Greentown China

Deutsche Bank Markets Research

Rating Company Date 14 October 2015 Buy Greentown China Forecast Change Asia China Reuters Bloomberg Exchange Ticker Price at 14 Oct 2015 (HKD) 6.35 Property 3900.HK 3900 HK HKG 3900 Price target - 12mth (HKD) 14.20 Property 52-week range (HKD) 11.56 - 5.17

HANG SENG INDEX 22,600

Property development management Jason Ching, CFA Tony Tsang initiative a new growth driver; Buy Research Analyst Research Analyst (+852) 2203 6205 (+852) 2203 6256 Reiterating Buy on asset-light business initiative; target price raised to HK$14.2 [email protected] [email protected] We reiterate our positive stance on Greentown on the back of its asset-light initiative in property development management. Specifically, we see this initiative as in line with the company’s strategy and an effective way to expand Key changes its operation with minimal capital requirement. Moreover, this platform may Price target 13.00 to 14.20 ↑ 9.2% serve as an effective means for CCCG to utilize Greentown’s expertise and Sales (FYE) 32,003 to 32,253 ↑ 0.8% brand for developing its landbank. We estimate a HK$1.99/shr NAV accretion Op prof 16.3 to 16.9 ↑ 3.6% from this initiative. Meanwhile, the valuation is attractive post the market-wide margin(FYE) sell-off in the past quarter, trading at a 69% discount to NAV, 4x 2015 PER and Net 3,848.6 to ↓ -15.6% 45% below CCCG’s average price for its 29% stake in Greentown. Buy. profit(FYE) 3,248.9 Source: Deutsche Bank Property development management a new growth driver Greentown has identified building a leading property development Price/price relative management franchise, by leveraging on its reputation and expertise, as one of the key growth drivers ahead. We see this asset-light business model as 20 positive for Greentown and an effective way to expand its operation with 16 minimal capital requirement. Following the acquisition of Greentown Dingyi 12 and Greentown Shidai (both are property development management companies offering one-stop services in planning, design, project development 8 and construction management) in early August, Greentown has reached an 4 important milestone in property development management, in our view. 10/13 4/14 10/14 4/15 Greentown China We see HK$1.99/share NAV accretion from asset-light business initiative HANG SENG INDEX (Rebased)

According to management, Greentown first engaged in property development Performance (%) 1m 3m 12m management for the private housing sector as early as 2010, and has Absolute 9.5 -25.7 -18.3 cumulatively been involved in 52 projects, with total GFA exceeding 17mn sqm. By assuming the number of projects under management reaches 80 by HANG SENG INDEX 4.8 -10.0 -1.9 2018, we estimate the fee income to reach Rmb1bn (based on 3.5% over sales Source: Deutsche Bank

of Rmb30bn). Furthermore, by assuming a net profit margin of 40%, we estimate contribution from property development management to reach 3%, 5% and 7% of core net profit in 2015-17, respectively. Target price based upon 30% discount to our NAV estimate of HK$20.29/shr Our target price is based on a 30% discount to our revised NAV estimate of HK$20.29/shr (HK$18.58/shr) by including the accretion from the property development initiative, which implies a 2015e PER of 8x. Our target discount is markedly higher than industry leaders like COLI/Vanke (both at 10%), which we believe is appropriate, given its business scale, operating history and leverage. Risks include economic fluctuations and housing demand. Forecasts And Ratios Year End Dec 31 2013A 2014A 2015E 2016E 2017E Sales (CNYm) 28,990.6 32,049.0 32,253.4 32,482.3 32,173.3 EBITDA(CNYm) 6,669.7 5,604.2 5,446.2 6,163.2 7,369.2 Reported NPAT(CNYm) 4,885.5 2,071.7 3,248.9 3,924.0 4,538.8 DB EPS FD (CNY) 2.45 1.56 1.50 1.81 2.09 PER (x) 4.6 4.4 3.5 2.9 2.5 DPS (net) (CNY) 0.43 0.00 0.24 0.28 0.32 Source: Deutsche Bank estimates, company data

______Deutsche Bank AG/Hong Kong Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 124/04/2015.

14 October 2015

Property Greentown China

Model updated:14 October 2015 Fiscal year end 31-Dec 2013 2014 2015E 2016E 2017E

Running the numbers Financial Summary Asia DB EPS (CNY) 2.45 1.56 1.50 1.81 2.09 Reported EPS (CNY) 1.94 0.80 1.50 1.81 2.09 China DPS (CNY) 0.43 0.00 0.24 0.28 0.32 BVPS (CNY) 11.6 12.3 13.8 15.4 17.2 Property Weighted average shares (m) 2,155 2,159 2,167 2,167 2,167 Greentown China Average market cap (CNYm) 24,485 14,767 11,056 11,056 11,056 Enterprise value (CNYm) 38,538 38,767 30,381 28,242 27,548 Reuters: 3900.HK Bloomberg: 3900 HK Valuation Metrics P/E (DB) (x) 4.6 4.4 3.5 2.9 2.5 Buy P/E (Reported) (x) 5.9 8.5 3.5 2.9 2.5 Price (14 Oct 15) HKD 6.35 P/BV (x) 0.81 0.50 0.38 0.34 0.30

Target Price HKD 14.20 FCF Yield (%) nm nm 43.1 24.2 12.0 Dividend Yield (%) 3.8 0.0 4.6 5.4 6.2 52 Week range HKD 5.17 - 11.56 EV/Sales (x) 1.3 1.2 0.9 0.9 0.9 Market Cap (m) HKDm 13,525 EV/EBITDA (x) 5.8 6.9 5.6 4.6 3.7 EV/EBIT (x) 5.8 6.9 5.6 4.6 3.7 USDm 1,745 Income Statement (CNYm) Company Profile Sales revenue 28,991 32,049 32,253 32,482 32,173 Greentown China Holdings Limited is engaged principally Gross profit 8,775 8,133 7,760 9,112 10,287 in the property development business in Zhejiang Province EBITDA 6,670 5,604 5,446 6,163 7,369 and also around the Bohai Rim Region in China. Depreciation 0 0 0 0 0 Amortisation 0 0 0 0 0 EBIT 6,670 5,604 5,446 6,163 7,369 Net interest income(expense) -13 -14 -44 6 89 Associates/affiliates 1,570 408 655 412 786 Exceptionals/extraordinaries 919 -69 0 0 0 Other pre-tax income/(expense) 0 0 100 192 322 Profit before tax 9,146 5,928 6,157 6,773 8,566 Price Performance Income tax expense 3,156 2,719 2,085 2,369 3,187 Minorities 1,105 1,138 824 480 840 20 Other post-tax income/(expense) 0 0 0 0 0 Net profit 4,886 2,072 3,249 3,924 4,539 16

DB adjustments (including dilution) 393 1,307 0 0 0 12 DB Net profit 5,279 3,379 3,249 3,924 4,539 8 Cash Flow (CNYm) 4 Cash flow from operations -765 -2,700 4,845 2,727 1,353 Oct 13Jan 14Apr 14 Jul 14 Oct 14Jan 15Apr 15 Jul 15 Net Capex -1,382 -1,432 0 0 0 Greentown China Free cash flow -2,147 -4,132 4,845 2,727 1,353 HANG SENG INDEX (Rebased) Equity raised/(bought back) -64 -421 0 0 0 Margin Trends Dividends paid -1,596 -1,465 0 -520 -604 Net inc/(dec) in borrowings 8,791 4,863 705 -62 -250 24 Other investing/financing cash flows -463 -1,797 0 0 0 23 Net cash flow 4,522 -2,952 5,550 2,145 499 21 Change in working capital -2,290 -2,962 2,771 92 -2,297

20 Balance Sheet (CNYm) 18 Cash and other liquid assets 11,281 9,084 14,634 16,779 17,278 17 Tangible fixed assets 6,696 8,108 7,879 7,650 7,421 13 14 15E 16E 17E Goodwill/intangible assets 665 662 662 662 662 EBITDA Margin EBIT Margin Associates/investments 12,241 10,921 11,576 11,988 12,774

Other assets 91,453 98,369 99,310 102,128 102,805 Growth & Profitability Total assets 122,336 127,144 134,062 139,208 140,941 Interest bearing debt 30,512 35,815 36,521 36,459 36,209 12 25 Other liabilities 59,813 56,483 58,623 59,946 57,154 10 20 Total liabilities 90,325 92,299 95,144 96,405 93,363 8 Shareholders' equity 24,947 26,655 29,903 33,308 37,242 15 6 Minorities 7,064 8,191 9,014 9,495 10,335 4 10 Total shareholders' equity 32,011 34,845 38,918 42,803 47,577 2 0 5 Net debt 19,230 26,731 21,886 19,680 18,931 -2 0 13 14 15E 16E 17E Key Company Metrics Sales growth (%) nm 10.5 0.6 0.7 -1.0 Sales growth (LHS) ROE (RHS) DB EPS growth (%) na -36.1 -4.2 20.8 15.7

Solvency EBITDA Margin (%) 23.0 17.5 16.9 19.0 22.9 EBIT Margin (%) 23.0 17.5 16.9 19.0 22.9 100 600 Payout ratio (%) 19.7 0.0 16.0 15.4 15.4 ROE (%) 21.2 8.0 11.5 12.4 12.9 80 500 Capex/sales (%) 4.8 4.5 0.0 0.0 0.0 400 60 Capex/depreciation (x) nm nm nm nm nm 300 40 Net debt/equity (%) 60.1 76.7 56.2 46.0 39.8 200 Net interest cover (x) 508.3 387.0 124.7 nm nm 20 100

0 0 Source: Company data, Deutsche Bank estimates

13 14 15E 16E 17E

Net debt/equity (LHS) Net interest cover (RHS)

Jason Ching, CFA +852 2203 6205 [email protected]

Page 2 Deutsche Bank AG/Hong Kong

14 October 2015

Property Greentown China

Investment thesis

Outlook

We maintain our Buy rating on Greentown with a target price of HK$14.2. Following the introduction of China Communications Construction Group (CCCG) as a strategic shareholder in Dec-14, Greentown benefited from a more favorable financing environment thanks to the state-owned background of CCCG, which should help to boost profitability going forward – with lower funding costs, in our view. Indeed, Greentown successfully exchanged two senior notes at substantially lower coupon rates in Aug-15 despite the average coupon rate edging upwards following the collapse of Kaisa in Jan-15.

Moreover, we view the property development management initiative as in line with the company’s strategy and an effective way to expand its operation with minimal capital requirement. We believe this platform may serve as an effective way for CCCG to utilize Greentown’s expertise and brand for developing its landbank. We estimate a HK$1.99/shr NAV accretion from this initiative. Meanwhile, the valuation is attractive following the market-wide sell- off in the past quarter, trading at a steep discount to NAV and markedly below CCCG’s average price for its 29% stake in Greentown.

Valuation Our target price is based upon on a 30% discount to our revised NAV estimate of HK$20.29/shr (HK$18.58/shr) by including the accretion from the property development initiative, which implies a 2015e PER of 8x. Our target discount is markedly higher than for industry leaders like COLI/Vanke (both at 10%), which we believe is appropriate, given its business scale, operating history and leverage. We adopt NAV as our primary valuation metric, in line with residential-focused peers under our coverage.

Risks  Further government tightening policies targeted at the property sector - The government has repeatedly emphasized its desire to avoid an overheated property market. The introduction of new tightening policies/reinforcement of existing policies could adversely impact earnings and profitability.

 Demand in high-end segment may weaken dramatically in economic slowdown - Greentown is mainly focused on the high-end residential segment, where demand could weaken substantially upon a dramatic economy slowdown. Such a slowdown could translate into a sharp deterioration in profitability compared to those who are focusing on the mid-tier market segment.

Deutsche Bank AG/Hong Kong Page 3

14 October 2015

Property Greentown China

Asset-light initiative a new growth driver ahead

Property development management to add HK$1.99/shr to NAV; contributing up to 7% of core net profit by 2017

Greentown has identified building a leading property development management franchise, by leveraging on its reputation and expertise, as one of the key growth drivers ahead. Specifically, property development management refers to an all-around service to other developers in managing their development projects, from project planning to design, market positioning, construction management and sales. We see this asset-light business model as positive for Greentown – an effective way to expand its operation with minimal capital requirement.

According to management, Greentown first engaged in property development management for the private housing sector as early as 2010, and it has cumulatively been involved in 52 projects with total GFA exceeding 17mn sqm. The increasing popularity of property development management is due to smaller developers seeing increasing difficulties in obtaining financing and lack of economies of scale, such that they would achieve a higher financial return by partnering with larger developers with a much better brand name (i.e. possibility of getting a price premium) and access to financing.

In early Aug, Greentown announced the acquisition of Greentown Dingyi and Greentown Shidai (both are property development management companies offering one-stop services in planning, design, project development and construction management); we believe this is an important milestone in property development management. In our view, this platform may serve as an effective way for CCCG to utilize Greentown’s expertise and brand for developing its overseas landbank, as a trial; this is reported to exceed 20mn sqm GFA.

Figure 1: CCCG’s subsidiaries and landbank Property subsidiaries Non-property subsidiaries H-share Ticker A-share Ticker Not listed H-share Ticker A-share Ticker China Greentown 3900.HK China Real Estate 000736.SZ Beijing Lianhe Real Estate CCCC 1800.HK ZPMC 600320.SS Communications Corporation (CREC) CCCREC Construction Group China National Real Estate Development Group

Landbank GFA 33,240,000 sqm Estimated at 170,000,000 sqm (overseas: 20,000,000 sqm)

Source: Company, Takungpao, Deutsche Bank

Page 4 Deutsche Bank AG/Hong Kong

14 October 2015

Property Greentown China

Expect number of project under management to grow rapidly ahead By assuming the number of projects under management to reach 30, 43, 61 and 80 in 2015, 2016, 2017 and 2018, we estimate the fee income to reach Rmb250mn in 2015, Rmb480mn in 2016, Rmb805mn in 2017 and Rmb1bn in 2018 based on 3.5% over sales of Rmb10bn, Rmb16bn, Rmb23bn and Rmb30bn, respectively. Meanwhile, we are expecting a gradual increase in the average fee as a % of contracted sales, on a higher proportion of projects in the private housing market. While the growth in projects under management in the coming years looks aggressive, we believe it is an achievable target on the back of its strong parent CCCG, where they have reported to have an overseas landbank exceeding 20mn sqm GFA.

Furthermore, by assuming a net profit margin of 40% (more conservative than management guidance of close to 50%), we estimate the contribution from property development management to reach Rmb100mn in 2015 (contributing 3% of core net profit), Rmb192mn in 2016 (5% of core net profit) and Rmb322mn in 2017 (7% of core net profit), respectively.

Figure 2: Projection for property development management initiative 2015E 2016E 2017E 2018E Number of project under management 30 43 61 80 Total GFA under construction (mn sqm) 10,000 16,000 23,000 30,000 Contracted sales (Rmb mn) 10,000 16,000 23,000 30,000

Fee as % of contracted sales 2.5% 3.0% 3.5% 3.5% Fee received (Rmb mn) 250 480 805 1,050

Profit margin 40% 40% 40% 40% Net profit (Rmb mn) 100 192 322 420

% contribution to core net profit 3% 5% 7% NA

Source: Deutsche Bank estimates

Deutsche Bank AG/Hong Kong Page 5

14 October 2015

Property Greentown China

Financial analysis

Figure 3: Income Statement (Rmb mn) Year ended Dec 31 2012 2013 2014 2015E 2016E 2017E

Property sales 34,214 27,460 30,111 30,072 29,943 28,981 Property rental income 112 114 122 134 147 162 Hotel 310 310 440 462 485 509 Other business 756 1,105 1,377 1,586 1,907 2,522 Total Revenue 35,393 28,991 32,049 32,253 32,482 32,173

Cost of sales (24,679) (20,215) (23,916) (24,494) (23,370) (21,886) Gross profit 10,714 8,775 8,133 7,760 9,112 10,287

Other operating income 300 235 299 299 299 299 Selling and administrative expenses (2,069) (2,340) (2,827) (2,613) (3,248) (3,217) Profits from operation 8,945 6,670 5,604 5,446 6,163 7,369

Interest income 700 494 665 524 540 623 Gross interest expenses (3,481) (2,431) (3,125) (2,841) (2,965) (2,965) Capitalized interest 2,917 1,925 2,445 2,272 2,431 2,431 Net finance cost (564) (507) (680) (568) (534) (534) Net interest income/expenses 136 (13) (14) (44) 6 89

Others - - - 100 192 322 Exceptional item 663 919 (69) - - - Share of results of associates &JCEs 513 1,570 408 655 412 786 Pre-tax profit 10,257 9,146 5,928 6,157 6,773 8,566

Taxation (4,204) (3,156) (2,719) (2,085) (2,369) (3,187) Net Profit 6,053 5,990 3,210 4,073 4,404 5,379

Minority interests (1,202) (1,105) (1,138) (824) (480) (840) Profit attributable for shareholders 4,851 4,886 2,072 3,249 3,924 4,539

Core profit 4,257 5,279 3,379 3,249 3,924 4,539

Core EPS (Rmb) - Weighted average 2.25 2.45 1.56 1.50 1.81 2.09 DPS (Rmb) 0.50 0.43 - 0.24 0.28 0.32 Source: Deutsche Bank estimates, company data

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Property Greentown China

Figure 4: Balance Sheet (Rmb mn) As of Dec 31 2012 2013 2014 2015E 2016E 2017E Fixed Assets 13,591 19,660 19,700 20,126 20,309 20,867 Property, plant and equipment 3,675 4,864 6,216 5,987 5,759 5,530 Investment property 1,731 1,832 1,892 1,892 1,892 1,892 Interests in associates and JV 7,577 11,864 10,533 11,187 11,600 12,386 Available-for-sale investments 347 377 389 389 389 389 Others - 50 - - - - Prepaid lease payment 255 665 662 662 662 662 Rental paid in advance 7 9 9 9 9 9 Deferred tax assets 782 1,053 1,116 1,116 1,116 1,116

Current assets 93,334 101,622 106,328 112,820 117,782 118,958 Properties for development 6,021 6,280 5,750 8,084 7,763 7,528 Properties under development 43,136 38,968 41,312 46,346 47,770 48,393 Completed properties for sale 7,330 13,063 15,651 10,265 10,327 9,394 Inventories 76 102 123 106 105 95 Other receivables, deposits & prepayments 4,713 4,381 5,215 4,193 5,847 7,078 Amount due from related parties 21,619 24,981 27,157 27,157 27,157 27,157 Prepaid income taxes 1,076 1,304 1,056 1,056 1,056 1,056 Prepaid other taxes 1,465 1,263 980 980 980 980 Pledged bank deposits 1,734 595 1,351 1,351 1,351 1,351 Bank balances and cash 6,164 10,686 7,734 13,284 15,428 15,927

Current liabilities 73,562 65,127 67,775 65,559 65,320 61,278 Account payables 15,959 17,911 19,381 12,901 13,967 12,226 Pre-sale deposits 28,848 23,428 20,116 28,037 27,449 25,139 Amounts due to related parties 7,125 10,775 9,850 9,850 9,850 9,850 Income and other taxes payable 6,375 6,995 6,260 6,414 6,583 6,798 LAT payable - - - 545 1,221 2,266 Bank & other borrowings 15,256 6,018 12,167 7,811 6,249 4,999

Total Assets Less Current Liabilities 34,145 57,208 59,369 68,503 73,888 79,663

Long term liabilities 6,657 25,197 24,523 29,585 31,085 32,085 Bank and other borrowings 6,118 15,935 15,056 20,118 21,618 22,618 Cross currency swaps - - 71 71 71 71 Senior notes - 8,558 8,592 8,592 8,592 8,592 Deferred tax liabilities 539 704 804 804 804 804

Issued share capital 207 209 209 209 209 209 Share premium 6,300 6,300 6,300 6,300 6,300 6,300 Retained profits 14,635 18,439 17,132 19,861 23,180 27,020 Perpetual securities - - 3,015 3,015 3,015 3,015 Proposed final dividends - - - 520 604 699 Shareholders' funds 21,142 24,947 26,655 29,903 33,308 37,242 Minority interests 6,346 7,064 8,191 9,014 9,495 10,335

Total capital employed 34,145 57,208 59,369 68,503 73,888 79,663 Source: Deutsche Bank estimates, company data

Deutsche Bank AG/Hong Kong Page 7

14 October 2015

Property Greentown China

Valuation

Our revised NAV estimate is HK$20.29/share

We adopt NAV as our primary valuation metric, in line with residential-focus peers under our coverage. Our approach is based on sum-of-the-parts, where we use DCF for property developments for sale and direct capitalization approach for investment properties. We generally assume ASP to rise by 10% for projects in Tier-1 cities and stay flat for projects in Tier-2/3 cities in 2015. However, we have made project-specific adjustments, stemming from product mix/phase differences. We have adopted a discount rate of 8.1%, in line with our estimated WACC. Our revised fully-diluted NAV estimate is HK$20.29 per share, by including the accretion from the property development initiative where we estimate a HK$1.99 per share NAV accretion from this initiative.

Figure 5: NAV breakdown NAV (HK$m) NAV (HK$/Share) % of NAV

Development Properties Residential 62,608 28.89 142.4% Retail 3,391 1.56 7.7% Commercial 6,070 2.80 13.8% Hotel 3,364 1.55 7.6% 75,434 34.80 171.5%

Other Assets Fixed Assets 8,108 3.74 18.4% Property development management 4,311 1.99 9.8% 12,419 5.73 28.2%

Gross Asset Value (GAV) 87,852 40.53 199.8%

Net Cash/(Debt) (26,731) (12.33) -60.8% Potential LAT Liabilities (10,885) (5.02) -24.8% Tax liabilities/others (6,260) (2.89) -14.2% Fully-diluted NAV 43,976 20.29 100.0% Source: Deutsche Bank estimates

Page 8 Deutsche Bank AG/Hong Kong

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Property Greentown China

Our target price of HK$14.2 is based on 30% discount to our estimated NAV Our target price of HK$14.2 is based upon a discount of 30% to our estimated NAV of HK$20.29/shr. Our target discount is markedly higher than industry leaders like COLI/Vanke (both at 10%), which we believe is appropriate given its business scale, operating history and leverage. We adopt NAV as our primary valuation metric, in line with residential-focused peers under our coverage. As a cross check, our target price implies 2015 PER of 8x, respectively, which we believe the longer time needed for financial performance to turnaround has already been priced in.

Meanwhile, valuation looks attractive to us following the market-wide sell-off in the past quarter, trading at 69% discount to NAV, 4x 2015 PER and 45% below CCCG’s average price for its 29% stake in Greentown.

Figure 6: Historical discount to NAV -20%

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Source: Deutsche Bank; Bloomberg Finance LP

Figure 7: Historical P/E band Figure 8: Historical P/B band 30 4.0 3.5 25 3.0 20 2.5

15 2.0 1.5 10 1.0 5 0.5 0.0

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Source: Deutsche Bank; Bloomberg Finance LP Source: Deutsche Bank; Bloomberg Finance LP

Deutsche Bank AG/Hong Kong Page 9

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Property Greentown China

Figure 9: China property – valuation table DB Trade Report Mkt 12M 14 Oct Target Implied Est. NAV EPS PE(x) Cap Daily T/O Company Ticker Rating Ccy Ccy USDm USDm Price Price Upside NAV Disc 14A 15E 16E 14A 15E 16E Covered COLI 688 HK Buy HKD HKD 32,699 84.4 25.70 30.30 18% 33.7 -24% 3.39 3.16 3.55 7.6 8.1 7.2 Wanda 3699 HK Buy HKD CNY 29,033 43.3 49.70 55.60 12% 85.6 -42% 2.57 3.63 4.42 15.9 11.2 9.2 CSCEC 601668 CH Buy CNY CNY 29,016 873.7 6.14 10.97 79% 12.2 -50% 0.75 0.83 1.00 8.2 7.4 6.2 China Vanke - A 000002 CH Buy CNY CNY 23,323 534.4 13.28 17.30 30% 20.3 -35% 1.20 1.49 1.64 11.1 8.9 8.1 China Vanke - H 2202 HK Buy HKD CNY 23,323 27.5 17.44 19.80 14% 23.3 -25% 1.20 1.49 1.64 11.9 9.6 8.7 CR Land 1109 HK Buy HKD HKD 18,557 48.7 20.75 28.37 37% 35.5 -41% 2.02 2.32 2.39 10.3 8.9 8.7 Poly - A 600048 CH Buy CNY CNY 14,113 488.0 8.33 9.77 17% 12.2 -32% 1.13 1.37 1.74 7.4 6.1 4.8 CMPD 000024 CH Buy CNY CNY 11,416 249.9 29.62 16.42 -45% 23.5 26% 2.04 2.30 2.78 14.5 12.9 10.6 Evergrande 3333 HK Sell HKD CNY 9,231 50.9 4.93 2.45 -50% 4.1 21% 0.06 0.35 0.39 65.8 11.7 10.4 Country Garden 2007 HK Sell HKD CNY 8,656 17.6 2.97 2.60 -12% 4.3 -32% 0.48 0.43 0.47 5.0 5.6 5.1 Gemdale 600383 CH Sell CNY CNY 8,562 113.8 12.08 7.50 -38% 11.5 5% 0.78 0.86 0.90 15.5 14.1 13.4 GLP GLP SP Buy SGD USD 7,855 32.6 2.30 3.20 39% 2.4 -6% 0.05 0.05 0.06 32.1 35.1 27.4 Longfor 960 HK Buy HKD CNY 7,533 6.6 10.02 15.40 54% 19.2 -48% 1.21 1.19 1.28 6.8 6.9 6.4 Shimao 813 HK Sell HKD CNY 5,986 21.7 13.36 8.19 -39% 16.4 -18% 2.29 2.30 2.62 4.8 4.8 4.2 CSCI 3311 HK Buy HKD HKD 5,820 13.0 11.12 15.30 38% 15.3 -27% 0.88 1.07 1.32 12.7 10.4 8.4 Sino-Ocean 3377 HK Buy HKD CNY 4,375 6.2 4.51 6.68 48% 9.5 -53% 0.48 0.56 0.65 7.7 6.6 5.7 R&F 2777 HK Hold HKD CNY 3,235 12.6 7.78 8.21 6% 16.4 -53% 1.20 1.37 1.51 5.3 4.7 4.2 China Jinmao 817 HK Buy HKD HKD 3,071 4.6 2.23 3.40 52% 4.9 -54% 0.36 0.35 0.38 6.3 6.4 5.8 KWG 1813 HK Hold HKD CNY 2,258 7.4 5.84 6.89 18% 11.5 -49% 0.88 1.01 1.11 5.4 4.8 4.3 Agile 3383 HK Sell HKD CNY 2,214 9.7 4.38 3.20 -27% 9.1 -52% 1.12 0.89 0.89 3.2 4.0 4.0 Yuexiu 123 HK Sell HKD CNY 2,192 7.5 1.37 1.11 -19% 2.2 -38% 0.12 0.12 0.13 9.5 9.2 8.8 BJ North Star - A 601588 CH Hold CNY CNY 2,150 71.0 4.60 7.10 54% 10.2 -55% 0.20 0.21 0.23 23.5 22.1 19.6 BJ North Star - H 588 HK Buy HKD CNY 2,150 2.2 2.44 8.00 228% 11.4 -79% 0.20 0.21 0.23 10.2 9.6 8.5 Joy City 207 HK Buy HKD CNY 2,148 4.4 1.17 3.50 199% 5.0 -77% 0.08 0.08 0.10 12.1 12.0 9.8 Sunac 1918 HK Sell HKD CNY 2,092 17.6 4.77 8.02 68% 14.6 -67% 0.92 1.09 1.12 4.3 3.6 3.5 Greentown 3900 HK Buy HKD CNY 1,772 7.7 6.35 14.20 124% 20.3 -69% 1.56 1.50 1.81 3.3 3.5 2.9 Yanlord YLLG SP Sell SGD CNY 1,454 1.4 1.04 0.80 -23% 1.6 -35% 0.25 0.33 0.35 18.8 14.5 13.4 Kaisa 1638 HK Hold HKD CNY 1,034 7.0 1.56 1.80 15% 6.7 -77% 0.64 0.72 0.81 2.0 1.8 1.6 E-House EJ US Buy USD USD 915 10.6 6.43 12.40 93% 0.0 NA 0.43 0.54 0.62 14.9 11.9 10.4 COGO 81 HK Buy HKD HKD 748 2.1 2.54 6.70 164% 9.6 -73% 0.55 0.89 1.28 4.7 2.8 2.0 Central China 832 HK Buy HKD CNY 473 0.4 1.50 2.93 95% 4.5 -67% 0.36 0.49 0.63 3.4 2.5 1.9 Not Rated NWCL 917 HK NR HKD HKD 5,595 1.2 4.99 NA NA NA NA 0.45 0.35 0.38 11.1 14.5 13.1 Hui Xian REIT 87001 HK NR CNY CNY 2,720 1.6 3.21 NA NA NA NA 0.22 0.23 0.24 14.6 14.0 13.2 SOHO China 410 HK NR HKD CNY 2,409 4.6 3.59 NA NA NA NA 0.42 0.13 0.15 7.0 22.8 19.9 Shui On 272 HK NR HKD CNY 2,092 4.4 2.02 NA NA NA NA 0.08 0.21 0.13 20.7 7.7 13.0 Hopson 754 HK NR HKD HKD 1,836 1.7 6.37 NA NA NA NA 0.56 0.56 0.60 11.4 11.4 10.6 CIFI 884 HK NR HKD CNY 1,321 2.7 1.53 NA NA NA NA 0.34 0.35 0.41 3.7 3.6 3.0 Greenland HK 337 HK NR HKD CNY 1,166 6.4 3.66 NA NA NA NA 0.11 0.25 0.50 28.6 11.8 6.0 Poly Property 119 HK NR HKD HKD 1,153 10.8 2.44 NA NA NA NA 0.53 0.11 0.13 4.6 22.4 18.2 BC Land 2868 HK NR HKD CNY 934 2.8 3.57 NA NA NA NA 0.76 0.77 0.95 3.8 3.8 3.1 Yuzhou 1628 HK NR HKD CNY 931 1.4 1.89 NA NA NA NA 0.46 0.41 0.52 3.4 3.8 3.0 Glorious 845 HK NR HKD CNY 915 1.3 0.91 NA NA NA NA 0.14 0.10 0.04 5.2 7.5 18.6 Powerlong 1238 HK NR HKD CNY 820 0.7 1.59 NA NA NA NA 0.27 0.30 0.40 4.8 4.3 3.3 Fantasia 1777 HK NR HKD CNY 691 1.6 0.93 NA NA NA NA 0.18 0.22 0.27 4.2 3.5 2.8 C C Land 1224 HK NR HKD HKD 681 0.7 2.04 NA NA NA NA 0.44 0.09 NA 4.6 22.7 Aoyuan 3883 HK NR HKD CNY 578 1.1 1.61 NA NA NA NA 0.34 0.43 NA 3.9 3.1 Minmetals 230 HK NR HKD HKD 341 0.4 0.79 NA NA NA NA 0.20 0.18 0.26 4.0 4.4 3.0 Far East Global 830 HK NR HKD HKD 320 0.6 1.15 NA NA NA NA 0.09 12.8 NA NA Overall average -41% 11.0 9.0 8.5 Source: Deutsche Bank estimates, Company data, Bloomberg Finance LP Consensus estimates for companies NR

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Figure 10: China property – valuation table (cont.) EPS growth % BVPS PB(x) DPS Dividends yield % Net gearing % Company Ticker 14A 15E 16E 14A 15E 16E 14A 15E 16E 14A 15E 16E 14A 15E 16E 14A 15E 16E Covered COLI 688 HK 46 -7 12 16.3 20.6 23.6 1.6 1.2 1.1 0.6 0.6 0.7 2.1 2.3 2.5 28.5 32.5 15.5 Wanda 3699 HK 24 42 22 33.8 36.2 39.2 1.2 1.1 1.0 1.2 1.3 1.6 2.9 3.3 3.9 57.5 67.7 54.7 CSCEC 601668 CH 10 10 21 4.6 5.3 6.1 1.3 1.2 1.0 0.2 0.2 0.2 2.8 2.8 3.2 61.1 36.6 25.7 China Vanke - A 000002 CH -12 24 10 8.0 9.1 10.2 1.7 1.5 1.3 0.5 0.6 0.6 3.8 4.1 4.7 7.0 NA NA China Vanke - H 2202 HK -12 24 10 8.0 9.1 10.2 1.8 1.6 1.4 0.5 0.6 0.6 3.5 3.9 4.3 7.0 NA NA CR Land 1109 HK 25 15 3 16.6 18.9 20.7 1.3 1.1 1.0 0.5 0.6 0.6 2.4 2.7 2.9 46.0 21.9 22.1 Poly - A 600048 CH 14 21 27 5.7 6.8 8.3 1.5 1.2 1.0 0.2 0.3 0.3 2.6 3.0 3.2 140.3 123.4 88.9 CMPD 000024 CH 25 13 21 12.0 13.9 16.1 2.5 2.1 1.8 0.4 0.5 0.6 1.4 1.6 1.9 39.5 10.7 NA Evergrande 3333 HK -88 464 12 3.7 4.7 5.0 1.1 0.9 0.8 0.5 0.1 0.1 13.1 2.9 3.3 85.9 86.2 90.8 Country Garden 2007 HK 12 -11 10 2.8 2.8 3.2 0.9 0.9 0.8 0.1 0.1 0.1 6.1 5.4 5.9 59.7 54.3 60.7 Gemdale 600383 CH 61 10 5 7.0 7.7 8.5 1.7 1.6 1.4 0.1 0.2 0.2 1.1 1.4 1.5 59.0 59.1 55.0 GLP GLP SP -24 -8 28 1.8 1.8 1.8 0.9 0.9 0.9 0.0 0.0 0.0 2.2 2.4 2.6 21.0 12.2 21.4 Longfor 960 HK 7 -1 8 8.2 9.1 10.1 1.0 0.9 0.8 0.3 0.3 0.3 3.5 3.4 3.6 60.1 62.3 56.1 Shimao 813 HK 8 1 14 13.5 15.0 16.8 0.8 0.7 0.7 0.9 0.9 0.8 6.7 6.4 6.0 81.2 80.2 73.0 CSCI 3311 HK 26 22 24 5.0 5.7 6.7 2.2 2.0 1.7 0.3 0.3 0.3 2.3 2.9 3.1 37.1 46.4 41.2 Sino-Ocean 3377 HK -4 15 17 5.8 6.4 6.9 0.6 0.6 0.5 0.2 0.2 0.3 6.5 6.6 7.1 73.1 67.5 66.8 R&F 2777 HK -34 15 10 11.2 12.5 13.6 0.6 0.5 0.5 0.0 0.4 0.4 0.0 6.3 6.3 176.5 162.9 151.9 China Jinmao 817 HK 22 -2 9 4.1 4.2 4.5 0.5 0.5 0.5 0.1 0.1 0.1 5.2 5.6 6.3 86.9 61.5 41.0 KWG 1813 HK 9 14 11 6.9 7.6 8.4 0.7 0.6 0.6 0.3 0.4 0.4 6.9 7.3 7.3 50.9 40.7 13.8 Agile 3383 HK -12 -21 0 8.6 10.4 11.0 0.4 0.3 0.3 0.4 0.3 0.3 11.0 8.4 8.5 75.2 64.7 60.1 Yuexiu 123 HK -5 3 5 2.3 2.4 2.5 0.5 0.5 0.4 0.1 0.0 0.1 5.4 4.4 4.5 65.6 75.3 75.6 BJ North Star - A 601588 CH -17 7 13 4.8 4.9 5.0 1.0 0.9 0.9 0.1 0.1 0.1 1.7 1.7 1.7 73.0 66.2 68.8 BJ North Star - H 588 HK -17 7 13 4.8 4.9 5.0 0.4 0.4 0.4 0.1 0.1 0.1 3.8 3.8 4.0 73.0 66.2 68.8 Joy City 207 HK -57 1 23 2.1 1.8 1.9 0.5 0.5 0.5 0.0 0.0 0.0 1.0 1.0 1.6 56.0 58.2 38.8 Sunac 1918 HK -3 19 3 4.8 5.7 6.7 0.8 0.7 0.6 0.2 0.2 0.2 4.9 5.6 5.9 57.1 102.6 40.3 Greentown 3900 HK -46 -4 21 12.3 13.8 15.4 0.4 0.4 0.3 0.0 0.2 0.3 0.0 4.6 5.4 100.3 73.2 59.1 Yanlord YLLG SP -50 29 9 9.8 10.1 10.4 0.5 0.5 0.5 0.0 0.0 0.0 0.3 0.3 0.3 44.9 47.5 50.5 Kaisa 1638 HK 50 13 12 4.1 4.8 5.5 0.3 0.3 0.2 0.2 0.2 0.2 14.2 16.2 18.3 73.6 85.6 69.5 E-House EJ US -19 25 15 6.5 6.7 6.9 1.0 1.0 0.9 0.2 0.2 0.2 2.3 2.3 2.3 NA NA NA COGO 81 HK -55 64 43 5.4 6.3 7.5 0.5 0.4 0.3 0.1 0.1 0.1 2.0 2.4 3.1 59.5 62.4 66.8 Central China 832 HK -14 38 28 2.6 2.9 3.4 0.5 0.4 0.4 0.1 0.2 0.2 9.8 16.3 19.5 47.6 63.2 70.1 Not Rated NWCL 917 HK 32 -23 10 6.7 7.0 7.4 0.7 0.7 0.7 0.1 0.1 0.1 1.4 1.1 1.0 37.3 48.2 48.2 Hui Xian REIT 87001 HK 5 5 6 5.3 5.2 5.2 0.6 0.6 0.6 0.2 0.3 0.3 7.7 8.6 9.1 1.2 11.8 12.1 SOHO China 410 HK -41 -69 15 7.5 7.9 8.1 0.4 0.4 0.4 0.3 0.1 0.1 8.6 4.4 4.4 16.8 31.3 35.3 Shui On 272 HK -4 168 -41 5.4 5.4 5.6 0.3 0.3 0.3 0.0 0.0 0.0 2.5 2.6 2.7 82.9 96.2 92.7 Hopson 754 HK -53 0 7 25.4 26.0 NA 0.3 0.2 0.0 0.0 0.0 0.0 0.0 0.0 NA NA NA CIFI 884 HK 28 1 19 1.7 2.0 2.1 0.7 0.6 0.6 0.1 0.1 0.1 6.6 7.4 8.7 61.0 95.6 22.3 Greenland HK 337 HK -53 141 98 2.1 2.7 3.1 1.4 1.1 1.0 0.0 0.0 0.0 1.3 0.1 1.0 NA -17.6 -142.6 Poly Property 119 HK -28 -79 23 8.8 8.3 8.4 0.3 0.3 0.3 0.2 0.0 0.0 7.1 1.2 1.5 106.3 103.0 85.7 BC Land 2868 HK 31 1 24 5.0 5.6 NA 0.6 0.5 0.2 0.2 0.3 7.9 8.0 9.1 NA 234.1 248.4 Yuzhou 1628 HK 42 -10 27 2.4 2.7 3.0 0.7 0.6 0.5 0.1 0.1 0.2 7.4 8.4 10.0 79.8 78.2 1.7 Glorious 845 HK 7 -30 -60 2.5 2.0 2.1 0.3 0.4 0.4 0.0 0.0 0.0 0.0 NA 117.9 136.8 141.8 Powerlong 1238 HK 1 11 33 NA NA NA 0.1 0.1 0.1 4.0 5.0 6.0 NA NA NA Fantasia 1777 HK -14 22 23 1.7 2.0 2.2 0.4 0.4 0.3 0.0 0.1 0.1 4.9 6.8 8.5 91.0 85.7 84.9 C C Land 1224 HK NA NA -80 6.1 6.1 NA 0.3 0.3 0.1 0.0 NA 4.4 1.0 NA 26.7 NA Aoyuan 3883 HK NA NA 28 5.0 NA 0.3 NA 0.1 0.1 NA 7.4 9.9 77.2 76.5 72.3 Minmetals 230 HK -11 -10 44 NA NA NA 0.0 0.0 NA 2.3 3.3 NA NA NA Far East Global 830 HK 80 NA NA 0.6 1.9 NA NA NA NA NA -3.9 NA NA Overall average -3 22 13 0.9 0.8 0.7 4.3 4.5 5.0 62.7 68.2 57.7 Source: Deutsche Bank estimates, Company data, Bloomberg Finance LP Consensus estimates for companies NR

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Appendix 1

Important Disclosures

Additional information available upon request

Disclosure checklist Company Ticker Recent price* Disclosure Greentown China 3900.HK 6.34 (HKD) 14 Oct 15 14 *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr. Important Disclosures Required by U.S. Regulators Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See Important Disclosures Required by Non-US Regulators and Explanatory Notes.

14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year.

For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=3900.HK

Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Jason Ching

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Historical recommendations and target price: Greentown China (3900.HK) (as of 10/14/2015)

18.00 Previous Recommendations

16.00 Strong Buy Buy 14.00 Market Perform Underperform Not Rated 12.00 6 Suspended Rating 5 10.00 1 4 Current Recommendations 2 8.00 3 Buy

7 Hold SecurityPrice 6.00 Sell Not Rated Suspended Rating 4.00 *New Recommendation Structure as of September 9,2002 2.00

0.00 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Date

1. 24/03/2014: Buy, Target Price Change HKD19.10 5. 04/05/2015: Buy, Target Price Change HKD13.40 2. 26/08/2014: Buy, Target Price Change HKD11.00 6. 31/05/2015: Buy, Target Price Change HKD15.25 3. 30/03/2015: Buy, Target Price Change HKD9.40 7. 31/08/2015: Buy, Target Price Change HKD13.00 4. 19/04/2015: Buy, Target Price Change HKD12.23

Equity rating key Equity rating dispersion and banking relationships Buy: Based on a current 12- month view of total 500 share-holder return (TSR = percentage change in 450 53 % share price from current price to projected target price 400 350 plus pro-jected dividend yield ) , we recommend that 300 37 % investors buy the stock. 250 200 Sell: Based on a current 12-month view of total share- 150 22 % 10 % holder return, we recommend that investors sell the 100 17 % 18 % 50 stock 0 Hold: We take a neutral view on the stock 12-months Buy Hold Sell out and, based on this time horizon, do not recommend either a Buy or Sell. Companies Covered Cos. w/ Banking Relationship Notes: Asia-Pacific Universe 1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were: Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12- month period Sell: Expected total return (including dividends)

of -10% or worse over a 12-month period

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Regulatory Disclosures 1.Important Additional Conflict Disclosures Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. 2.Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.

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Additional Information

The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sources believed to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness.

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Derivative transactions involve numerous risks including, among others, market, counterparty default and illiquidity risk. The appropriateness or otherwise of these products for use by investors is dependent on the investors' own circumstances including their tax position, their regulatory environment and the nature of their other assets and liabilities, and as such, investors should take expert legal and financial advice before entering into any transaction similar

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to or inspired by the contents of this publication. The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of the high degree of leverage obtainable in futures and options trading, losses may be incurred that are greater than the amount of funds initially deposited. Trading in options involves risk and is not suitable for all investors. Prior to buying or selling an option investors must review the "Characteristics and Risks of Standardized Options”, at http://www.optionsclearing.com/about/publications/character-risks.jsp. If you are unable to access the website please contact your Deutsche Bank representative for a copy of this important document.

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Deutsche Bank AG/Hong Kong Page 17

David Folkerts-Landau Group Chief Economist Member of the Group Executive Committee

Raj Hindocha Marcel Cassard Steve Pollard Global Chief Operating Officer Global Head Global Head Research FICC Research & Global Macro Economics Equity Research

Michael Spencer Ralf Hoffmann Andreas Neubauer Regional Head Regional Head Regional Head Asia Pacific Research Deutsche Bank Research, Germany Equity Research, Germany

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