Sensitivity Analysis on UK/Europe and Sector Exposure

June 14, 2016

COMPANY UPDATE CK Hutchison Holdings (0001.HK)

Buy Equity Research Sensitivity analysis on UK/Europe and sector exposure

What's changed Investment Profile In view of the macro uncertainties, we conduct a sensitivity analysis to Low High assess CKH’s UK and European exposure. The impact could be two-fold: Growth Growth Returns * Returns * (1) lower translated earnings and NAV with weaker GBP and Euro. Multiple Multiple

Although we do not take a view on the outcome, our economists estimate Volatility Volatility GBP/Euro could devalue by 10%/4% vs. USD in the event of Brexit; (2) Percentile 20th 40th 60th 80th 100th earnings impact from weaker economies and trade activities. Should CK Hutchison Holdings (0001.HK) uncertainties persist, it may affect the group’s future expansion strategies Asia Pacific Conglomerates Peer Group Average * Returns = Return on Capital For a complete description of the investment and how it would deploy strong annual FCF in excess of HK$20bn. profile measures please refer to the disclosure section of this document.

Implications Key data Current Price (HK$) 89.05 Since 2009, CKH has spent HK$53bn to acquire assets in Europe. Together 12 month price target (HK$) 122.00 with improved operating efficiency, especially in telco and retail, EBIT Market cap (HK$ mn / US$ mn) 343,704.4 / 44,276.4 Foreign ownership (%) -- exposure in Europe would increase from 29% in 2011 to 55% in FY17E, including 36% in UK. Every 10% movement in GBP/Euro would translate to 12/15 12/16E 12/17E 12/18E EPS (HK$) New 8.08 8.48 9.68 10.40 4%/2% change in group earnings. As for the potential impact of a macro EPS revision (%) 0.0 1.1 (1.1) 0.6 downturn, if we strip out 24% contribution from defensive regulated utility EPS growth (%) (48.7) 5.0 14.1 7.4 EPS (dil) (HK$) New 8.08 8.48 9.68 10.40 assets, we estimate European telco, retail and ports account for 20%, 9% P/E (X) 12.4 10.5 9.2 8.6 P/B (X) 0.9 0.8 0.7 0.7 and 3% of group 2017E EBIT, with 9%, 3% and 1% from UK. Experience EV/EBITDA (X) 13.2 11.4 10.6 9.9 during the GFC in 2008-2009 indicates telco and retail were resilient, while Dividend yield (%) 2.5 3.1 3.5 3.8 ROE (%) 7.0 7.4 8.1 8.2 softer demand could affect port volume not only for UK, but also for its CROCI (%) 7.6 9.9 10.2 10.2 trading partners (e.g., Europe, PRC). Price performance chart Valuation 120 32,000 115 30,000 After removing value accretion originally assigned for the O2 UK deal, 110 28,000 updating macro assumptions and rolling our valuation base year over to 105 26,000 2017, we fine-tune FY16E-FY18E EPS for CKH but maintain our 12-m NAV- 100 24,000 based TP at HK$122.0. Trading at 38% NAV discount and 9.3X 2017E P/E, 95 22,000 the stock appears to have discounted a degree of macro slowdown in 90 20,000

85 18,000 Europe/UK. Our base case has not incorporated any value from the Jun-15 Sep-15 Dec-15 Mar-16 proposed Wind merger pending regulatory approval by mid-August. CK Hutchison Holdings (L) Hang Seng Index (R) Key risks Severe macro downturn and political uncertainties, currency movements. Share price performance (%) 3 month 6 month 12 month Absolute (10.1) (12.3) (21.3) INVESTMENT LIST MEMBERSHIP Rel. to Hang Seng Index (9.9) (8.3) 5.3 Asia Pacific Buy List Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 6/14/2016 close. Asia Pacific Conviction Buy List

Coverage View: Neutral Simon Cheung, CFA +852-2978-6102 [email protected] Goldman Sachs (Asia) L.L.C. Goldman Sachs does and seeks to do business with companies Alex Ye covered in its research reports. As a result, investors should be +852-2978-6666 [email protected] Goldman Sachs (Asia) L.L.C. aware that the firm may have a conflict of interest that could Michelle Han affect the objectivity of this report. Investors should consider +65-6654-5264 [email protected] Goldman Sachs (Singapore) Pte this report as only a single factor in making their investment

decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non- US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

The Goldman Sachs Group, Inc. Global Investment Research June 14, 2016 CK Hutchison Holdings (0001.HK)

CK Hutchison Holdings: Summary Financials

Profit model (HK$ mn) 12/15 12/16E 12/17E 12/18E Balance sheet (HK$ mn) 12/15 12/16E 12/17E 12/18E

Total revenue 277,317.0 281,059.3 294,281.3 307,656.5 Cash & equivalents 121,171.0 90,419.7 51,903.1 66,249.1 Cost of goods sold (107,152.2) (108,598.2) (113,707.0) (118,875.0) Accounts receivable 52,042.0 51,080.8 50,005.8 49,566.9 SG&A (44,349.7) (44,948.2) (47,062.7) (49,201.7) Inventory 19,761.0 19,070.1 18,573.6 18,801.2 R&D ------Other current assets 0.0 0.0 0.0 0.0 Other operating profit/(expense) (73,681.3) (71,271.1) (73,654.4) (77,258.5) Total current assets 192,974.0 160,570.6 120,482.5 134,617.2 EBITDA 52,133.8 56,241.9 59,857.2 62,321.2 Net PP&E 187,404.0 202,709.4 215,972.5 228,069.8 Depreciation & amortization (14,381.7) (15,013.8) (16,049.9) (16,951.1) Net intangibles 32,608.0 32,608.0 32,608.0 32,608.0 EBIT 37,752.1 41,228.0 43,807.2 45,370.1 Total investments 251,052.0 255,335.0 260,059.5 265,061.2 Interest income ------Other long-term assets 368,906.0 368,906.0 368,906.0 368,906.0 Interest expense (6,842.6) (6,733.3) (6,274.0) (6,190.5) Total assets 1,032,944.0 1,020,129.0 998,028.5 1,029,262.1 Income/(loss) from uncons. subs. 18,588.5 17,896.6 21,281.5 23,830.8 Others 0.0 0.0 0.0 0.0 Accounts payable 0.0 0.0 0.0 0.0 Pretax profits 49,498.0 52,391.3 58,814.7 63,010.4 Short-term debt 33,016.0 62,798.0 12,144.0 29,569.0 Income tax (7,197.0) (8,386.8) (9,729.7) (10,491.1) Other current liabilities 97,287.0 97,788.7 98,877.8 100,717.1 Minorities (10,040.0) (10,631.3) (11,264.6) (12,052.7) Total current liabilities 130,303.0 160,586.7 111,021.8 130,286.1 Long-term debt 270,536.0 201,615.0 199,348.0 179,656.0 Net income pre-preferred dividends 32,261.0 33,373.2 37,820.4 40,466.6 Other long-term liabilities 82,994.0 82,994.0 82,994.0 82,994.0 Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 353,530.0 284,609.0 282,342.0 262,650.0 Net income (pre-exceptionals) 32,261.0 33,373.2 37,820.4 40,466.6 Total liabilities 483,833.0 445,195.7 393,363.8 392,936.1 Post-tax exceptionals (1,093.0) (635.2) (460.0) (325.9) Net income 31,168.0 32,738.0 37,360.4 40,140.7 Preferred shares 0.0 0.0 0.0 0.0 Total common equity 428,588.0 450,499.6 475,951.0 502,991.7 EPS (basic, pre-except) (HK$) 8.36 8.65 9.80 10.48 Minority interest 120,523.0 124,433.7 128,713.8 133,334.3 EPS (basic, post-except) (HK$) 8.08 8.48 9.68 10.40 EPS (diluted, post-except) (HK$) 8.08 8.48 9.68 10.40 Total liabilities & equity 1,032,944.0 1,020,129.0 998,028.5 1,029,262.1 DPS (HK$) 2.552.813.093.39 Dividend payout ratio (%) 31.6 33.1 31.9 32.6 BVPS (HK$) 111.04 116.72 123.31 130.32 Free cash flow yield (%) 3.5 4.5 6.1 6.7

Growth & margins (%) 12/15 12/16E 12/17E 12/18E Ratios 12/15 12/16E 12/17E 12/18E Sales growth 1.9 1.3 4.7 4.5 CROCI (%) 7.6 9.9 10.2 10.2 EBITDA growth 0.5 7.9 6.4 4.1 ROE (%) 7.0 7.4 8.1 8.2 EBIT growth 8.3 9.2 6.3 3.6 ROA (%) 3.3 3.2 3.7 4.0 Net income growth (53.6) 5.0 14.1 7.4 ROACE (%) 7.0 6.7 7.2 7.5 EPS growth (48.7) 5.0 14.1 7.4 Inventory days 66.5 65.3 60.4 57.4 Gross margin 61.4 61.4 61.4 61.4 Receivables days 78.1 67.0 62.7 59.1 EBITDA margin 18.8 20.0 20.3 20.3 Payable days ------EBIT margin 13.6 14.7 14.9 14.7 Net debt/equity (%) 42.6 38.6 33.5 28.4 Interest cover - EBIT (X) 5.5 6.1 7.0 7.3

Cash flow statement (HK$ mn) 12/15 12/16E 12/17E 12/18E Valuation 12/15 12/16E 12/17E 12/18E Net income pre-preferred dividends 32,261.0 33,373.2 37,820.4 40,466.6 D&A add-back 14,381.7 15,013.8 16,049.9 16,951.1 P/E (analyst) (X) 12.4 10.5 9.2 8.6 Minorities interests add-back 10,040.0 10,631.3 11,264.6 12,052.7 P/B (X) 0.9 0.8 0.7 0.7 Net (inc)/dec working capital 2,832.0 2,153.8 2,660.5 2,050.7 EV/EBITDA (X) 13.2 11.4 10.6 9.9 Other operating cash flow (19,034.7) (8,941.8) (9,625.8) (10,389.8) EV/GCI (X) 1.1 1.0 0.9 0.9 Cash flow from operations 40,480.0 52,230.4 58,169.7 61,131.2 Dividend yield (%) 2.5 3.1 3.5 3.8

Capital expenditures (22,494.0) (30,954.5) (29,334.0) (28,935.3) Acquisitions 85,390.0 (2,061.8) (2,522.2) (2,483.1) Divestitures 9,672.0 0.0 0.0 0.0 Others 76,403.0 0.0 0.0 0.0 Cash flow from investments 148,971.0 (33,016.3) (31,856.2) (31,418.3)

Dividends paid (common & pref) (9,687.0) (10,826.4) (11,909.0) (13,099.9) Inc/(dec) in debt (37,963.0) (39,139.0) (52,921.0) (2,267.0) Common stock issuance (repurchase) (14,313.0) 0.0 0.0 0.0 Other financing cash flows (131,635.0) 0.0 0.0 0.0 Cash flow from financing (193,598.0) (49,965.4) (64,830.0) (15,366.9) Total cash flow (4,147.0) (30,751.3) (38,516.6) 14,346.0 Note: Last actual year may include reported and estimated data. Source: Company data, Goldman Sachs Research estimates.

Analyst Contributors

Simon Cheung, CFA [email protected]

Alex Ye [email protected]

Michelle Han [email protected]

Goldman Sachs Global Investment Research 2 June 14, 2016 CK Hutchison Holdings (0001.HK)

Assessing CKH’s European and UK exposure

Given macro slowdown concerns in the UK/Europe and recent movement in currencies, we conduct an analysis on CKH’s earnings and NAV sensitivity to different forex and macro assumptions. Please refer to a series of reports (“Sterling and Uncertainty Around the Referendum Outcome” dated Jun 7, 2016; “European Economics Daily: UK - Credit easing as a robust BoE policy response to Brexit” dated May 26, 2016; “European Economics Daily: On Brexit, Sterling and the BoE's interest rate response” dated May 25, 2016) published by our economists on their latest views, e.g., Brexit etc.

Exhibit 1: EUR/USD trend since 2010 Exhibit 2: GBP/USD trend since 2010

1.8 1.7

1.6 1.7

1.5 1.6 1.4

1.3 1.5

1.2 1.4 1.1

1.0 1.3 10 10 10 11 11 11 12 12 12 13 13 13 14 14 14 15 15 15 16 16 10 10 10 11 11 11 12 12 12 13 13 13 14 14 14 15 15 15 16 16 10 11 12 13 14 15 10 11 12 13 14 15 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr

EUR to USD GBP to USD

Source: Bloomberg. Source: Bloomberg.

Exhibit 3: Hutchison’s business exposure to European countries

Countries Hutch's businesses 3G Retail Ports Infrastructure UK Power Networks, Northumbrian Water Group, Northern Gas The Perfume Shop, Felixstowe, Harwich, UK 3UK Network, Wales & West Utilities, Superdrug, Savers London Thamesport Southern Water Group, Seabank Power, Eversholt

Italy 3Italia Marionnaud Taranto Container Terminal

France Marionnaud Germany Rossmann Austria 3Austria Marionnaud Denmark Hi3G Container Terminal Sweden Hi3G Frihamnen ICI Paris XL, ECT, Amsterdam Container Netherlands Kruidvat, AVR Terminal Trekpleister Spain Marionnaud Terminal Catalunya

Poland Gdynia Container Terminal Ireland 3Ireland Portugal Marionnaud Switzerland Marionnaud Turkey Watsons Ukraine Watsons Russia Spektr Baltic States Drogas % of Hutch's 2017E EBIT 20% 9% 3% 23%

Source: Company data, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 3 June 14, 2016 CK Hutchison Holdings (0001.HK)

(1) NAV and earnings exposure by regions CKH’s annual report disclosed the geographical breakdown of group assets and borrowings. It also disclosed in the FY15 results presentation its pro-forma revenue, EBITDA and EBIT breakdown as if the group restructuring was completed at the beginning of last year. In the past, asset breakdown was not accurate in that the group had not written down the value of its 3G licenses like the other European telecom operators did. Its investments in ports, energy etc were also carried at historical costs. After the “mark to market” exercise during the restructuring, we think its financial accounts should now better reflect its geographical exposure. H3G’s asset value was revised down from HK$243bn at end-2014 to HK$146bn at end-2015, while retail was marked up from HK$44bn to HK$207bn.

Half of CKH’s NAV attributed to Europe, including 35% in UK As shown in Exhibit 4, 47% of CKH’s 2015 assets were in Europe, vs. 11% in HK, 8% in China, 8% in Asia and the rest elsewhere. 76% of its 2015 net debt is denominated in Euro currencies (40% in Euro, 36% in GBP), providing certain degree of natural hedge against its asset base and earnings exposure. Net-net, we estimate around half of the group’s FY17E NAV is exposed to Europe, including 34% in UK and 16% elsewhere. In FY17E EBIT terms, its exposure is around 55% (36% UK, 19% elsewhere). Exhibits 8-9 shows CKH’s NAV and earnings sensitivity to changes in GBP and Euro. Every 5% GBP and Euro movements would change CKH’s 2017E NAV by 1.7% and 0.8%, earnings by 2.2% and 0.9%.

Exhibit 4: CKH geographical breakdown

2015 % % Net % (HK$mn) Borrowings breakdown Cash breakdown debt breakdown RMB - 0% 10,514 8% (10,514) -6% HKD 21,249 7% 36,799 28% (15,551) -9% USD 109,279 36% 52,570 40% 56,708 33% EUR 75,888 25% 6,571 5% 69,317 40% GBP 75,888 25% 14,457 11% 61,431 36% Others 21,249 7% 10,514 8% 10,735 6% Total 303,552 100% 131,426 100% 172,126 100%

2015 Pro-forma % Pro-forma % Pro-forma % Total % (HK$mn) Revenue breakdown EBITDA breakdown EBIT breakdown assets breakdown China 40,467 10% 11,521 13% 8,453 14% 81,975 8% Hong Kong 62,691 16% 5,856 6% 2,974 5% 116,485 11% Other Asia & Australia 50,403 13% 16,724 18% 12,801 21% 132,670 13% Europe 182,010 46% 48,843 53% 34,960 56% 484,273 47% UK 83,178 21% 31,312 34% 22,969 37% n.a. n.a. Other Europe 98,832 25% 17,531 19% 11,991 19% n.a. n.a. Canada 37,953 10% 7,007 8% 1,069 2% 51,861 5% Others 22,563 6% 2,142 2% 1,822 3% 165,680 16% Total 396,087 100% 92,093 100% 62,079 100% 1,032,944 100%

2017E % % % Net% (HK$mn) EV breakdown NAV breakdown EBIT breakdown profit breakdown China 87,746 13% 94,648 17% 7,325 10% 4,333 12% Hong Kong 35,343 5% 8,324 1% 3,899 6% 1,681 5% Other Asia & Australia 88,791 13% 81,743 15% 8,127 11% 3,838 10% Europe 367,968 55% 282,134 51% 38,609 55% 23,490 63% UK 232,281 35% 191,952 34% 25,426 36% 16,403 44% Other Europe 135,687 20% 90,181 16% 13,183 19% 7,087 19% Canada 58,474 9% 58,474 10% 5,979 8% 1,872 5% Others 32,325 5% 32,325 6% 6,888 10% 2,147 6% Total 670,647 100% 557,648 100% 70,827 100% 37,360 100%

Source: Company data, Goldman Sachs Global Investment Research

Goldman Sachs Global Investment Research 4 June 14, 2016 CK Hutchison Holdings (0001.HK)

Exhibit 5: CKH group EBIT breakdown by country since 2011

(HK$mn) 2011 2012 2013 2014 2015 PF China 9,745 11,023 12,572 11,021 8,453 Hong Kong 9,761 9,085 10,114 8,633 2,974 Other Asia & Australia 7,737 9,015 9,584 9,063 12,801 Europe 15,009 19,556 23,998 27,495 34,960 UK n.a. 13,407 16,149 18,400 22,969 Europe (ex UK) n.a. 6,149 7,849 9,095 11,991 Canada 8,648 7,271 7,070 5,762 1,069 Others 470 2,340 1,259 3,739 1,822 Total 51,370 58,290 64,597 65,713 62,079

% breakdown China 19% 19% 19% 17% 14% Hong Kong 19% 16% 16% 13% 5% Other Asia & Australia 15% 15% 15% 14% 21% Europe 29% 34% 37% 42% 56% UK n.a. 23% 25% 28% 37% Other Europe n.a. 11% 12% 14% 19% Canada 17% 12% 11% 9% 2% Others 1% 4% 2% 6% 3% Total 100% 100% 100% 100% 100%

Source: Company data

Exhibit 6: CKH 2017E group EBIT breakdown by country Exhibit 7: CKH 2017E net profit breakdown by country and by segment and by segment

By segment By segment (HK$mn) Total Telco Ports Retail Energy Infra Others (HK$mn) Total Telco Ports Retail Energy Infra Others China 7,325 - 1,511 4,917 - 898 - China 4,333 - 1,125 2,620 - 588 - Hong Kong 3,899 1,513 387 828 - 1,171 - Hong Kong 1,681 462 288 441 - 489 - Other Asia & Australia 8,127 1,467 2,982 1,646 - 2,032 - Other Asia & Australia 3,838 937 985 877 - 1,038 - Europe 38,609 14,114 1,800 6,648 - 16,047 - Europe 23,490 10,618 914 3,542 - 8,416 - UK 25,426 6,651 650 2,368 - 15,758 - UK 16,403 6,651 484 1,261 - 8,007 - Europe (excl. UK) 13,183 7,464 1,150 4,280 - 289 - Europe (excl. UK) 7,087 3,968 430 2,281 - 409 - USA & Canada 5,979 - - - 3,661 2,318 - USA & Canada 1,872 - - - 461 1,410 - Others 6,888 2 1,904 - - 2,070 2,912 Others 2,147 - 1,418 - - (382) 1,111 2017E group EBIT 70,827 17,096 8,583 14,039 3,661 24,536 2,912 2017E group EBIT 37,360 12,018 4,731 7,480 461 11,559 1,111

% breakdown % breakdown China 10% - 2% 7% - 1% - China 12% - 3% 7% - 2% - Hong Kong 6% 2% 1% 1% - 2% - Hong Kong 5% 1% 1% 1% - 1% - Other Asia & Australia 11% 2% 4% 2% - 3% - Other Asia & Australia 10% 3% 3% 2% - 3% - Europe 55% 20% 3% 9% - 23% - Europe 63% 28% 2% 9% - 23% - UK 36%9%1%3%- 22% - UK 44% 18% 1% 3% - 21% - Europe (excl. UK) 19% 11% 2% 6% - 0% - Europe (excl. UK) 19% 11% 1% 6% - 1% - USA & Canada 8% - - - 5% 3% - USA & Canada 5% - - - 1% 4% - Others 10% 0% 3% - - 3% 4% Others 6% - 4% - - -1% 3% Total 100% 24% 12% 20% 5% 35% 4% Total 100% 32% 13% 20% 1% 31% 3%

Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

Exhibit 8: We estimate every 5% change in GBP/HKD Exhibit 9: …and every 5% change in EUR/HKD would lead would lead to 2.2%/1.7% impact to CKH’s 2017E net to 0.9%/0.8% impact to CKH’s 2017E net profit and NAV profit and NAV… CKH’s earnings and NAV sensitivity to EUR CKH’s earnings and NAV sensitivity to GBP

Base case Base case GBP/HKD 9.4 9.9 10.5 11.0 11.6 12.1 12.7 EUR/HKD 7.4 7.9 8.3 8.8 9.2 9.6 10.1 vs. base case -15.0% -10.0% -5.0% 0% 5.0% 10.0% 15.0% vs. base case -15.0% -10.0% -5.0% 0% 5.0% 10.0% 15.0%

2017E net profit (HK$mn) 34,900 35,720 36,540 37,360 38,181 39,001 39,821 2017E net profit (HK$mn) 36,297 36,652 37,006 37,360 37,715 38,069 38,424 vs. base case -6.6% -4.4% -2.2% 0.0% 2.2% 4.4% 6.6% vs. base case -2.8% -1.9% -0.9% 0.0% 0.9% 1.9% 2.8%

2017E NAV (HK$/share) 137.0 139.5 142.0 144.5 147.0 149.4 151.9 2017E NAV (HK$/share) 141.0 142.1 143.3 144.5 145.6 146.8 148.0 vs. base case -5.2% -3.4% -1.7% 0.0% 1.7% 3.4% 5.2% vs. base case -2.4% -1.6% -0.8% 0.0% 0.8% 1.6% 2.4%

Implied valuation Implied valuation 2017E P/E 9.9 9.7 9.5 9.3 9.1 8.9 8.7 2017E P/E 9.6 9.5 9.4 9.3 9.2 9.1 9.0 Discount to NAV -34% -36% -37% -38% -39% -40% -41% Discount to NAV -36% -37% -37% -38% -38% -39% -39%

Source: Datastream, Goldman Sachs Global Investment Research Source: Datastream, Goldman Sachs Global Investment Research

Goldman Sachs Global Investment Research 5 June 14, 2016 CK Hutchison Holdings (0001.HK)

(2) Sensitivity analysis on macro assumptions As far as the business outlook is concerned, we notice that over 60% of CKH’s 2017E EBIT in UK is attributed to regulated utility assets (or 22% of overall group EBIT) which we think should be relatively insulated from a potential macro downturn. For the rest, 26% comes from telco, 2% from ports and 9% from retail. We discuss below their earnings sensitivity to change in the macro assumptions with reference to what happened during the global financial crisis in 2008/2009 (Exhibits 12-13).

 Telecom (26% of UK, 9% of group EBIT in 2017E) – 3UK is one of H3G’s more profitable markets. Of the HK$17bn EBITDA last year, 3UK contributed HK$8bn, with 31% margin in line with the industry. Similar to other telecom businesses globally, during the financial crisis, its revenue was relatively resilient and only dropped 1% yoy in local currency terms, dragged by lower ARPU as roaming revenue fell due to less traveling in the region. For cost savings, EBITDA still managed to grow 5% yoy. A weaker macro backdrop could affect mobile data usage, especially for price-sensitive customers. Any change in visa and immigration policies could slow subscriber take-up. If 3UK’s revenue fell 3% yoy as for the industry in 2009, it would reduce our FY17E EBIT by 4% and group EBIT by 1.5%.

 Port (2% of UK, 1% of group EBIT in 2017E) – CKH operates three ports in UK including Felixstowe, Harwich and London Thamesport. Along with weakness in global trades, its UK ports posted 7% volume decline in 2009, driving 6% EBIT decline in local currency term during the financial crisis. We note that re-negotiation of trade treaties may affect not only UK, but also EU as its closest trading partner. China’s throughput may also be affected, as UK accounts for 3% of China’s export in 2015. Should global trades slow, it may impact HPH’s port portfolio elsewhere in the world, which together would contribute 12% of CKH’s group FY17E EBIT by our estimate.

 Retail (9% of UK, 3% of group EBIT in 2017E) – AS Watson operates various different brands in Europe, and in UK, Savers and Superdrugs for health & beauty products. The group did not provide a breakdown, but only disclosed that its stores in UK and Europe together still posted 6% revenue growth in 2009 on record sale in the Benelux countries, expansion in Poland and better sales of Savers in UK. According to Euromonitor, overall the UK health & beauty market revenue grew 1% yoy in 2009, highlighting the defensive nature of the health & beauty business.

Outside of UK, we also conduct earnings sensitivity of businesses in other European countries where the group has exposure (Exhibit 13). They together would contribute 19% of 2017E group EBIT, including 57% from telco, 32% retail, 9% ports and 2% infrastructure.

Exhibit 10: We estimate over 60% of CKH’s UK EBIT is Exhibit 11: …while retail and telecom contribute around contributed by infrastructure segment 90% of Europe (ex. UK) EBIT of CKH CKH’s UK EBIT breakdown by segment CKH’s non-UK European EBIT breakdown by segment

2017E UK EBIT = HK$25.4bn, or 36% of group EBIT 2017E Europe (ex. UK) EBIT = HK$13.2bn, or 19% of group EBIT Infrastructure, HK$0.3bn, 2%

Telco, HK$6.7bn, Retail, 26% HK$4.3bn, 32% Infrastructure, Ports, HK$15.8bn, Telco, HK$0.6bn, 3% 62% HK$7.5bn, 57% Retail, HK$2.4bn, 9% Ports, HK$1.1bn, 9%

Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

Goldman Sachs Global Investment Research 6 June 14, 2016 CK Hutchison Holdings (0001.HK)

Exhibit 12: If 3UK’s revenue fell 3% yoy as for the industry in 2009, it would cut our FY17E EBIT forecast by 4% and group EBIT by 1.5% EBIT sensitivity on various UK macro assumptions Bear Bear Base Bull Bull Bull 2009 case case Bear case case case case case 12 3 123 UK GDP -4.2% -4.0% -2.0% 0.0% +2.0% +4.0% +6.0% +8.0%

UK overall port volume growth -10.9% -6.0% -3.0% 0.0% +3.0% +6.0% +9.0% +12.0% - Hutch UK port volume growth -7.3% -6.0% -3.0% 0.0% +3.0% +6.0% +9.0% +12.0% Hutch UK port EBIT yoy (in local currency) -6.0% -8.9% -4.8% -0.2% +4.0% +8.3% +12.8% +16.9%

UK mobile telecom revenue growth (in local currency) -3.4% -3.0% -1.5% 0.0% +1.5% +3.0% +4.5% +6.0% 3UK revenue (in local currency) -1.0% -3.0% -1.5% 0.0% +1.5% +3.0% +4.5% +6.0% 3UK EBITDA (in local currency) 5.0% -1.8% 0.6% 3.1% 5.2% +7.3% +9.8% +12.2% UK health and beauty retail sales growth 1.2% 1.0% +2.0% +3.0% +4.0% +5.0% +6.0% +7.0%

UK EBIT (HK$mn) 24,328 24,694 25,060 25,426 25,792 26,157 26,523 vs. base case -4.3% -2.9% -1.4% 0.0% 1.4% 2.9% 4.3% As % of group EBIT 34.9% 35.2% 35.6% 35.9% 36.2% 36.6% 36.9%

- Telco 5,902 6,152 6,401 6,651 6,900 7,149 7,399 vs. base case -11.3% -7.5% -3.8% 0.0% 3.8% 7.5% 11.3% - Ports 569 596 623 650 677 704 730 vs. base case -12.4% -8.3% -4.1% 0.0% 4.1% 8.3% 12.4% - Retail 2,099 2,188 2,278 2,368 2,457 2,547 2,636 vs. base case -11.3% -7.6% -3.8% 0.0% 3.8% 7.6% 11.3% - Infrastructure 15,758 15,758 15,758 15,758 15,758 15,758 15,758 vs. base case 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Group EBIT (HK$mn) 69,730 70,095 70,461 70,827 71,193 71,559 71,925 vs. base case -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% Source: Goldman Sachs Global Investment Research

Exhibit 13: Outside of UK, we also conduct earnings sensitivity of businesses in other European countries where the group has exposure EBIT sensitivity on various EU (ex UK) macro assumptions

Bear Bear Base Bull Bull Bull 2009 case case Bear case case case case case 12 3 123 EU GDP -4.2% -1.2% -0.2% +0.8% +1.8% +2.8% +3.8% +4.8%

Europe port volume growth -11.8% -3.0% -1.0% +1.0% 3.0% +5.0% +7.0% +9.0% - Hutch Europe port volume growth (ex new capacity) -8.7% -3.0% -1.0% +1.0% 3.0% +5.0% +7.0% +9.0% Hutch European port EBIT yoy (in HKD) -19.8% -3.8% -1.2% 1.4% 4.0% 6.6% 9.2% 11.8%

3 Europe mobile telecom revenue growth (in local currency) -1.0% 0.5% +2.0% 3.5% +5.0% +6.5% +8.0% - Italy -5.0% -1.6% -0.1% +1.4% 2.9% +4.4% +5.9% +7.4% - Austria 3.0% -1.1% 0.4% +1.9% 3.4% +4.9% +6.4% +7.9% - Ireland -1.0% -1.1% 0.4% +1.9% 3.4% +4.9% +6.4% +7.9% - Sweden -0.2% 1.3% +2.8% 4.3% +5.8% +7.3% +8.8% 22.0% - Denmark -1.1% 0.4% +1.9% 3.4% +4.9% +6.4% +7.9% Hutch Europe health and beauty retail sales growth (in local currency) 6.0% 1.0% 2.0% +3.0% 4.0% +5.0% +6.0% +7.0%

Europe (excl UK) EBIT (HK$mn) 12,152 12,496 12,839 13,183 13,527 13,870 14,214 vs. base case -7.8% -5.2% -2.6% 0.0% 2.6% 5.2% 7.8% As % of group EBIT 17.4% 17.8% 18.2% 18.6% 19.0% 19.4% 19.8%

- Telco 6,753 6,990 7,227 7,464 7,701 7,937 8,174 vs. base case -9.5% -6.3% -3.2% 0.0% 3.2% 6.3% 9.5% - Ports 1,046 1,081 1,115 1,150 1,184 1,219 1,253 vs. base case -9.0% -6.0% -3.0% 0.0% 3.0% 6.0% 9.0% - Retail 4,063 4,136 4,208 4,280 4,353 4,425 4,497 vs. base case -5.1% -3.4% -1.7% 0.0% 1.7% 3.4% 5.1% - Infrastructure 289 289 289 289 289 289 289 vs. base case 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Group EBIT (HK$mn) 69,796 70,140 70,484 70,827 71,171 71,514 71,858 vs. base case -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5%

Source: Goldman Sachs Global Investment Research

Goldman Sachs Global Investment Research 7 June 14, 2016 CK Hutchison Holdings (0001.HK)

(3) Capital allocation and future expansion Given a lack of expansion opportunities in HK and macro risks in China/Asia, CKH has allocated more capital to Europe and overseas in recent years, especially in UK where: (1) it has a long history and track record of investing since 1980s; (2) the group had mentioned in the past that it feels more comfortable with the political environment vs. other peripheral European countries; (3) there is still scope to improve return by increasing its investments, such as telecom, although the recent merger deal was rejected by the EU Commissioners. Exhibit 14 lists the M&A the group has conducted since 2009.

Any change in macro and/or political outlook in Europe may affect the group’s investment and expansion in the region. This raises questions as to how it would deploy the strong residual FCF as each of its divisions has already become self-sufficient (i.e., operating cashflow exceeds capex). Without M&A, we estimate CKH generates around HK$20bn FCF before dividend in 2016E (or HK$10bn post dividend), which would reduce its net debt to net capital ratio by 1.3% per annum (from 23.7% at end-2015).

Exhibit 14: M&A activities of CKH in recent years

Hutch's on- balance- Total sheet cash Consideration outflow Date Division Country Buyer/Seller Target Details (HK$mn) (HK$mn) Deal valuation

Acquisitions Oct-2015 Utility Portugal CKI (76%-owned by CKH) Iberwind CKI/PAH to acquire 50%/50% of Iberwind 1,250 1,250 13.0x 2014E P/E Aug-2015 Telco Italy CKH Holdings WIND** CKH Holdings and VimpelCom to form a 50/50 JV for 3 Italia and WIND n.a. 2,340 n.a. Apr-2015 Utility UK CKI (76%-owned by CKH) Eversholt CKI/CKH to acquire 50%/50% of Eversholt 13,338 6,669 9.0x 2014 EV/EBITDA Mar-2015 Telco UK CKH Holdings O2* Merge O2 with 3 UK and sell 32.98% of the combined co to third party investors 108,225 77,760 7.2x 2014 EV/EBITDA Oct-2014 Utility Australia CKI (76%-owned by CKH) Envestra A JV formed by CKI/CKH/PAH(33/33/33%) acquired 100% stake in Envestra 17,316 4,706 A$1.32/share offer px Jul-2014 Utility Canada CKI (76%-owned by CKH) Park'n'Fly CKI/CKH to acquire 50%/50% of Park'n Fly 2,720 1,360 4.1x 2013 P/B Jun-2013 Telco Ireland HWL Ireland O2 HWL to acquire 100% of Ireland O2 from Telefonica 7,800 7,800 6.0x 2012 EV/EBITDA Jun-2013 Utility Netherland CKI (76%-owned by HWL) AVR-Afvalverwerking B.V. CKI/CKH/PAH/LKS Foundation to acquire 35%/35%/20%/10% of AVR 3,444 2,030 8.6x 2012 EV/EBITDA Mar-2013 Port HK HPHT (28%-owned by HWL) Asia Container Terminals HPHT to acquire 100% of ACT 3,917 - 15.7x 2012 EV/EBITDA Jan-2013 Utility New Zealand CKI (76%-owned by HWL) Enviro Waste Services CKI to acquire 100% of EWS 3,182 3,182 8.9x 2013 EV/EBITDA 0.35 Dec-2012 Telco Austria HWL Orange Austria 3Austria to acquire 100% of Orange Austria 9,190 9,190 6.9x 2011 EV/EBITDA Jul-2012 Utility UK CKI (76%-owned by HWL) Wales & West Utilities CKI/PAH/CKH/LKS Foundation to acquire 30%/30%/30%/10% of WWU 7,057 2,452 8.3x 2012 EV/EBITDA 2012 Property China HWL Land acquisition in China 50/50 JV with Cheung Kong 859 - n.a.

Jul-2011 Utility UK CKI (76%-owned by HWL) Northumbrian Water Group CKI to acquire 40% of NWG 24,329 11,275 13.5x trailing P/E Jun-2011 Energy Canada HWL Husky Energy HWL to take up ~C$100mn of a private share placement by Husky Energy 800 800 n.a. 2011 Property China HWL Land acquisition in China 50/50 JV with Cheung Kong 4,857 - n.a.

Nov-2010 Energy Canada HWL Husky Energy To take up HWL's 34.55% share of the C$1 billion common share placement 2,614 2,614 n.a. Jul-2010 Utility UK CKI (76%-owned by HWL) UK Power Networks CKI/PAH/LKS Foundation to acquire 40%/40%/20% of UKPN 28,045 12,059 8.1x 2010 EV/EBITDA May-2010 Telco ASEAN HWL HTIL Privatisation of HTIL (then 60.4%-owned by HWL) 4,199 4,199 Apr-2010 Utility UK CKI (76%-owned by HWL) Seabank Power CKI/PAH to acquire 25%/25% of Seabank Power 1,180 1,180 n.a. 2010 Property China HWL Land acquisition in China 50/50 JV with Cheung Kong 1,745 - n.a.

Nov-2009 Utility UK CKI (76%-owned by HWL) Northern Gas Networks CKI acquired an additional 7.1% stake in NGN 523 523 7.4x 2008 P/E

Acquisition subtotal (excl. O2 and WIND) 138,366 71,289 Acquisition in Europe 94,906 53,178 Acquisition in UK 74,472 34,158

Disposals Mar-2014 Retail HWL AS Watson Hutch sold 24.95% stake of AS Watson to Temasek 44,000 44,000 20x 2013 P/E Jan-2014 Utility PAH Hongkong Electric PAH spins off Hongkong Electric (sold 50.1% stake in HKE IPO) 24,000 - n.a. 3Austria sold certain frequencies, base station sites, and Yesss! To Telekom Dec-2012 Telco HWL Yessss! Austria as a part of the Orange Austria acquisition 3,900 3,900 n.a. Mar-2011 Port HWL HPH Trust IPO of HPH Trust 45,000 45,000 n.a. Aug-2009 Telco HTIL (then 60.4%-owned by HWL) Partner Communications Disposal of HWL's entire 51.3% shareholding in Partner Communications 10,706 10,706 n.a.

Disposal subtotal 127,606 103,606

* O2 deal has been rejected by European Commission ** WIND merger is still subject to regulatory approval

Source: Company data

Goldman Sachs Global Investment Research 8 June 14, 2016 CK Hutchison Holdings (0001.HK)

(4) Valuation After incorporating in latest macro assumptions (e.g., forex, oil prices), we fine-tune our FY16E-FY18E EPS by -1% to +1%. Rolling over the base year to 2017E offset by the removal of HK$4/share value accretion for 50% weighting assigned on the O2 merger in UK (which was rejected by the EU Commission on May 12), we maintain our 12-month target price at HK$122.0, still based on a 15% target NAV discount. Our base case has not factored in any potential contribution from its proposed telco merger with Wind in Italy, the results of which are pending regulatory approval by mid-August. Trading at 38% NAV discount and 9.3x 2017E P/E, we think the stock appears to have discounted a certain degree of macro risks.

Exhibit 15: Hutch’s detailed NAV breakdown

Per% of Per% of 2016E Share total 2017E Share total Operations Interest (%) Valuation methodology HK$mn (HK$)EV HK$mn (HK$) EV Assumptions Telecoms & media 3 Group Europe 126,498 32.77 20 134,379 34.82 20 3UK 100 EV/EBITDA 63,242 16.39 10 66,533 17.24 10 2017E EV/EBITDA at 7.0x 3Italia 97 EV/EBITDA 18,731 4.85 3 20,110 5.21 3 2017E EV/EBITDA at 7.0x Others 60-100 EV/EBITDA 44,525 11.54 7 47,737 12.37 7 2017E EV/EBITDA at 7.0x Hutch Telecom Australia (HTA.AX) 88 Market value 5,468 1.42 1 5,468 1.42 1 Current market price Hutch Telecom Hong Kong (0215.HK) 37 Market value 8,078 2.09 1 8,078 2.09 1 Current market price Other Asia telecom operations 100 EV/EBITDA 9,650 2.50 2 10,954 2.84 2 2017E EV/EBITDA at 7.0x Tom Group (2383.HK) 37 Market value 864 0.22 0 864 0.22 0 Current market price Telecom sub-total 150,559 39.01 23 159,745 41.39 24

Container ports HPH Trust (HPHT.SI) 27.6 Equity value 8,415 2.18 1 9,911 2.57 1 GS 12m TP = US$0.53 China and Hong Kong ports 24 - 40 DCF 13,437 3.48 2 13,847 3.59 2 9.5% WACC, implied 10.1x 2017E EV/EBITDA European ports 72 - 78 DCF 18,773 4.86 3 19,268 4.99 3 9.0% WACC, implied 9.2x 2017E EV/EBITDA Asia and others 25 - 80 DCF 48,668 12.61 8 50,555 13.10 8 10.0% WACC, implied 11.6x 2017E EV/EBITDA Other port related services 2,880 0.75 0 2,966 0.77 0 Port sub-total 92,173 23.88 14 96,548 25.01 14 Implied 10.4x 2017E EV/EBITDA

Retail and manufacturing AS Watson 75 EV/EBITDA 156,126 40.45 24 168,714 43.71 25 13.0x 2017E EV/EBITDA Marionnaud 100 P/B 2,904 0.75 0 3,014 0.78 0 1.0x P/B Retail sub-total 159,030 41.20 25 171,728 44.49 26

Energy Husky Energy (HSE.TO) 40 Market value 38,235 9.91 6 39,266 10.17 6 GS 12m TP = C$16.00

Infrastructure Cheung Kong Infrastructure (CKI, 1038.HK) 77 Market value 147,622 38.25 23 147,622 38.25 22 Market value = HK$73 Aircraft leasing 50-100 DCF 18,010 4.67 3 18,675 4.84 3 Acquired the aircraft leasing for HK$18bn Infrastructure projects directly held by CKH 36,235 9.39 6 37,063 9.60 6 - NWG 40 DCF 11,358 2.94 2 11,612 3.01 2 - West & Wales Utilities 30 DCF 5,727 1.48 1 5,840 1.51 1 - Envestra 28 Market value 3,720 0.96 1 3,720 0.96 1 - Park'n Fly 50 P/E 518 0.13 0 534 0.14 0 14x 2017E P/E - AVR 35 P/E 2,283 0.59 0 2,397 0.62 0 14x 2017E P/E - Eversholt Rail 50 DCF 12,628 3.27 2 12,960 3.36 2 CKH injected HK$6.8bn equity for 50% interest Infrastructure sub-total 201,866 52.30 31 203,360 52.69 30

Total enterprise value (EV) 641,864 166.30 100 670,647 173.76 100

Consolidated net debt Estimated book value (173,993) (45.08) (159,589) (41.35) Add Perpetual bonds Estimated book value (35,153) (9.11) (35,153) (9.11) Less subsidiaries: HTHKH, CKI Estimated book value 13,301 3.45 13,453 3.49 Less net debt: NWG, Eversholt and Park'N Fly Estimated book value 53,992 13.99 53,992 13.99 Less minority net debt: HPH, 3UK, Watson Estimated book value 5,013 1.30 4,043 1.05 Managed funds Estimated book value 10,255 2.66 10,255 2.66 Adjusted net debts & managed funds (126,584) (32.80) (112,998) (29.28)

Total net asset value (NAV) 515,279 133.50 557,648 144.48

Shares outstanding (mn) 3,860 3,860 NAV per share (HK$) 133.5 144.5

Share price in HK$ at 13-Jun-16 89.85 89.85 Premium/(discount) to NAV (%) (33) (38)

Hutchison stub valuation analysis Stub NAV per share in HK$ (ex-listed telco, Husky, CKI & HPHT) 79.43 89.78 Stub implied share price in HK$ at 13-Jun-16 35.78 35.13 Discount to stub NAV (55) (61)

HPH Trust (HPHT.SI): Key risks are better/worse DM economy Husky Energy (HSE.TO): Key risks relate to project execution, oil prices and spreads.

Source: Datastream, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 9 June 14, 2016 CK Hutchison Holdings (0001.HK)

Exhibit 16: We expect the group FCF to jump from Exhibit 17: CKH is trading at 7.2x 2017E EV/EBITDA HK$16bn in 2014 pro forma to HK$30bn in 2018E, EV/EBITDA calculation translating into 8.7% FCF yield FCF and FCF yield of the group

(HK$mn) 2014 PF 2015 2016E 2017E 2018E (HK$mn) 2014 PF 2015 2016E 2017E 2018E EBIT 31,818 37,752 41,228 43,807 45,370 EV calculation Depreciation & amortization 15,585 14,382 15,014 16,050 16,951 Consolidated net det 167,278 207,279 198,891 184,487 167,874 EBITDA 47,403 52,134 56,242 59,857 62,321 Off-balance-sheet debt 67,654 67,654 67,654 67,654 67,654 Dividend from associates 11,253 12,192 11,738 13,958 15,630 See-through net debt 234,932 274,933 266,545 252,141 235,528 Change in working capital (3,751) 2,832 2,154 2,661 2,051 Minority interests 107,910 120,523 124,434 128,714 133,334 Taxation (4,935) (2,169) (4,450) (5,048) (5,248) EV with consolidated net debt 621,980 674,594 670,117 659,993 648,000 Asset disposal 4,091 9,672 - - - EV with see-through net debt (a) 689,634 742,248 737,771 727,647 715,654 Capex and license (23,827) (24,942) (30,954) (29,334) (28,935) Purchase of subsidiary and associates (29,034) 88,578 (2,062) (2,522) (2,483) EBITDA calculation Dividend to minority (4,964) (2,997) (5,091) (5,355) (5,803) EBITDA (subsidiary) 50,339 52,134 56,242 59,857 62,321 Interest expenses (9,705) (6,038) (6,733) (6,274) (6,190) EBITDA (associates) 46,891 40,504 37,999 41,753 44,285 Others 1,117 (16,214) (1,629) (1,629) (1,629) Associates dividends 14,050 13,522 13,710 15,972 17,184 Hutchison Group free cash flow (12,352) 113,048 19,214 26,313 29,713 Total EBITDA (incl. associate EBITDA) (b) 97,230 92,638 94,241 101,610 106,606 FCF excl. disposal or acquisition 16,342 28,180 19,122 26,175 30,145 FCF yield 6.2%8.1%5.5%7.5%8.7% EV/EBITDA (a/b) 7.1 8.0 7.8 7.2 6.7

Source: Company data, Goldman Sachs Global Investment Research Source: Datastream, Goldman Sachs Global Investment Research

Exhibit 18: The stock is now trading at 38% discount to Exhibit 19: ... and 1.0x EV/invested capital NAV, below mid-cycle level Hutch’s EV/Invested capital vs. CROCI Historical discount to NAV

Disc. to NAV (%) Hutchison historical discount to NAV EV/Invested capital Average multiple +1 stdev 40 3.00 -1 stdev CROCI (RHS) 25.0% 30 2.50 20.0% 20

10 2.00 15.0% +1 std dev 0 1.50 10.0% (10)

(20) 1.00 5.0% (30) ‐1 std dev Average NAV discount = ‐15.0% (40) 0.50 0.0%

(50) - -5.0% (60) 95 96 97 98 98 99 00 01 02 03 04 05 06 07 08 09 09 10 11 12 13 14 15 16 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jul Jul Jan Jan Jan Jun Jun Oct Oct Apr Jan-1992 Jan-1993 Jan-1994 Jan-1995 Jan-1996 Jan-1997 Jan-1998 Jan-1999 Jan-2000 Jan-2001 Jan-2002 Jan-2003 Jan-2004 Jan-2005 Jan-2006 Jan-2007 Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015 Jan-2016 Sep Feb Sep Dec Dec Aug Aug Nov Nov Mar Mar Mar May May

Source: Datastream, Goldman Sachs Global Investment Research Source: Datastream, Goldman Sachs Global Investment Research

Exhibit 20: The stock is now trading at 10.6x 2016E P/E… Exhibit 21: ... and 0.8x 2016E P/B Historical P/E Historical P/B

P/E (X) CKH historical P/E CKH Historical P/B 4.00 40.00

3.50 35.00

3.00 30.00

2.50 25.00 +1 std dev 2.00 +1 std dev 20.00

1.50 15.00 Average P/B = 1.2x Average P/E = 15x 1.00 10.00 -1 std dev 5.00 0.50 -1 std dev

0.00 0.00 Jul 97 Jul 03 Jul 09 Jul 15 Apr 99 Apr 05 Apr 07 Oct 13 Oct Jan 95 Jan 98 Jun Jul 09 Jul 10 Jul Feb 00 Feb 06 Feb 11 Mar 12 Feb Nov 95 Nov 96 Sep 00 Dec 01 Nov 02 Sep 06 Dec 08 Sep 12 Dec 14 Aug May 04 May 10 May 16 May Oct 00 Oct 01 Oct 02 Jan 95 Jan 11 Jun 12 Jun 13 Jun Dec 95 Dec 96 Dec 97 Dec 98 Nov 99 Nov 03 Sep 04 Sep 05 Sep 06 Aug 07 Aug 08 Aug May 14 May 15 May 16 May

Source: Datastream, Goldman Sachs Global Investment Research Source: Datastream, Goldman Sachs Global Investment Research

Goldman Sachs Global Investment Research 10 June 14, 2016 CK Hutchison Holdings (0001.HK)

Exhibit 22: CKH Holdings’ income statement

Hutchison Whampoa CKH Holdings

(HK$ mn except for per share data) 2010 2011 2012 2013 2014 2014 PF 2015 2016E 2017E 2018E Turnover: subsidiaries Ports and related services 24,469 25,094 25,647 26,562 27,914 27,914 26,309 26,417 27,815 28,903 Telecommunication - 2G (HAT& HTHKH) 12,366 15,739 19,988 19,072 22,053 22,053 24,420 25,498 26,412 27,360 Telecommunication - 3G 47,823 56,877 58,708 61,968 65,599 65,599 62,799 63,129 64,777 66,285 Property development and holdings 5,682 6,046 6,341 6,807 7,285 - - - - - Retail, manufacturing and other services 102,014 118,051 111,418 119,637 126,709 126,709 123,056 130,145 138,170 146,997 Energy, infrastructure, finance and investment 8,575 10,182 20,987 22,188 22,601 22,601 34,027 35,872 37,109 - Total turnover: subsidiaries 200,929 232,637 243,089 256,234 272,161 275,674 277,317 281,059 294,281 307,656 YoY% -4% 16% 4% 5% 6% 1% 1% 5% 5%

Total EBIT, associate & JVs Ports and related services 6,657 7,848 7,681 7,358 7,944 8,095 7,957 8,043 8,583 9,061 Telecommunication - 2G (HAT & HTHKH) (1,598) 254 898 958 (85) (85) 2,602 2,802 2,982 3,081 Telecommunication - 3G Europe 1,802 1,567 3,145 4,856 6,892 9,807 11,664 13,418 14,114 14,497 Telecommunication - 3G Australia (HTA) 1,129 ------Property 8,847 9,517 10,521 13,659 9,661 - - - - - Retail and others 7,866 9,330 10,357 11,771 13,023 13,023 12,328 13,094 13,929 14,900 Infrastructure 8,454 13,478 16,643 17,528 18,215 21,895 23,477 23,523 24,536 25,814 Energy 3,073 8,614 7,427 7,208 6,324 7,353 2,229 1,158 3,661 4,977 Finance and investment 810 470 3,004 2,808 3,691 3,691 1,680 2,339 2,399 1,959 Marionnaud - - (311) (725) (450) (450) (319) - 110 110 Other investments - - (779) (824) 498 490 461 486 512 540 Reconciliation item 1,058 292 (567) ------Total EBIT 38,098 51,370 58,019 64,597 65,713 63,819 62,079 64,863 70,827 74,939 YoY% 32% 35% 13% 11% 2% -3% 4% 9% 6% Total EBIT (excl 3G) 35,167 49,803 54,874 59,741 58,821 56,927 50,415 51,445 56,713 60,442 Total EBIT less Associates' finance charges 34,268 44,981 50,903 58,829 59,439 58,080 56,341 59,125 65,089 69,201 Total EBIT (excl 3G) less associate finance charge 31,337 43,414 47,758 53,973 52,547 51,188 44,677 45,707 50,974 54,704 YoY% -9% 39% 10% 13% -3% -13% 2% 12% 7%

Interest expenses (8,634) (8,546) (9,348) (8,564) (8,153) (8,079) (6,754) (6,820) (6,355) (6,270) Interest capitalised 158 131 105 173 103 103 86 87 81 80 Exceptional Items 4,115 33,458 (690) 84 35,148 74,455 (1,093) (635) (460) (326) Profit before taxation 29,907 70,024 40,970 50,522 86,537 124,559 48,405 51,756 58,355 62,684

Taxation—subsidiaries (2,566) (897) (2,349) (5,193) (1,829) (3,072) (3,446) (4,450) (5,048) (5,248) Taxation—associates & JCEs (4,962) (6,153) (6,295) (6,549) (7,681) (5,048) (3,751) (3,937) (4,682) (5,243) Minority interests (2,200) (6,955) (6,429) (7,668) (9,871) (10,827) (10,040) (10,631) (11,265) (12,053) Net profit 20,179 56,019 25,897 31,112 67,156 105,612 31,168 32,738 37,360 40,141 Net profit (excluding exceptionals) 16,064 22,561 26,587 31,028 32,008 31,157 32,261 33,373 37,820 40,467

EPS (HK$) 4.73 13.14 6.07 7.30 15.75 27.36 8.08 8.48 9.68 10.40 %YoY 42% 178% -54% 20% 116% -70% 5% 14% 7%

Core EPS (HK$) 3.77 5.29 6.24 7.28 7.51 8.07 8.36 8.65 9.80 10.48 %YoY NM 40% 18% 17% 3% 4% 3% 13% 7%

Dividends per share (HK$) 1.92 2.08 2.08 2.30 9.42 9.42 2.55 2.81 3.09 3.39 %YoY 11% 8% 0% 11% 310% -73% 10% 10% 10%

Source: Company data, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 11 June 14, 2016 CK Hutchison Holdings (0001.HK)

Exhibit 23: CKH Holdings’ cash flow statement

Hutchison Whampoa CKH Holdings

(HK$ mn except for per share data) 2010 2011 2012 2013 2014 2014 PF 2015 2016E 2017E 2018E Cash flow of Hutchison non-3G operations Total EBIT 14,111 18,403 20,374 24,420 27,936 24,926 26,088 27,810 29,693 30,873 Depn and amortisation 6,707 7,033 7,634 8,035 8,300 9,797 8,650 9,312 9,868 10,446 Total EBITDA 20,818 25,436 28,008 32,455 36,236 34,723 34,738 37,122 39,561 41,319 Dividends received from associated companies 12,142 8,259 10,552 19,834 14,066 11,253 12,192 11,738 13,958 15,630 Change in working capital (5,200) 10,121 (2,842) (4,338) (2,916) (3,751) 2,832 2,154 2,661 2,051 Taxation (2,617) (3,231) (2,334) (3,813) (4,401) (4,935) (2,169) (4,450) (5,048) (5,248) Asset disposal 10,528 37,979 1,786 11,614 6,781 4,091 9,672 - - - Capex (12,362) (19,862) (15,368) (13,388) (10,021) (12,518) (14,012) (19,518) (17,727) (17,194) Purchase of subsidiary and associates (14,853) (23,221) (3,910) (22,938) (18,507) (29,034) 88,578 (2,062) (2,522) (2,483) Dividend to minority (2,465) (16,165) (2,821) (3,510) (4,265) (4,964) (2,997) (5,091) (5,355) (5,803) Interest expenses (1,797) (1,497) (2,479) (209) (1,516) (3,818) (3,373) (6,733) (6,274) (6,190) Others (6,376) (2,636) (1,243) 541 (7,137) 1,117 (16,214) (1,629) (1,629) (1,629) Free cash flow from non-3G operations (2,182) 15,183 9,349 16,248 8,320 (7,837) 109,247 11,531 17,624 20,452 Free cash flow ex gain / lose from asset disposal 7,343 (1,696) 14,315 31,910 22,962 20,857 8,165 11,439 17,486 20,884

Cash flow of Hutchison 3G operations EBIT 1,802 1,566 3,159 4,856 6,892 6,892 11,664 13,418 14,114 14,497 Depn and amortisation (incl SAC) 7,379 6,921 6,515 7,815 8,703 5,788 5,732 5,702 6,182 6,505 Cash EBITDA 9,181 8,487 9,674 12,671 15,595 12,680 17,396 19,120 20,296 21,002 Dividend from associates - (1,409) (3,160) ------Change in working capital ------Taxation ------Asset disposal ------Capex and license (9,894) (10,980) (13,599) (17,000) (11,309) (11,309) (10,930) (11,437) (11,607) (11,741) Purchase of subsidiary and associates ——------Interest expenses (5,966) (6,241) (6,030) (7,486) (5,887) (5,887) (2,665) - - - Free cash flow from 3G operations (6,679) (10,143) (13,115) (11,815) (1,601) (4,515) 3,801 7,683 8,689 9,261

Cash flow of Hutchison Group EBIT 15,913 19,969 23,533 29,276 34,828 31,818 37,752 41,228 43,807 45,370 Depn and amortisation 14,086 13,954 14,149 15,850 17,003 15,585 14,382 15,014 16,050 16,951 EBITDA 29,999 33,923 37,682 45,126 51,831 47,403 52,134 56,242 59,857 62,321 Dividend from associates 12,142 6,850 7,392 19,834 14,066 11,253 12,192 11,738 13,958 15,630 Change in working capital (5,200) 10,121 (2,842) (4,338) (2,916) (3,751) 2,832 2,154 2,661 2,051 Taxation (2,617) (3,231) (2,334) (3,813) (4,401) (4,935) (2,169) (4,450) (5,048) (5,248) Asset disposal 10,528 37,979 1,786 11,614 6,781 4,091 9,672 - - - Capex and license (22,256) (30,842) (28,967) (30,388) (21,330) (23,827) (24,942) (30,954) (29,334) (28,935) Purchase of subsidiary and associates (14,853) (23,221) (3,910) (22,938) (18,507) (29,034) 88,578 (2,062) (2,522) (2,483) Dividend to minority (2,465) (16,165) (2,821) (3,510) (4,265) (4,964) (2,997) (5,091) (5,355) (5,803) Interest expenses (7,763) (7,738) (8,509) (7,695) (7,403) (9,705) (6,038) (6,733) (6,274) (6,190) Others (6,376) (2,636) (1,243) 541 (7,137) 1,117 (16,214) (1,629) (1,629) (1,629) Hutchison Group free cash flow (8,861) 5,040 (3,766) 4,433 6,719 (12,352) 113,048 19,214 26,313 29,713 Free cash flow ex gain / lose from asset disposal 664 (11,839) 1,200 20,095 21,361 16,342 28,180 19,122 26,175 30,145

Dividend (7,375) (8,356) (8,868) (9,081) (39,905) (44,374) (9,687) (10,826) (11,909) (13,100) Free cash flow ex assets disposal and dividends (6,711) (20,195) (7,668) 11,014 11,300 (28,032) 18,493 8,296 14,266 17,045

Funds from Equity Financing 15,464 - 7,746 15,919 (617) (617) (14,313) - - - Contribution from Minorities 8,105 1,260 6,702 (69) 40,435 40,438 - - - - Increase/(Decrease) in Debt (8,202) (23,057) 39,595 (33,499) 33,035 32,660 (37,963) (39,139) (52,921) (2,267) Change in cash (869) (25,113) 41,409 (22,297) 39,667 70,755 91,734 (30,751) (38,517) 14,346

Beginning cash 92,521 91,652 66,539 107,948 85,651 29,437 121,171 90,420 51,903 Ending cash 91,652 66,539 107,948 85,651 125,318 121,171 90,420 51,903 66,249

Source: Company data, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 12 June 14, 2016 CK Hutchison Holdings (0001.HK)

Exhibit 24: CKH Holdings’ balance sheet

Hutchison Whampoa CKH Holdings

(HK$ mn except for per share data) 2010 2011 2012 2013 2014 2014 PF 2015 2016E 2017E 2018E Current Assets 166,614 145,292 189,269 175,589 211,178 289,692 192,974 160,571 120,483 134,617 Stocks 17,733 18,408 19,533 20,855 19,284 19,296 19,761 19,070 18,574 18,801 Debtors 57,229 60,345 61,788 69,083 66,576 68,675 52,042 51,081 50,006 49,567 Bank Bal./Other Liquid Funds 91,652 66,539 107,948 85,651 125,318 201,721 121,171 90,420 51,903 66,249

Fixed Assets 238,652 208,116 220,735 229,627 247,958 167,810 187,404 202,709 215,973 228,070 Investment properties 43,240 42,610 43,652 42,454 66,211 304 334 334 334 334 Other properties 81,455 53,390 57,465 61,832 61,243 61,243 7,215 7,215 7,215 7,215 Other assets 228,200 228,521 244,192 263,680 260,254 260,187 187,862 218,181 247,494 276,543 Less: Accumulated depreciation and amortization (114,243) (116,405) (124,574) (138,339) (139,750) (153,924) (8,007) (23,021) (39,071) (56,022)

3G Telecom spectrum 68,333 75,503 78,655 86,576 81,602 25,720 32,608 32,608 32,608 32,608 License cost 94,743 101,719 106,069 114,999 109,084 53,202 32,960 32,960 32,960 32,960 Accumulated amortisation (26,410) (26,216) (27,414) (28,423) (27,482) (27,482) (352) (352) (352) (352)

Other unlisted investments 9,131 10,184 9,579 7,934 7,139 4,799 4,238 4,238 4,238 4,238 Brand names and other rights 12,865 12,615 15,328 18,755 16,233 99,118 82,233 82,233 82,233 82,233 Deferred tax assets 14,105 16,992 18,059 18,548 19,203 21,198 20,986 20,986 20,986 20,986 Goodwill 27,332 26,338 26,492 38,028 39,132 192,107 261,449 261,449 261,449 261,449

Associated Companies & JV 159,560 205,265 222,255 223,329 245,849 215,244 240,797 245,080 249,804 254,806 LT investment and managed funds 24,585 20,239 23,499 17,136 15,141 14,036 10,255 10,255 10,255 10,255

Total Assets 721,177 720,544 803,871 815,522 883,435 1,029,724 1,032,944 1,020,129 998,028 1,029,262

Current Liabilities: 106,911 109,359 120,923 108,290 132,425 157,670 130,303 160,587 111,022 130,286 Bank Loans/Overdrafts 23,122 28,835 39,596 18,159 42,281 60,466 33,016 62,798 12,144 29,569 Creditors 80,889 78,093 78,471 86,812 87,139 94,870 94,849 95,351 96,440 98,279 Current tax liabilities 2,900 2,431 2,856 3,319 3,005 2,334 2,438 2,438 2,438 2,438

Deferred items and others (incl minority debts) 33,430 22,683 23,967 23,805 26,616 76,034 82,994 82,994 82,994 82,994 Long term debts 228,134 189,719 220,440 207,195 205,332 273,886 270,536 201,615 199,348 179,656

Share Capital 1,066 1,066 1,066 1,066 29,425 3,859 3,860 3,860 3,860 3,860 Petpetual Capital securities 15,600 15,600 23,400 40,244 39,638 48,683 35,153 35,153 35,153 35,153 Reserves 292,831 342,946 367,053 385,956 397,155 361,682 389,575 411,487 436,938 463,979 Share premium 28,523 28,523 28,593 28,359 - 244,987 244,691 244,691 244,691 244,691 Other reserves 3,353 3,632 6,027 6,971 43,339 - - - - - Exchange translation 3,477 6,968 12,064 6,789 (16,416) - - - - - Reserves/Retained earnings 257,478 303,823 320,369 343,837 370,232 116,695 144,884 166,796 192,247 219,288 Shareholders Funds 309,497 359,612 391,519 427,266 466,218 414,224 428,588 450,500 475,951 502,992

Minority Interests 43,205 39,171 47,022 48,966 52,844 107,910 120,523 124,434 128,714 133,334 Total liab & equity 721,177 720,544 803,871 815,522 883,435 1,029,724 1,032,944 1,020,129 998,028 1,029,262

Net debt (including managed funds) 131,125 127,076 124,705 121,035 106,408 118,595 172,126 163,738 149,334 132,721 Net total capital 497,320 532,361 569,553 602,712 633,470 650,729 726,064 743,499 758,826 773,874

Net book value per share (HK$) 82.7 93.5 102.9 111.7 121.7 135.3 142.3 149.0 156.7 164.9 Net debt to equity % (including managed funds) 36.7% 31.9% 28.4% 25.4% 20.5% 22.7% 31.3% 28.5% 24.7% 20.9% Net debt to net capital % (including managed funds) 26.4% 23.9% 21.9% 20.1% 16.8% 18.2% 23.7% 22.0% 19.7% 17.2%

Source: Company data, Goldman Sachs Global Investment Research.

Financial advisory disclosure

Goldman Sachs and/or one of its affiliates is acting as a financial advisor in connection with an announced strategic matter involving the following company or one of its affiliates: Ck Hutchison Holdings Ltd.

Goldman Sachs Global Investment Research 13 June 14, 2016 CK Hutchison Holdings (0001.HK)

Disclosure Appendix Reg AC I, Simon Cheung, CFA, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division. Investment Profile The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and market. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on composites of several methodologies to determine the stocks percentile ranking within the region's coverage universe. The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows: Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends. Quantum Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets. GS SUSTAIN GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list includes leaders our analysis shows to be well positioned to deliver long term outperformance through sustained competitive advantage and superior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporate performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the environmental, social and governance issues facing their industry). Disclosures Coverage group(s) of stocks by primary analyst(s) Simon Cheung, CFA: Asia Pacific Conglomerates. Alex Ye: Asia Pacific Conglomerates. Asia Pacific Conglomerates: Beijing Enterprises Holdings, Cheung Kong Infrastructure, China Gas Holdings, China Merchants Holdings, China Resources Gas Group, China Suntien Green Energy, CITIC Ltd., CK Hutchison Holdings, COSCO Pacific, ENN Energy Holdings, Fosun International, Galaxy Entertainment Group, Hutchison Port Holdings Trust, Jardine Matheson, Kunlun Energy Co., Legend Holdings, Melco Crown Entertainment (ADR), Melco International Development, MGM China, MTR Corp., Sands China, Shanghai Industrial, Sinopec Kantons, SJM Holdings, Summit Ascent Holdings, Swire Pacific, Tianhe Chemicals Group, Towngas China, Wharf Holdings, Wheelock and Co., Wynn Macau. Company-specific regulatory disclosures The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies covered by the Global Investment Research Division of Goldman Sachs and referred to in this research. Goldman Sachs has received compensation for investment banking services in the past 12 months: CK Hutchison Holdings (HK$89.05) Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: CK Hutchison Holdings (HK$89.05) Goldman Sachs had an investment banking services client relationship during the past 12 months with: CK Hutchison Holdings (HK$89.05) Goldman Sachs had a non-securities services client relationship during the past 12 months with: CK Hutchison Holdings (HK$89.05) Goldman Sachs makes a market in the securities or derivatives thereof: CK Hutchison Holdings (HK$89.05) Distribution of ratings/investment banking relationships Goldman Sachs Investment Research global Equity coverage universe

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Goldman Sachs Global Investment Research 14 June 14, 2016 CK Hutchison Holdings (0001.HK)

Price target and rating history chart(s)

CK Hutchison Holdings (0001.HK) Stock Price Currency : Hong Kong Dollar Goldman Sachs rating and stock price target history 15,000 190 143.8 150 158 169 14,500 146.1 144 170 138 122 14,000 145.5 137.8 123 13,500 150 126 167 13,000 130 12,500 110 12,000 90 11,500 11,000 70 140 138 160 10,500 50 10,000 Mar 23 Jan 15 Jun 4 Sep 11 Dec 17 B B CS B CS B M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M 2013 2014 2015 2016 Index Price Stock Price Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 3/31/2016. Rating Mar 3, 2014 to RS from B Covered by Simon Cheung, CFA Pric e tar get Price target at removal Not covered by current analyst MSCI Hong Kong

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Goldman Sachs Global Investment Research 15 June 14, 2016 CK Hutchison Holdings (0001.HK)

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Goldman Sachs Global Investment Research 16 June 14, 2016 CK Hutchison Holdings (0001.HK)

may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Investors should review current options disclosure documents which are available from Goldman Sachs sales representatives or at http://www.theocc.com/about/publications/character-risks.jsp. Transaction costs may be significant in option strategies calling for multiple purchase and sales of options such as spreads. Supporting documentation will be supplied upon request. All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Not all research content is redistributed to our clients or available to third-party aggregators, nor is Goldman Sachs responsible for the redistribution of our research by third party aggregators. For research, models or other data available on a particular security, please contact your sales representative or go to http://360.gs.com. Disclosure information is also available at http://www.gs.com/research/hedge.html or from Research Compliance, 200 West Street, New York, NY 10282. © 2016 Goldman Sachs. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Goldman Sachs Group, Inc.

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