China / Hong Kong Company Guide Version 9 | Bloomberg: 101 HK EQUITY | Reuters: 101.HK Refer to important disclosures at the end of this report

DBS Group Research . Equity 31 Jul 2019

BUY Retail sales growth gathering Last Traded Price ( 30 Jul 2019):HK$18.64 (HSI : 28,147) momentum Price Target 12-mth: HK$22.38 (20.1% upside) (Prev HK$20.35) BUY with HK$22.38 TP. The stock is trading at a 49% discount to Analyst our estimated current NAV and offers an attractive dividend yield Jeff YAU CFA, +852 36684180 [email protected] of 4.0% for FY19. Stellar tenants’ sales growth at its retail malls in Ian CHUI +852 36684174 [email protected] Jason LAM +852 36684179 [email protected] China augurs well for reversionary growth. Portfolio expansion and asset enhancement initiatives should provide additional What’s New momentum to drive rental income, offering better earnings quality • Improving retail tenants’ sales to underpin and in turn providing share price upside. HLP is among our preferred landlords. BUY with HK$22.38 TP. reversionary growth

Portfolio expansion to lift rental income. The progressive opening • New properties to spice up rental earnings of new properties in , , , and in • BUY with HK$22.38 TP 2019-20 should give an additional boost to Hang Lung Properties’

recurrent earnings growth, and its ability to raise dividends. Pre-

leasing at Spring City 66 in Kunming is progressing smoothly, with Price Relative 88% of retail space already pre-committed. This mall is scheduled to open for business in late Aug.

Improving retail sales growth translating into higher income. Despite a higher comparison base, retail sales at Shanghai Plaza 66 grew 15% in 1H19. Retail malls outside Shanghai posted favourable growth in tenants’ sales. In particular, retail sales at Shenyang Palace 66, Olympia 66, and Parc 66 jumped

25-29%. Sequential retail sales improvement supports positive Forecasts and Valuation and improving reversionary growth. FY Dec (HK$ m) 2017A 2018A 2019F 2020F Turnover 11,199 9,408 8,909 10,917 Valuation: EBITDA 7,837 6,326 5,891 7,065 Our TP for Hang Lung Properties is based on a target discount of Pre-tax Profit 7,278 5,703 6,079 7,311 40% to our Jun-2020 NAV estimate. Underlying Profit 5,530 4,093 4,378 5,331 EPS (HK$) 1.23 0.91 0.97 1.19 Key Risks to Our View: EPS Gth (%) (12.8) (26.0) 7.0 21.8 PE (X) 15.2 20.5 19.1 15.7 A slower retail market recovery in China could be a drag on its P/Cash Flow (X) 8.1 12.3 13.6 10.6 earnings growth and share price performance. EV/EBITDA (X) 13.4 16.6 17.8 14.8 DPS (HK$) 0.75 0.75 0.75 0.77 Interest rate hikes may lead to capitalisation rate expansion for Div Yield (%) 4.0 4.0 4.0 4.1 rental properties in Hong Kong, and in turn adversely affect their Net Gearing (%) 2 11 20 24 valuation. ROE (%) 4.2 3.0 3.2 3.8 Est. NAV (HK$): 36.5 37.3 Further depreciation in Rmb may negatively impact the valuations Disc. to NAV (%) (49) (50) and rental contributions from its rental properties in China.

Earnings Rev (%): 6 24 Consensus EPS (HK$): 0.99 1.06 At A Glance Other Broker Recs: B: 11 S: 2 H: 3 Issued Capital (m shrs) 4,498 Source: Company, DBS Bank (Hong Kong) Limited (“DBS HK”), Mkt Cap (HK$m/US$m) 83,837 / 10,716 Thomson Reuters Major Shareholders (%) Ltd 57.6 Free Float (%) 42.4 3m Avg. Daily Val. (US$m) 12.53 ICB Industry: Financials / Real Estate Investment & Services

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Company Guide

Hang Lung Properties

WHAT’S NEW 2018. Outside Shanghai, retail malls posted favourable growth in tenants’ sales in 1H19. In particular, retail sales at Shenyang Palace 66, Dalian Olympia 66, and Jinan Parc 66 Due to the absence of development earnings, Hang Lung jumped 25-29%. Shenyang Forum 66 and Riverside Properties’ (HLP) 1H19 underlying profit fell 4% to 66 also showed signs of turning around with mild retail sales HK$2.23bn, coming in 30% above our estimate. The growth of 2-3%. Continued retail sales improvement discrepancy arose from lower-than-expected interest expense supports positive and improving reversionary growth which as a result of the adoption of an amendment to the will underpin future rental income expansion. accounting standard on the capitalization of borrowing costs.

Despite lower earnings, interim DPS was flat at HK$0.17. Scheduled to open for business in late Aug, the retail mall at

Kunming Spring City 66 has been 88% pre-committed. The Gross rental receipts were up 2% to HK$4.2bn. Aided by office tower will be handed over to tenants for renovation in positive rental reversion for office and retail properties, rental Sep-19. The second office tower at Center 66 will also be revenue from the Hong Kong investment property portfolio completed soon. Conrad Hotel at Forum 66 is on track for expanded by 3% to HK$2bn. opening in Sep-19. In Wuhan, Heartland 66 is expected to

come onstream in stages from 2H20 onwards. About 40% of Despite Rmb depreciation of 6%, rental revenue from retail area has been pre-leased. New rental properties should Mainland China rose 1% in 1H19. In Rmb terms, revenue spice up its recurrent earnings starting from FY20. would have increased 7% y-o-y (or 4% h-o-h) thanks to

increased retail income from Shanghai Plaza 66, Shenyang The company sold 111 car parks at Laichikok Bay Garden for Palace 66 and Wuxi Center 66, and improved contributions HK$110m at an exit yield of 2.6%. The transaction will be from office premises. This was despite the US-China trade completed in Sep-19. disputes and other global uncertainties. With overall margin

improving slightly to 76.5%, rental earnings rose 3% to

HK$3.22bn.

Despite a higher comparison base, retail sales at Shanghai

Plaza 66 grew a further 15% in 1H19 after rising 13% in

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Company Guide

Hang Lung Properties

Results Summary

(HK$m) 1H18 1H19 % Chg Comments Turnover 5,150 4,204 (18) 1H19: absence of property sales revenue

Property leasing 3,117 3,217 3 1H19: China portfolio: up 3% despite short-term rental disruption by major renovation in Grand Gateway 66 and a 6% Rmb depreciation against HKD; Hong Kong portfolio: up 4% Property sales 565 0 (100) 1H18: from the booking of 3 semi-detached houses at 23-29 Blue Pool Road and 5 Long Beach apartments

Other net (loss)/income 70 4 (94) 1H18: included gain of HK$45m and HK$25m on disposal of certain investment properties and assets held for sale respectively Administrative expenses (292) (317) 9 Operating profit 3,460 2,904 (16) Change in fair value of investment properties 2,456 1,438 (41) 1H19: total value of investment properties HK$66.3bn from HK and HK$70.6bn from China; includes HK$69m of fair value gain from the reclassification of 111 carpark spaces in Laichikok Garden as assets held for sale. Interest income 256 96 (63) 1H19: reduction of average deposit balance after settling payments on capital expenditure and Hangzhou land premium

Finance costs (542) (8) (99) 1H19: more borrowing costs were capitalised to the projects under development with additional construction costs for projects under development, full payment of land premium of Hangzhou Westlake 66 and the adoption of an amendment to the accounting standard on the capitalisation of borrowing costs effective Jan 2019 Share of profits of joint venture 54 38 (30) Profit before taxation 5,684 4,468 (21) Taxation (736) (698) (5) Non-controlling interests (259) (254) (2) Net profit 4,689 3,516 (25)

Underlying net profit 2,319 2,229 (4)

Interim DPS (HK$) 0.17 0.17 0 Source: Hang Lung Properties

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Company Guide

Hang Lung Properties

CRITICAL FACTORS TO WATCH KEY ASSUMPTION

Critical Factors Residential price - HK Retail mall performance to dictate share price. HLP’s share price performance should be primarily driven by its investment property portfolio in China (which comprises mainly retail malls) as we estimate that these assets account for about 50% of its gross asset value. Generally, performance of these retail malls has strong correlation with China’s retail consumption, especially luxury goods. Tenants’ sales growth to underpin reversionary growth, which in turn dictates future rental income growth. In 1H19, tenant sales growth at its retail malls in China gathered momentum despite the ongoing US-China trade war. During the period, Office rental - HK Plaza 66 recorded healthy retail sales growth of 15% y-o-y despite a higher comparison base. Retail malls outside Shanghai registered improving tenants’ sales. We note that retail sales at Center 66, Olympia 66, and Palace 66 recorded impressive growth of 25%, 27% and 29% respectively. Even Riverside 66 and Forum 66 recorded mild retail sales growth of 2-3%. As a result, these malls registered favourable reversionary growth. Facelift to rejuvenate the malls. Asset enhancement initiatives play a crucial role in unlocking the earnings potential of shopping malls in China/Hong Kong, which in turn provides Retail rental (Shopping centre) - HK additional growth impetus for HLP. The company has been carrying out large-scale enhancement works at Grand Gateway 66 in Shanghai. Ph 1 of the upgrade works has been completed with the renovated area being fully let at higher income. Ph 2, which covers the bulk of South Building and its basement, is in full swing and will be completed in stages from late 2019. The renovation at Peak Galleria in Hong Kong is well on track. It will re-open for business in phases starting from 2Q19. Portfolio expansion to augment income growth. Scheduled to open for business in late Aug, the mall at Kunming Spring City 66 has been 88% pre-committed already. In addition, the Source: Company, DBS HK second office tower at Center 66 and Conrad Hotel at Forum 66 are also on track for opening in 2H19. This will be followed by the opening of Heartland 66’s retail portion in 2H20. With the new investment properties, the company’s rental income growth from China should improve from FY20. Growing commercial exposure in China. In May-18, HLP acquired a commercial site in Hangzhou for Rmb10.73bn. This marked its first land purchase in China since Feb-13. Upon scheduled completion in phases from 2024, this development will provide GFA of 2.5m sf. New ventures in Hong Kong. HLP has successfully consolidated the ownership of Amoy Industrial Center in Ngau Tau Kok through compulsory auction. This site is expected to be redeveloped into a residential/retail tower with GFA of c.180,000sf for sale. In Apr-19, HLP formed a joint venture with its parent Hang Lung Group (HLG) to redevelop the sites in North Point into a commercial and office tower with GFA of 105,000sf. HLP and HLG own 66.7% and 33.3% in this redevelopment respectively which is estimated to cost HK$2.56bn.

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Company Guide

Hang Lung Properties

Appendix 1: A look at Company's listed history – what drives its share price?

China rental portfolio revenue

1H17 2H17 1H18 2H18 1H19 City Property Rmb m Rmb m Rmb m Rmb m Rmb m Shanghai Plaza 66 710 699 763 791 827 Shanghai Grand Gateway 66 451 432 410 393 394 Shenyang Palace 66 77 78 77 85 95 Shenyang Forum 66 105 108 105 111 113 Jinan Parc 66 133 138 141 151 158 Wuxi Center 66 105 114 121 131 140 Tianjin Riverside 66 90 91 90 89 93 Dalian Olympia 66 52 47 57 62 74 T otal 1,723 1,707 1,764 1,813 1,894 Source: Hang Lung Properties

China retail portfolio occupancy

Dec-18 J un-19 Change City Property Occ % Occ % pp Shanghai Plaza 66 99 98 (1) Shanghai Grand Gateway 66 79 86 7 Shenyang Palace 66 88 91 3 Shenyang Forum 66 93 94 1 Jinan Parc 66 96 95 (1) Wuxi Center 66 89 93 4 Tianjin Riverside 66 90 83 (7) Dalian Olympia 66 79 79 - Source: Hang Lung Properties

China office portfolio occupancy

Dec-18 J un-19 Change City Property Occ % Occ % pp Shanghai Plaza 66 95 93 (2) Shenyang Forum 66 88 89 1 Wuxi Center 66 86 90 4 Source: Hang Lung Properties

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Company Guide

Hang Lung Properties

Hang Lung Properties share price vs. China retail sales growth

(HK$/share) (YOY %) 40 24 22 35 Correlation since Jan-09: 0.77 20 30 18 16 25 14 20 12 10 15 8

10 6

Jul-13 Jul-08 Jul-18

Jan-06 Jan-11 Jan-16

Jun-11 Jun-06 Jun-16

Feb-08 Oct-09 Feb-13 Oct-14 Feb-18

Apr-07 Sep-07 Apr-17 Sep-17 Apr-12 Sep-12

Dec-13 Dec-18 Dec-08

Nov-11 Nov-06 Nov-16

Mar-15 Mar-10

Aug-15 Aug-10

May-09 May-19 May-14 101.HK (LHS) China retail sales growth YOY (RHS)

Source: Bloomberg Finance L.P.

Hang Lung Properties share price vs. key events

(HK$/share) 45 7 40 6 35 9 11 8 10 12 30 5 13 25 15 14 16 20 4 15 2 3 1 10 5

0

Jan-99

Jan-00

Jan-01

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Jan-07

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Jan-09

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Jan-17

Jan-18 Jan-19 101.HK Event

# Event 1 Grand Gateway 66 opened in Shanghai 2 Plaza 66 opened in Shanghai 3 Completion of The Harbourside in Hong Kong 4 Completion of The Long Beach in Hong Kong 5 Acquired land in Wuxi (to be developed as Center 66 Ph2) 6 Mr Philip Chen Nan Lok joined Hang Lung Properties as CEO 7 Palace 66 opened in Shenyang 8 Parc 66 opened in Jinan 9 Acquired land in Kunming (to be developed as Spring City 66) 10 Forum 66 opened in Shenyang 11 Acquired land in Wuhan (to be developed as Heartland 66) 12 Center 66 Ph1 opened in Wuxi 13 Riverside 66 opened in Tianjin 14 Olympia 66 opened in Dalian 15 Mr Weber Lo Wai Pak joined Hang Lung Properties as CEO as Mr Philip Chen retired

16 Acquired a land parcel in Hangzhou for Rmb10.73bn or Rmb55,285psm. Source: Bloomberg Finance L.P., DBS HK

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Company Guide

Hang Lung Properties

Balance Sheet: Gearing Hang Lung Properties’ net debt rose to HK$25.4bn in Jun-19 from Dec-18’s HK$14.9bn, due to the payment of the remaining 50% land cost for the Hangzhou plot that was acquired in May-18, and construction expenses for other projects. This puts its gearing at 17.6%. Despite higher gearing, financial risk should remain manageable in our view.

Share Price Drivers: Stellar tenants’ sales growth at its retail malls in China augurs well for reversionary growth. Portfolio expansion and the progressive completion of asset enhancement works add new Net Capital Expenditure impetus to its recurrent earnings growth, providing upside on stock.

Key Risks: Market risk. Slowdown in retail consumption in China could be a drag on its earnings growth and share price performance.

Interest rate risk. Interest rate hikes may lead to capitalisation rate expansion for rental properties in Hong Kong and in turn ROE adversely affect their valuation.

Currency risk. Further RMB depreciation may negatively impact the valuations and rental contributions from its rental properties in China.

Environment, Social, Governance: Hang Lung Properties has committed to achieving a Gold rating or above under the LEED certification in Mainland China. 23-39 Blue Pool Road has also been LEED certified. Discount to NAV Peak Galleria, and Standard Chartered Building are rated % BEAM Plus. The company has targeted a 75%/25% reduction 40 of construction/commercial waste by 2030 from 2018 levels. 20 +2SD: 7% To reduce energy use and related greenhouse gas emissions, 0 Hang Lung Properties has retrofitted existing properties with +1SD: -14% (20) Average: -34% new lighting and cooling systems while designing new (40) -1SD: -55% buildings to meet the latest environmental standards. (60) -2SD: -76% (80) Company Background (100)

Hang Lung Properties develops commercial property

Jul-06

Jul-07

Jul-08

Jul-09

Jul-10

Jul-11

Jul-12

Jul-13

Jul-14

Jul-15 Jul-16 complexes in China for long-term investment. As of Jun-19 Jul-17 completed China portfolio has GFA of 31.2m sf with another Source: Company, DBS HK 20m sf under development. The company also owns an investment property portfolio of 7m sf in GFA in Hong Kong, comprising mainly office and retail properties.

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Company Guide

Hang Lung Properties

Key Assumptions (%) FY Dec 2019F 2020F Residential price - HK 10 5 Office rental - HK 0 2 Retail rental (Shopping 0 1 Center) - HK Source: DBS HK

Segmental Breakdown (HK$ m)

FY Dec 2016A 2017A 2018A 2019F 2020F Revenues (HK$ m) Property sales 5,322 3,420 1,227 338 1,685 Property leasing 7,737 7,779 8,181 8,538 9,143 Hotel 0 0 0 32 89 Total 13,059 11,199 9,408 8,909 10,917 Source: DBS HK

Income Statement (HK$ m) FY Dec 2016A 2017A 2018A 2019F 2020F Turnover 13,059 11,199 9,408 8,909 10,917 EBITDA 8,373 7,837 6,326 5,891 7,065 Depr / Amort (53) (43) (45) (45) (45) EBIT 8,320 7,794 6,281 5,846 7,020 Associates Inc 61 53 49 54 55 Interest (Exp)/Inc (117) (569) (627) 180 235 Exceptionals 0 0 0 0 0 Pre-tax Profit 8,264 7,278 5,703 6,079 7,311 Tax (1,520) (1,353) (1,203) (1,277) (1,535) Minority Interest (403) (395) (407) (424) (444) Underlying Profit 6,341 5,530 4,093 4,378 5,331

Sales Gth (%) 46 (14) (16) (5) 23 Net Profit Gth (%) 45 (13) (26) 7 22 EBITDA Margins (%) 64 70 67 66 65 EBIT Margin (%) 64 70 67 66 64 Tax Rate (%) 18 19 21 21 21 Source: DBS HK

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Company Guide

Hang Lung Properties

Balance Sheet (HK$ m) FY Dec 2016A 2017A 2018A 2019F 2020F Fixed Assets 143,030 156,256 168,078 180,706 188,195 Other LT Assets 1,261 1,362 1,423 1,438 1,453 Cash & ST Invts 24,325 22,106 12,363 4,931 1,941 Other Current Assets 6,291 3,862 4,589 6,037 7,097 Total Assets 174,907 183,586 186,453 193,112 198,685 ST Debt 568 2,112 2,414 2,000 1,000 Creditors 6,327 6,673 5,974 5,867 5,760 Other Current Liab 932 504 558 658 758 LT Debt 26,514 22,708 24,839 30,253 34,253 Other LT Liabilities 8,421 9,344 9,074 9,074 9,074 Minority Interests 5,580 6,087 6,033 6,302 6,570 Shareholder’s Equity 126,565 136,158 137,561 138,958 141,270 Total Cap. & Liab. 174,907 183,586 186,453 193,112 198,685 Share Capital (m) 4,498 4,498 4,498 4,498 4,498 Net Cash/(Debt) (2,757) (2,714) (14,890) (27,322) (33,312) Working Capital 22,789 16,679 8,006 2,443 1,519 Net Gearing (%) 2 2 11 20 24 Source: DBS HK

Cash Flow Statement (HK$ m) FY Dec 2016A 2017A 2018A 2019F 2020F EBIT 8,320 7,794 6,281 5,846 7,020 Tax Paid (1,002) (1,776) (1,063) (1,277) (1,535) Depr/Amort 53 43 45 45 45 Chg in Wkg.Cap (729) 2,792 501 282 845 Other Non-Cash 93 (296) (26) 0 0 Operating CF 6,735 8,557 5,738 4,896 6,376 Net Capex (2,666) (4,216) (13,661) (12,012) (6,867) Assoc, MI, Invsmt 4,279 (10,107) 8,402 239 320 Investing CF 1,613 (14,323) (5,259) (11,773) (6,547) Net Chg in Debt (5,051) (3,245) 3,053 5,000 3,000 New Capital 7 0 0 0 0 Dividend (3,702) (3,685) (3,718) (3,797) (3,862) Other Financing CF (1,287) (1,157) (1,261) (1,757) (1,957) Financing CF (10,033) (8,087) (1,926) (554) (2,819) Chg in Cash (1,685) (13,853) (1,447) (7,432) (2,990) Source: DBS HK

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Company Guide

Hang Lung Properties

Target Price & Ratings History

HK$ S.No. Date Closing 12-mth Rating 21.0 Price T arget Price 20.0 1: 31-Jul-18 HK$16.58 HK$19.28 Buy 19.0 2: 17-Jan-19 HK$15.68 HK$17.90 Buy 18.0 5 3: 29-Jan-19 HK$16.36 HK$17.90 Buy 6 4 4: 31-Jan-19 HK$16.84 HK$18.22 Buy 17.0 1 3 5: 10-Jul-19 HK$18.58 HK$20.35 Buy 16.0 2 6: 29-Jul-19 HK$18.46 HK$20.35 Buy 15.0 14.0

13.0

Jul-18

Jul-19

Jan-19

Jun-19

Oct-18

Feb-19

Sep-18

Apr-19

Dec-18

Nov-18

Mar-19

Aug-18 May-19 May-19 Source: DBS HK

Analyst: Jeff YAU CFA, Ian CHUI Jason LAM

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Company Guide

Hang Lung Properties

DBS HK recommendations are based on an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return, i.e., > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable share price catalysts within this time frame)

*Share price appreciation + dividends

Completed Date: 31 Jul 2019 08:29:38 (HKT) Dissemination Date: 31 Jul 2019 09:36:01 (HKT) Sources for all charts and tables are DBS HK unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER

This report is prepared by DBS Bank (Hong Kong) Limited (“DBS HK”). This report is solely intended for the clients of DBS Bank Ltd., DBS HK, DBS Vickers (Hong Kong) Limited (“DBSV HK”), and DBS Vickers Securities (Singapore) Pte Ltd. (“DBSVS”), its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS HK.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., DBS HK, DBSV HK, DBSVS, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

DBS Vickers Securities (USA) Inc (“DBSVUSA”), a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

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Company Guide

Hang Lung Properties

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS HK, DBSVS or their subsidiaries and/or other affiliates have a proprietary position in Hang Lung Properties Ltd (101 HK) recommended in this report as of 26 Jul 2019.

2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

3. Compensation for investment banking services: DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

4. Disclosure of previous investment recommendation produced: DBS Bank Ltd, DBSVS, DBS HK, their subsidiaries and/or other affiliates of DBSVUSA may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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Hang Lung Properties

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946. DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report is being distributed in Hong Kong by DBS Bank Ltd, DBS Bank (Hong Kong) Limited and DBS Vickers (Hong Kong) Limited, all of which are registered with or licensed by the Hong Kong Securities and Futures Commission to carry out the regulated activity of advising on securities.

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report. Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. United This report is produced by DBS HK which is regulated by the Hong Kong Monetary Authority

Kingdom This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd (“DBSVUK”). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608-610, 6th Floor, Gate International Precinct Building 5, PO Box 506538, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Financial Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for Centre professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

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Company Guide

Hang Lung Properties

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as defined Emirates in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent. United States This report was prepared by DBS HK. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. DBS Bank (Hong Kong) Limited 13 th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong Tel: (852) 3668-4181, Fax: (852) 2521-1812

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Company Guide

Hang Lung Properties

DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE DBS Bank (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 13th Floor One Island East, 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 18 Westlands Road, Capital Square, Marina Bay Financial Centre Tower 3 Quarry Bay, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 852 3668 4181 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 852 2521 1812 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] e-mail: [email protected] Company Regn. No. 196800306E

INDONESIA THAILAND PT DBS Vickers Sekuritas (Indonesia) DBS Vickers Securities (Thailand) Co Ltd Contact: Maynard Priajaya Arif Contact: Chanpen Sirithanarattanakul DBS Bank Tower 989 Siam Piwat Tower Building, Ciputra World 1, 32/F 9th, 14th-15th Floor Jl. Prof. Dr. Satrio Kav. 3-5 Rama 1 Road, Pathumwan, Jakarta 12940, Indonesia Bangkok Thailand 10330 Tel: 62 21 3003 4900 Tel. 66 2 857 7831 Fax: 6221 3003 4943 Fax: 66 2 658 1269 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

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