China / Hong Kong Company Guide Version 10 | Bloomberg: 101 HK EQUITY | Reuters: 101.HK Refer to important disclosures at the end of this report

DBS Group Research . Equity 22 Jan 2020

BUY Higher dividend signals positive earnings Last Traded Price ( 21 Jan 2020):HK$18.24 (HSI : 27,985) outlook Price Target 12-mth: HK$21.66 (18.8% upside)

BUY with HK$21.66 TP. The stock is trading at a 50% discount to Analyst Jeff YAU CFA, +852 36684180 [email protected] our estimated current NAV and offers an attractive dividend yield of Ian CHUI CFA, +852 36684174 [email protected] 4.2% for FY20. The company’s retail mall operations in China are Jason LAM +852 36684179 [email protected] going from strength to strength. Improving tenants’ sales growth at What’s New its retail malls in China augurs well for reversionary growth and retail turnover rents. Portfolio expansion should provide additional • FY19 underlying profit grew 9%, 4% ahead of momentum to drive rental income, offering better earnings quality our forecast and in turn supporting share price upside. Maintain BUY with • Final DPS was up 2% to HK$0.59, a positive HK$21.66 TP.

surprise Continued healthy retail sales growth translating into sequential • Healthy retail sales growth from China retail rental income improvement. Despite a higher comparison base, properties, coupled with portfolio expansion, retail sales at Shanghai Plaza 66 grew 21% in FY19. Retail malls supports higher rental income in China outside Shanghai posted favourable growth in tenants’ sales. In particular, retail sales at Palace 66, Center 66, and • Maintain BUY with HK$21.66 TP Olympia 66 jumped 20-29% y-o-y. This supported the

sequential growth in China rental income. With the good showing, HLP raised its final DPS by 2% to HK$0.59, which signals the Price Relative management’s positive outlook on its core leasing operations.

Portfolio expansion to lift rental income. The progressive opening of new properties in , , Wuxi, and Shenyang is giving an additional boost to HLP’s recurrent earnings growth. This should enhance its ability to raise dividends.

Valuation: Our TP for Hang Lung Properties is based on a target discount of

40% to our Jun-2020 NAV estimate. Forecasts and Valuation FY Dec (HK$ m) 2018A 2019A 2020F 2021F Key Risks to Our View: Turnover 9,408 8,852 10,016 10,518 A slower retail market recovery in China could be a drag on its EBITDA 6,323 5,953 6,654 6,955 earnings growth and share price performance. Pre-tax Profit 5,703 6,050 6,708 6,969 Interest rate hikes may lead to capitalisation rate expansion for rental Underlying Profit 4,093 4,474 4,851 5,041 EPS (HK$) 0.91 0.99 1.08 1.12 properties in Hong Kong, and in turn adversely affect their valuation. EPS Gth (%) (26.0) 9.3 8.4 3.9 Further depreciation in Rmb may negatively impact the valuations PE (X) 20.0 18.3 16.9 16.3 and rental contributions from its rental properties in China. P/Cash Flow (X) 12.1 9.2 11.4 8.5 At A Glance EV/EBITDA (X) 18.6 19.7 17.7 16.9 Issued Capital (m shrs) 4,498 DPS (HK$) 0.75 0.76 0.77 0.78 Mkt Cap (HK$m/US$m) 82,038 / 10,558 Div Yield (%) 4.1 4.2 4.2 4.3 Major Shareholders (%) Net Gearing (%) 11 19 23 26 Ltd 57.9 ROE (%) 3.0 3.2 3.5 3.5 Free Float (%) 42.1 Est. NAV (HK$): 36.4 36.1 3m Avg. Daily Val. (US$m) 10.67 Disc. to NAV (%) (50) (49) GICS Industry: Real Estate / Real Estate Management & Development

Earnings Rev (%): (0) 0 Consensus EPS (HK$): 1.08 1.14 Bloomberg ESG disclosure score (2018)^ 52.5 Other Broker Recs: B:12 S:2 H:0 - Environmental / Social / Governance 49.6 / 43.9 / 67.9 Source: Company, DBS Bank (Hong Kong) Limited (“DBS HK”), ^ refer to back page for more information Thomson Reuters

ed-JS/ sa- CS /DL

Company Guide

Hang Lung Properties

WHAT’S NEW Revenue from its Hong Kong portfolio were both up 2% to Hang Lung Properties’ (HLP) FY19 underlying earnings came HK$4.01bn. Due to the social unrest, total retail sales in at HK$4.47bn, up 9% y-o-y. The growth was led by slumped 17% y-o-y in 2H19, with retail income down 1.8% increased rental earnings and lower interest expenses (due to h-o-h. As such, HLP’s rental receipts from Hong Kong fell the adoption of an amendment to the accounting standard marginally h-o-h. on the capitalization of borrowing costs), partially offset by reduced development profit. The result was 4% ahead of our Despite ramp-up losses at new properties in China, overall forecast due to higher-than-expected rental earnings and rental margin was largely stable at 73.9%, with rental lower-than-expected administrative expenses. earnings growing 4% to HK$6.33bn.

Final DPS was up 2% to HK$0.59, which came as a pleasant Due to fewer residential units sold, development earnings surprise. This also reflects the management’s positive outlook tumbled 79% to HK$162m in FY19, which stemmed from of HLP’s core leasing operations in China. This brought full- selling one house at Blue Pool Road project. year DPS to HK$0.76, which represents a current dividend yield of 4.2%. In FY19, HLP sold 111 car parking spaces at Laichikok Bay Garden which was previously held as investment properties. Gross rental income went up 5% to HK$8.56bn mainly led by The disposal gains amounted to HK$69m and has been higher contributions from its China rental portfolio. recognised as part of fair value gain of properties. Despite Rmb depreciation, income from the China portfolio rose 7%. In Rmb terms, revenue increased by a higher 12%. Excluding fresh income from new properties such as Kunming Spring City 66, Conrad Shenyang and second office tower at Wuxi Center 66, growth remained strong at 10%, fueled by improved retail income from Shanghai Plaza 66, Shenyang

Palace 66 and Wuxi Center 66. Income from Grand Gateway 66 also recovered as the enhanced area gradually re-opened after the renovation.

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Company Guide

Hang Lung Properties

CRITICAL FACTORS TO WATCH KEY ASSUMPTION

Critical Factors Office rental - 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 51% 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 FY19, tenant Retail rental (Shopping centre) - HK sales growth at its retail malls in China gathered momentum despite the ongoing US-China trade war. During the period, Plaza 66 recorded strong retail sales growth of 21% y-o-y despite a higher comparison base. Retail malls outside Shanghai registered improving tenants’ sales. We note that retail sales at Palace 66, Center 66, and Olympia 66, grew by an impressive 20%, 21% and 29% y-o-y respectively. Even Riverside 66 and Forum 66 recorded mild retail sales growth of 5-6%. With the opening of more new luxury branded shops, HLP’s retail malls stands to benefit from continued repatriation of luxury spending (instead of going overseas). This favourable trend bodes well for future reversionary growth. Source: Company, DBS HK

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 additional growth impetus for HLP. The renovation of the South Building at Grand Gateway 66 in Shanghai is gradually being completed with the mall’s occupancy recovering to 91% in Dec- 19. The entire South Building renovation are expected to be completed in 3Q20. With budgeted capital expenditure of HK$800m, we estimate a payback period of 4-5 years.

Portfolio expansion to augment income growth. Opened for business in Aug-19, Hang Lung’s retail mall at Spring City 66 in Kunming is 82% occupied in Dec-19. The 315-room Conrad Hotel at Forum 66 opened in Sep-19. As its operations are gradually ramped up, the hotel should bring in desirable foot traffic to the mall. The newly built office tower at Spring City 66 and second office tower at Center 66 were handed over to tenants from Aug-19. Retail mall at Heartland 66 in Wuhan is scheduled to open in mid-20 with c.60% of space being committed. With the new investment properties, the company’s rental income growth from China should improve from FY20.

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.155,000sf for sale. Project completion is expected in 2022. 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.

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Company Guide

Hang Lung Properties

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

Hang Lung Properties share price vs. China retail sales growth

(HK$/share) (YOY %) 40 24 22 35 Correlation since Jan-09: 0.78 20 30 18 16 25 14 20 12 10 15 8

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101.HK (LHS) China retail sales growth YOY (RHS)

Source: Bloomberg Finance L.P.

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Company Guide

Hang Lung Properties

Hang Lung Properties share price vs. key events

(HK$/share) 45 7 40 6 35 11 8 10 12 30 5 13 25 9 14 15 17 20 4 15 2 3 1 16 10 5

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Jan-19 Jan-20 101.HK Event

# Ev ent 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 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 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. 17 Kunming Spring City 66 mall and office tower opened

Source: Bloomberg Finance L.P., DBS HK, Hang Lung Properties, HKEx filings

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Company Guide

Hang Lung Properties

Results Summary

FY Dec (HK$m) F Y18 F Y19 % Chg Comments Turnover 9,408 8,852 (6) FY19: Lower revenue from property sales

Property leasing 6,060 6,325 4 FY19: China portfolio up 7% ; Hong Kong portfolio up 2% Property sales 762 162 (79) FY19: Contributed by the sale of 1 semi-detached house from 23-39 Blue Pool Road; FY18: mainly from selling 9 units at The Long Beach, and 3 semi- detached houses at 23-39 Blue Pool Road Other income 93 9 (90) FY18: Included mainly disposal gain (HK$71m) from the sale of 39 car parking spaces at The Long Beach Administrative expenses (637) (593) (7) Operating profit 6,278 5,903 (6) Change in fair value of 4,170 8,797 111 investment properties - property leasing in HK 3,852 (950) (125) FY19: Impacted by weakened economy and retail sales arising from the social unrest - property leasing in China 318 9,281 2819 FY19: Supported by robust rental growth and projections and capitalization rates compression Interest income 445 146 (67) FY19: Lower average balance of deposits Finance costs (1,069) (46) (96) FY19: Due to capitalization of borrowing costs to projects under development and the adpotion of the amended accounting standard for capitalization of borrowing costs Share of profits of jointly 97 9 (91) controlled entities Profit before taxation 9,921 14,809 49 Taxation (1,269) (5,009) 295 Minority interests (574) (3,628) 532 Net profit 8,078 6,172 (24)

Underlying net profit 4,093 4,474 9

Underlying EPS (HK$) 0.91 0.99 9 Interim DPS (HK$) 0.17 0.17 0 Final DPS (HK$) 0.58 0.59 2 Total DPS (HK$) 0.75 0.76 1

Source: Hang Lung Properties, DBS HK

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Hang Lung Properties

China rental portfolio revenue

1H17 2H17 1H18 2H18 1H19 2H19 City Property Rmb m Rmb m Rmb m Rmb m Rmb m Rmb m Shanghai Plaza 66 710 699 763 791 827 869 Shanghai Grand Gateway 66 451 432 410 393 394 459 Shenyang Palace 66 77 78 77 85 95 99 Shenyang Forum 66 105 108 105 111 113 144 Jinan Parc 66 133 138 141 151 158 164 Wuxi Center 66 105 114 121 131 140 149 Tianjin Riverside 66 90 91 90 89 93 93 Dalian Olympia 66 52 47 57 62 74 78 Kunming Spring City 66 54 T otal 1,723 1,707 1,764 1,813 1,894 2,109

Source: Hang Lung Properties

China retail portfolio occupancy

J un-19 Dec-19 Change City Property Occ % Occ % pp Shanghai Plaza 66 98 99 1 Shanghai Grand Gateway 66 86 91 5 Shenyang Palace 66 91 95 4 Shenyang Forum 66 94 94 - Jinan Parc 66 95 98 3 Wuxi Center 66 93 95 2 Tianjin Riverside 66 83 89 6 Dalian Olympia 66 79 82 3 Kunming Spring City 66 82 n.a.

Source: Hang Lung Properties

China office portfolio occupancy

J un-19 Dec-19 Change City Property Occ % Occ % pp Shanghai Plaza 66 93 93 - Shenyang Forum 66 89 87 (2) Wuxi # Center 66 90 65 (25)

#Wuxi Office Tower Two opened in 2019

Source: Hang Lung Properties

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Company Guide

Hang Lung Properties

Balance Sheet: Gearing As at Dec-19, HLP’s total borrowings amounted to HK$29.7bn with 45.4% hedged and an average tenure of 2.9 years. Due to the payment of the construction expenses, net debt rose to HK$26.4bn in Dec-19 from Jun-19’s HK$25.4bn. This represented 19% of its shareholders’ funds. Financial risk should remain manageable in our view. There is room for the company to further gear up when land acquisition opportunities knock. Moreover, HLP plans to sell the serviced apartments at Wuhan Heartland 66 in 2021 at the earliest which could help improve the balance sheet. Net Capital Expenditure Share Price Drivers: Healthy 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 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 ROE performance. Interest rate risk. Interest rate hikes may lead to capitalisation rate expansion for rental properties in Hong Kong and in turn adversely affect their valuation. Currency risk. Further RMB depreciation may negatively impact the valuations and rental contributions from its rental properties in China.

Environmental, Social, Governance: Discount to NAV 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. 40 Peak Galleria, and Standard Chartered Building are rated 20 BEAM Plus. The company has targeted a 75%/25% reduction +2SD: 6% of construction/commercial waste by 2030 from 2018 levels. 0 To reduce energy use and related greenhouse gas emissions, +1SD: -13% (20) Hang Lung Properties has retrofitted existing properties with Average: -33% new lighting and cooling systems while designing new (40) buildings to meet the latest environmental standards. (60) -1SD: -52%

Company Background (80) -2SD: -71%

Hang Lung Properties develops commercial property

Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 complexes in China for long-term investment. As of Dec-19 Jan-10 completed China portfolio has GFA of 31.2m sf with another

20m sf under development. The company also owns an Source: Company, DBS HK 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 2020F 2021F

Office rental - HK (8) 0 Retail rental (Shopping (10) 0 centre) - HK

Source: DBS HK

Segmental Breakdown (HK$ m)

FY Dec 2017A 2018A 2019A 2020F 2021F Revenues (HK$ m) Property sales 3,420 1,227 296 963 963 Property leasing 7,779 8,181 8,556 9,053 9,555 Total 11,199 9,408 8,852 10,016 10,518

Source: DBS HK

Income Statement (HK$ m) FY Dec 2017A 2018A 2019A 2020F 2021F Turnover 11,199 9,408 8,852 10,016 10,518 EBITDA 7,837 6,323 5,953 6,654 6,955 Depr / Amort (43) (45) (50) (55) (55) EBIT 7,794 6,278 5,903 6,599 6,900 Associates Inc 53 49 47 50 49 Interest (Exp)/Inc (569) (624) 100 60 20 Exceptionals 0 0 0 0 0 Pre-tax Profit 7,278 5,703 6,050 6,708 6,969 Tax (1,353) (1,203) (1,167) (1,409) (1,463) Minority Interest (395) (407) (409) (448) (465) Underlying Profit 5,530 4,093 4,474 4,851 5,041

Sales Gth (%) (14) (16) (6) 13 5 Net Profit Gth (%) (13) (26) 9 8 4 EBITDA Margins (%) 70 67 67 66 66 EBIT Margin (%) 70 67 67 66 66 Tax Rate (%) 19 21 19 21 21

Source: DBS HK

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Company Guide

Hang Lung Properties

Balance Sheet (HK$ m) FY Dec 2017A 2018A 2019A 2020F 2021F Fixed Assets 156,256 168,078 187,370 195,777 205,069 Other LT Assets 1,362 1,423 1,383 1,393 1,401 Cash & ST Invts 22,106 12,363 3,306 2,988 3,216 Other Current Assets 3,862 4,589 7,921 8,844 7,998 Total Assets 183,586 186,453 199,980 209,001 217,683 ST Debt 2,112 2,414 2,694 7,235 7,235 Creditors 6,673 5,974 8,911 8,804 8,697 Other Current Liab 504 558 832 932 1,032 LT Debt 22,708 24,839 26,979 28,438 33,938 Other LT Liabilities 9,344 9,074 12,752 12,752 12,752 Minority Interests 6,087 6,033 9,143 9,411 9,678 Shareholder’s Equity 136,158 137,561 138,669 141,429 144,351 Total Cap. & Liab. 183,586 186,453 199,980 209,001 217,683 Share Capital (m) 4,498 4,498 4,498 4,498 4,498 Net Cash/(Debt) (2,714) (14,890) (26,367) (32,685) (37,957) Working Capital 16,679 8,006 (1,210) (5,140) (5,751) Net Gearing (%) 2 11 19 23 26

Source: DBS HK

Cash Flow Statement (HK$ m) FY Dec 2017A 2018A 2019E 2020F 2021F

EBIT 7,794 6,278 5,903 6,599 6,900 Tax Paid (1,776) (1,063) (1,167) (1,409) (1,463) Depr/Amort 43 45 50 55 55 Chg in Wkg.Cap 2,792 501 2,936 547 2,716 Other Non-Cash (296) (23) 0 0 0 Operating CF 8,557 5,738 7,722 5,792 8,207 Net Capex (4,216) (13,661) (12,012) (6,867) (7,736) Assoc, MI, Invsmt (10,107) 8,402 (1,876) 180 141 Investing CF (14,323) (5,259) (13,888) (6,687) (7,595) Net Chg in Debt (3,245) 3,053 2,420 6,000 5,500 New Capital 0 0 0 0 0 Dividend (3,685) (3,718) (3,782) (3,867) (3,928) Other Financing CF (1,157) (1,261) (1,532) (1,557) (1,957) Financing CF (8,087) (1,926) (2,894) 576 (385) Chg in Cash (13,853) (1,447) (9,061) (318) 228

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: 29-Jan-19 HK$16.36 HK$17.90 Buy 3 2: 31-Jan-19 HK$16.84 HK$18.22 Buy 6 19.0 3: 10-Jul-19 HK$18.58 HK$20.35 Buy 4: 29-Jul-19 HK$18.46 HK$20.35 Buy 18.0 2 45 5: 31-Jul-19 HK$18.64 HK$22.38 Buy 6: 16-Jan-20 HK$18.58 HK$21.66 Buy 17.0 1 16.0

15.0

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Source: DBS HK

Analyst: Jeff YAU CFA, Ian CHUI CFA, Jason LAM

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Hang Lung Properties

^ Bloomberg ESG Disclosure Scores rate companies annually based on their disclosure of quantitative and policy-related ESG data. It is based on a scoring scale of 0-100, and calculated using a subset of more than 100 raw data points it collects on ESG. It is designed to measure the robustness of companies' disclosure of ESG information in their reporting/the public domain. Based on Bloomberg disclosures, as of 25 Jan 2019, the global ESG disclosure average score is 24.92 and 22.14, 28.26, 49.97 for Environmental, Social and Governance, respectively.

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: 22 Jan 2020 09:29:38 (HKT) Dissemination Date: 22 Jan 2020 10:23:48 (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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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 do not have a proprietary position in the securities recommended in this report as of 17 Jan 2020.

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.

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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

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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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