2016 17 Macquarie Research Cheung Kong Property

Macquarie Quant View

The quant model currently holds a neutral view on Cheung Kong Property. Attractive Displays where the The strongest style exposure is Earnings Momentum, indicating this stock company’s ranked based on has received earnings upgrades and is well liked by sell side analysts. The s l the fundamental consensus

a weakest style exposure is Growth, indicating this stock has weak historic t

n Price Target and and/or forecast growth. Growth metrics focus on both top and bottom line e Macquarie’s Quantitative items. m

a Alpha model.

d

n

482/1095 u Two rankings: Local market F (Hong Kong) and Global Global rank in sector (Real Estate) Real Estate Quant % of BUY recommendations 91% (10/11) Local market rank Global sector rank Number of Price Target downgrades 1 Number of Price Target upgrades 2

Macquarie Alpha Model ranking Factors driving the Alpha Model A list of comparable companies and their Macquarie Alpha model score For the comparable firms this chart shows the key underlying styles and their (higher is better). contribution to the current overall Alpha score.

PICC Property and Casualt… 1.6 PICC Property and Casualt…

China Overseas Land 1.4 China Overseas Land

PICC Group 1.3 PICC Group

Henderson Land 0.8 Henderson Land

Haitong Securities 0.6 Haitong Securities

Cheung Kong Property 0.1 Cheung Kong Property

Hong Kong Exchange -0.1 Hong Kong Exchange

-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 Valuations Growth Profitability Earnings Price Quality Momentum Momentum

Macquarie Earnings Sentiment Indicator Drivers of Stock Return The Macquarie Sentiment Indicator is an enhanced earnings revisions Breakdown of 1 year total return (local currency) into returns from dividends, changes signal that favours analysts who have more timely and higher conviction in forward earnings estimates and the resulting change in earnings multiple. revisions. Current score shown below.

PICC Property and Casualt… PICC Property and Casualt… 0.1 China Overseas Land China Overseas Land -0.2 PICC Group PICC Group -0.7 Henderson Land Henderson Land 0.0 Haitong Securities Haitong Securities -1.3

Cheung Kong Property 0.5 Cheung Kong Property

Hong Kong Exchange -0.6 Hong Kong Exchange

-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 -40% -30% -20% -10% 0% 10% 20% 30% 40% Dividend Return Multiple Return Earnings Outlook 1Yr Total Return

How it looks on the Alpha model A more granular view of the underlying style scores that drive the alpha (higher is better) and the percentile rank relative to the sector and market.

Normalized Percentile relative Percentile relative Score to sector(/1095) to market(/717) Alpha Model Score 0.06 Valuation -0.16 Growth -0.49 Profitability -0.31 Earnings Momentum -0.04 Price Momentum -0.07 Quality -0.10 Capital & Funding -0.62 Liquidity -1.52 Risk -0.08 Technicals & Trading 0.29 0 50 100 0 50 100 0 0 1 1

Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group ([email protected])

15 August 2016 18 Macquarie Research Cheung Kong Property

Cheung Kong Property (1113 HK, Outperform, Target Price: HK$67.00) Interim Results 1H/16A 2H/16E 1H/17E 2H/17E Profit & Loss 2015A 2016E 2017E 2018E

Net Property Income m 6,141 6,094 6,293 6,293 Net Property Income m 9,139 12,235 12,585 13,330 Development Income m 21,111 33,066 22,328 35,917 Development Income m 48,141 54,177 58,245 59,797 Other Revenue m 0 0 0 0 Other Revenue m 0 0 0 0 Total Revenue m 27,252 39,160 28,621 42,209 Total Revenue m 57,280 66,412 70,831 73,127 Management Fees m 0 0 0 0 Management Fees m 0 0 0 0 Other Expenses m 0 0 0 0 Other Expenses m 0 0 0 0 EBITDA m 11,393 16,031 12,374 17,878 EBITDA m 22,118 27,424 30,252 29,720 Dep & Amortisation m 340 340 0 700 Dep & Amortisation m 508 680 700 725 EBIT m 11,053 15,691 12,374 17,178 EBIT m 21,610 26,744 29,552 28,994 Net Interest Income m -318 -228 -185 -185 Net Interest Income m -549 -546 -369 -317 Associates m 130 764 503 503 Associates m 378 894 1,005 971 Exceptionals m 228 -228 0 0 Exceptionals m 2,774 0 0 0 Other Pre-Tax Income m 0 0 0 0 Other Pre-Tax Income m 0 0 0 0 Pre-Tax Profit m 11,093 15,998 12,692 17,496 Pre-Tax Profit m 24,213 27,091 30,188 29,648 Tax Expense m -2,314 -5,057 -3,904 -5,505 Tax Expense m -6,305 -7,371 -9,409 -9,838 Net Profit m 8,779 10,941 8,789 11,991 Net Profit m 17,908 19,720 20,780 19,810 Minority Interests m -173 -297 -302 -529 Minority Interests m -795 -470 -831 -773

Reported Earnings m 8,606 11,207 8,800 11,776 Reported Earnings m 17,113 19,813 20,576 19,086 Adjusted Earnings m 8,339 10,911 8,486 11,462 Adjusted Earnings m 15,568 19,250 19,948 19,037

EPS (rep) 2.23 2.90 2.28 3.06 EPS (rep) 4.43 5.14 5.34 4.96 EPS (adj) 2.16 2.83 2.20 2.98 EPS (adj) 4.03 4.99 5.18 4.95 EPS Growth yoy (adj) % 50.9 8.8 1.6 5.3 EPS Growth (adj) % -6.7 23.8 3.7 -4.4 PE (rep) x 12.4 10.7 10.3 11.1 PE (adj) x 13.6 11.0 10.6 11.1

EBITDA Margins % 41.8 40.9 43.2 42.4 Total DPS 1.40 1.75 1.87 1.88 EBIT Margins % 40.6 40.1 43.2 40.7 Total Div Yield % 2.6 3.2 3.4 3.4 Earnings Split % 43.3 56.7 42.5 57.5 Basic Shares Outstanding m 3,860 3,846 3,846 3,846 Revenue Growth % 53.6 -1.0 5.0 7.8 Diluted Shares Outstanding m 3,860 3,856 3,853 3,846 EBIT Growth % 89.3 -0.5 12.0 9.5

Profit & Loss Ratios 2015A 2016E 2017E 2018E Cashflow Analysis 2015A 2016E 2017E 2018E

Revenue Growth % 22.9 15.9 6.7 3.2 EBITDA m 22,118 27,424 30,252 29,720 EBITDA Growth % 7.2 24.0 10.3 -1.8 Tax Paid m 3,866 7,371 9,409 9,838 EBIT Growth % 7.2 23.8 10.5 -1.9 Chg in Working Capital m -21,787 -5,416 1,964 -11,910 EBITDA Margins % 38.6 41.3 42.7 40.6 Net Interest Paid m -766 -1,431 -1,176 -1,054 EBIT Margins % 37.7 40.3 41.7 39.6 Other m 1,820 894 1,005 971 Net Profit Margins % 27.2 29.0 28.2 26.0 Operating Cashflow m 5,251 28,843 41,454 27,564 Payout Ratio % 34.7 35.1 36.1 38.0 Acquisitions m -5,415 -3,174 -3,303 -1,227 EV/EBITDA x 9.7 7.7 7.0 7.1 Capex m 0 0 0 0 EV/EBIT x 9.9 7.9 7.1 7.3 Asset Sales m -423 -1,137 -1,261 -1,435 Other m 5,420 0 0 0 Balance Sheet Ratios Investing Cashflow m -418 -4,311 -4,564 -2,662 ROE % 6.4 7.1 7.0 6.4 Dividend (Ordinary) m -4,844 -5,404 -6,738 -7,181 ROA % 5.5 7.2 7.7 7.2 Equity Raised m 0 0 0 0 ROIC % 6.7 6.8 7.3 7.3 Debt Movements m 10,770 -10,000 0 0 Net Debt/Equity % 5.6 -1.4 -11.2 -16.2 Other m 2,744 -148 -631 -816 Interest Cover x 39.4 48.9 80.0 91.5 Financing Cashflow m 8,670 -15,552 -7,369 -7,997 Price/Book x 0.8 0.8 0.7 0.7 Book Value per Share 68.2 72.2 75.7 78.8 Net Chg in Cash/Debt m 13,503 8,980 29,521 16,905

Free Cashflow m 5,251 28,843 41,454 27,564

Balance Sheet 2015A 2016E 2017E 2018E

Cash m 45,861 54,841 84,362 101,268 Receivables m 12,335 13,569 14,925 16,418 Inventories m 153,301 141,446 127,573 118,050 Investments m 119,959 121,985 125,992 127,268 Fixed Assets m 18,614 19,071 19,632 20,342 Intangibles m 0 0 0 0 Other Assets m 21,735 23,445 23,369 23,369 Total Assets m 371,805 374,358 395,853 406,714 Payables m 26,795 21,483 26,904 25,473 Short Term Debt m 5,772 5,772 5,772 5,772 Long Term Debt m 55,217 45,217 45,217 45,217 Provisions m 14,334 17,467 19,505 19,934 Other Liabilities m 0 0 0 0 Total Liabilities m 102,118 89,939 97,397 96,396 Shareholders' Funds m 263,096 277,505 291,343 303,248 Minority Interests m 6,591 6,913 7,113 7,070 Total S/H Equity m 269,687 284,418 298,456 310,318 Total Liab & S/H Funds m 371,805 374,358 395,853 406,714

All figures in HKD unless noted. Source: Company data, Macquarie Research, August 2016

15 August 2016 19 Macquarie Research Cheung Kong Property Important disclosures: Recommendation definitions Volatility index definition* Financial definitions Macquarie - Australia/New Zealand This is calculated from the volatility of historical All "Adjusted" data items have had the following Outperform – return >3% in excess of benchmark return price movements. adjustments made: Neutral – return within 3% of benchmark return Added back: goodwill amortisation, provision for Underperform – return >3% below benchmark return Very high–highest risk – Stock should be catastrophe reserves, IFRS derivatives & hedging, expected to move up or down 60–100% in a year IFRS impairments & IFRS interest expense Benchmark return is determined by long term nominal – investors should be aware this stock is highly Excluded: non recurring items, asset revals, property GDP growth plus 12 month forward market dividend speculative. revals, appraisal value uplift, preference dividends & yield minority interests Macquarie – Asia/Europe High – stock should be expected to move up or Outperform – expected return >+10% down at least 40–60% in a year – investors should EPS = adjusted net profit / efpowa* Neutral – expected return from -10% to +10% be aware this stock could be speculative. ROA = adjusted ebit / average total assets Underperform – expected return <-10% ROA Banks/Insurance = adjusted net profit /average Medium – stock should be expected to move up total assets Macquarie – South Africa or down at least 30–40% in a year. ROE = adjusted net profit / average shareholders funds Outperform – expected return >+10% Gross cashflow = adjusted net profit + depreciation Neutral – expected return from -10% to +10% Low–medium – stock should be expected to *equivalent fully paid ordinary weighted average Underperform – expected return <-10% move up or down at least 25–30% in a year. number of shares Macquarie - Canada Outperform – return >5% in excess of benchmark return Low – stock should be expected to move up or All Reported numbers for Australian/NZ listed stocks Neutral – return within 5% of benchmark return down at least 15–25% in a year. are modelled under IFRS (International Financial Underperform – return >5% below benchmark return * Applicable to Asia/Australian/NZ/Canada stocks Reporting Standards). only Macquarie - USA Outperform (Buy) – return >5% in excess of Russell Recommendations – 12 months 3000 index return Note: Quant recommendations may differ from Neutral (Hold) – return within 5% of Russell 3000 index Fundamental Analyst recommendations return Underperform (Sell)– return >5% below Russell 3000 index return

Recommendation proportions – For quarter ending 30 June 2016 AU/NZ Asia RSA USA CA EUR Outperform 45.17% 56.00% 36.36% 43.16% 63.39% 45.91% (for global coverage by Macquarie, 6.27% of stocks followed are investment banking clients) Neutral 36.21% 28.59% 40.26% 50.38% 29.46% 36.96% (for global coverage by Macquarie, 6.33% of stocks followed are investment banking clients) Underperform 18.62% 15.41% 23.38% 6.46% 7.14% 17.12% (for global coverage by Macquarie, 5.38% of stocks followed are investment banking clients)

Company-specific disclosures:

Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/research/disclosures.

Date Stock Code (BBG code) Recommendation Target Price 16-Jun-2016 1113 HK Outperform HK$66.34 18-Mar-2016 1113 HK Outperform HK$67.83 19-Nov-2015 1113 HK Outperform HK$66.24 26-Aug-2015 1113 HK Outperform HK$68.72 04-Jun-2015 1113 HK Neutral HK$70.64

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15 August 2016 21

Asia Research Head of Equity Research Industrials Telecoms Peter Redhead (Global – Head) (852) 3922 4836 Janet Lewis (Asia) (852) 3922 5417 Nathan Ramler (Asia, Japan) (813) 3512 7875 Jake Lynch (Asia – Head) (852) 3922 3583 Patrick Dai (China) (8621) 2412 9082 Danny Chu (Greater China) (852) 3922 4762 David Gibson (Japan – Head) (813) 3512 7880 Leo Lin (China) (852) 3922 1098 Soyun Shin (Korea) (822) 3705 8659 Conrad Werner (ASEAN – Head) (65) 6601 0182 Kenjin Hotta (Japan) (813) 3512 7871 Chirag Jain (India) (9122) 6720 4352 James Hong (Korea) (822) 3705 8661 Prem Jearajasingam (ASEAN) (603) 2059 8989 Automobiles/Auto Parts Inderjeetsingh Bhatia (India) (9122) 6720 4087 Kervin Sisayan (Philippines) (632) 857 0893 Lyall Taylor (Indonesia) (6221) 2598 8489 Janet Lewis (China) (852) 3922 5417 Transport & Infrastructure Zhixuan Lin (China) (8621) 2412 9006 Internet, Media and Software Leo Lin (China) (852) 3922 1098 Janet Lewis (Asia) (852) 3922 5417 Takuo Katayama (Japan) (813) 3512 7856 Wendy Huang (Asia, China) (852) 3922 3378 Corinne Jian (Taiwan) (8862) 2734 7522 James Hong (Korea) (822) 3705 8661 David Gibson (Asia, Japan) (813) 3512 7880 Azita Nazrene (ASEAN) (603) 2059 8980 Amit Mishra (India) (9122) 6720 4084 Hillman Chan (China, Hong Kong) (852) 3922 3716 Lyall Taylor (Indonesia) (6221) 2598 8489 Nathan Ramler (Japan) (813) 3512 7875 Utilities & Renewables Soyun Shin (Korea) (822) 3705 8659 Financials Alan Hon (Hong Kong) (852) 3922 3589 Abhishek Bhandari (India) (9122) 6720 4088 Inderjeetsingh Bhatia (India) (9122) 6720 4087 Scott Russell (Asia) (852) 3922 3567 Oil, Gas and Petrochemicals Prem Jearajasingam (Malaysia) (603) 2059 8989 Dexter Hsu (China, Taiwan) (8862) 2734 7530 Karisa Magpayo (Philippines) (632) 857 0899 Elaine Zhou (Hong Kong) (852) 3922 3278 Polina Diyachkina (Asia, Japan) (813) 3512 7886 Keisuke Moriyama (Japan) (813) 3512 7476 Aditya Suresh (Asia, China) (852) 3922 1265 Commodities Leo Nakada (Japan) (813) 3512 6050 Anna Park (Korea) (822) 3705 8669 Colin Hamilton (Global) (44 20) 3037 4061 Chan Hwang (Korea) (822) 3705 8643 Duke Suttikulpanich (ASEAN) (65) 6601 0148 Ian Roper (65) 6601 0698 Suresh Ganapathy (India) (9122) 6720 4078 Isaac Chow (Malaysia) (603) 2059 8982 Jim Lennon (44 20) 3037 4271 Thomas Stoegner (65) 6601 0854 Pharmaceuticals and Healthcare Lynn Zhao (8621) 2412 9035 (Malaysia, Singapore) Matthew Turner (44 20) 3037 4340 Lyall Taylor (Indonesia) (6221) 2598 8489 Abhishek Singhal (India) (9122) 6720 4086 Gilbert Lopez (Philippines) (632) 857 0892 Wei Li (China, Hong Kong) (852) 3922 5494 Economics Passakorn Linmaneechote (Thailand) (662) 694 7728 Property Peter Eadon-Clarke (Global) (813) 3512 7850 Conglomerates Larry Hu (China, Hong Kong) (852) 3922 3778 Tuck Yin Soong (Asia, Singapore) (65) 6601 0838 Tanvee Gupta Jain (India) (9122) 6720 4355 David Ng (China, Hong Kong) (852) 3922 1291 David Ng (China, Hong Kong) (852) 3922 1291 Conrad Werner (Singapore) (65) 6601 0182 Raymond Liu (China, Hong Kong) (852) 3922 3629 Quantitative / CPG Gilbert Lopez (Philippines) (632) 857 0892 Wilson Ho (China) (852) 3922 3248 Gurvinder Brar (Global) (44 20) 3037 4036 Consumer and Gaming William Montgomery (Japan) (813) 3512 7864 Woei Chan (Asia) (852) 3922 1421 Corinne Jian (Taiwan) (8862) 2734 7522 Danny Deng (Asia) (852) 3922 4646 Linda Huang (Asia, China, Hong Kong) (852) 3922 4068 Abhishek Bhandari (India) (9122) 6720 4088 Per Gullberg (Asia) (852) 3922 1478 Zibo Chen (China, Hong Kong) (852) 3922 1130 Aiman Mohamad (Malaysia) (603) 2059 8986 Terence Chang (China, Hong Kong) (852) 3922 3581 Kervin Sisayan (Philippines) (632) 857 0893 Strategy/Country Satsuki Kawasaki (Japan) (813) 3512 7870 Patti Tomaitrichitr (Thailand) (662) 694 7727 Viktor Shvets (Asia, Global) (852) 3922 3883 Kwang Cho (Korea) (822) 3705 4953 Chetan Seth (Asia) (852) 3922 4769 KJ Lee (Korea) (822) 3705 9935 Resources / Metals and Mining David Ng (China, Hong Kong) (852) 3922 1291 Stella Li (Taiwan) (8862) 2734 7514 Polina Diyachkina (Asia, Japan) (813) 3512 7886 Erwin Sanft (China, Hong Kong) (852) 3922 1516 Amit Sinha (India) (9122) 6720 4085 Coria Chow (China) (852) 3922 1181 Peter Eadon-Clarke (Japan) (813) 3512 7850 Fransisca Widjaja (65) 6601 0847 Anna Park (Korea) (822) 3705 8669 Chan Hwang (Korea) (822) 3705 8643 (Indonesia, Singapore) Stanley Liong (Indonesia) (6221) 2598 8381 Jeffrey Ohlweiler (Taiwan) (8862) 2734 7512 Hendy Soegiarto (Indonesia) (6221) 2598 8369 Inderjeetsingh Bhatia (India) (9122) 6720 4087 Karisa Magpayo (Philippines) (632) 857 0899 Technology Lyall Taylor (Indonesia) (6221) 2598 8489 Chalinee Congmuang (Thailand) (662) 694 7993 Damian Thong (Asia, Japan) (813) 3512 7877 Anand Pathmakanthan (Malaysia) (603) 2059 8833 Emerging Leaders George Chang (Japan) (813) 3512 7854 Gilbert Lopez (Philippines) (632) 857 0892 Daniel Kim (Korea) (822) 3705 8641 Conrad Werner (Singapore) (65) 6601 0182 Jake Lynch (Asia) (852) 3922 3583 Allen Chang (Greater China) (852) 3922 1136 Alastair Macdonald (Thailand) (662) 694 7753 Aditya Suresh (Asia) (852) 3922 1265 Jeffrey Ohlweiler (Greater China) (8862) 2734 7512 Timothy Lam (China, Hong Kong) (852) 3922 1086 Patrick Liao (Greater China) (8862) 2734 7515 Find our research at Mike Allen (Japan) (813) 3512 7859 Louis Cheng (Greater China) (8862) 2734 7526 Kwang Cho (Korea) (822) 3705 4953 Kaylin Tsai (Greater China) (8862) 2734 7523 Macquarie: www.macquarie.com.au/research Thomson: www.thomson.com/financial Corinne Jian (Taiwan) (8862) 2734 7522 Marcus Yang (Taiwan) (8862) 2734 7532 Reuters: www.knowledge.reuters.com Conrad Werner (ASEAN) (65) 6601 0182 Bloomberg: MAC GO Factset: http://www.factset.com/home.aspx CapitalIQ www.capitaliq.com Email [email protected] for access

Asia Sales Regional Heads of Sales Regional Heads of Sales cont’d Sales Trading cont’d Miki Edelman (Global) (1 212) 231 6121 Paul Colaco (San Francisco) (1 415) 762 5003 Suhaida Samsudin (Malaysia) (603) 2059 8888 Jeff Evans (Boston) (1 617) 598 2508 Amelia Mehta (Singapore) (65) 6601 0211 Michael Santos (Philippines) (632) 857 0813 Jeffrey Shiu (China, Hong Kong) (852) 3922 2061 Angus Kent (Thailand) (662) 694 7601 Chris Reale (New York) (1 212) 231 2555 Sandeep Bhatia (India) (9122) 6720 4101 Ben Musgrave (UK/Europe) (44 20) 3037 4882 Marc Rosa (New York) (1 212) 231 2555 Thomas Renz (Geneva) (41 22) 818 7712 Christina Lee (UK/Europe) (44 20) 3037 4873 Justin Morrison (Singapore) (65) 6601 0288 Daniel Clarke (Taiwan) (8862) 2734 7580 Riaz Hyder (Indonesia) (6221) 2598 8486 Sales Trading Nick Cant (Japan) (65) 6601 0210 Brendan Rake (Thailand) (662) 694 7707 John Jay Lee (Korea) (822) 3705 9988 Adam Zaki (Asia) (852) 3922 2002 Mike Keen (UK/Europe) (44 20) 3037 4905 Nik Hadi (Malaysia) (603) 2059 8888 Stanley Dunda (Indonesia) (6221) 515 1555 Eric Roles (New York) (1 212) 231 2559 Gino C Rojas (Philippines) (632) 857 0861

This publication was disseminated on 15 August 2016 at 08:00 UTC.