China / Company Guide Times Holdings Version 1 | Bloomberg: 1233 HK Equity | Reuters: 1233.HK

Refer to important disclosures at the end of this report

DBS Group Research . Equity 15 Jan 2020

BUY(Initiating Coverage) An emerging regional leader Last Traded Price ( 14 Jan 2020):HK$15.18 (HSI : 28,885) • Clear and well-executed GBA-focused expansion strategy Price Target 12-mth: HK$19.89 (31.0% upside) • Capable of entering the Rmb100bn presales club in 2020 • Rich redevelopment pipeline to offer good buffer Analyst against margin compression Jason LAM +852 36684179 [email protected] Danielle WANG CFA, +852 36684176 [email protected] • Among the cheapest in GBA plays – Initiate with BUY Ken HE CFA, +86 2138968221 [email protected] The most attractive regional player – initiating coverage with BUY. Price Relative Thanks to accelerated land acquisition pace in 9M19 that has already more than doubled the consideration paid versus 2018, we believe Times is well on its way to record another year of decent presales growth enter the Rmb100bn club for presales this year. In line with its GBA-focused expansion strategy, c.72% of the Rmb26.8bn consideration spent (for c.5.3m sm of GFA) in 9M19 was for land located in GBA or nearby cities. This, coupled with its soon-to-bear-fruit redevelopment projects, we believe the company is well on track to grow into a regional leader. Where we differ? Confidence in Times’ redevelopment model both Forecasts and Valuation from cash flow and profit margin angles. A common concern shed FY Dec (RMB m) 2018A 2019F 2020F 2021F on Times relates to its presence on redevelopment projects, an area Turnover 34,375 42,112 52,244 64,501 where investors are often concerned about its potentially slower EBITDA 8,118 11,112 13,563 16,081 cashflows (besides execution risks) compared to ordinary projects Pre-tax Profit 8,339 10,328 12,694 15,135 Core Profit 3,662 5,182 6,684 7,813 from open market auctions. We are more confident at this end Core Profit Gth (%) 67.1 41.5 29.0 16.9 both in a cash flow and profit margin standpoints. Our analysis Core EPS (RMB) 2.00 2.71 3.44 4.02 shows that a typical redevelopment project for Times can yield Core EPS (HK$) 2.26 3.06 3.89 4.55 higher gross margin and NPV if it can achieve1) >35% GPM from Core EPS Gth (%) 61.1 35.8 26.9 16.9 primary development stage of old factories; and 2) total conversion Core PE (X) 6.7 5.0 3.9 3.3 costs for old villages can be controlled at >15% discount to the EV/EBITDA (X) 7.4 6.2 5.6 5.1 land price that would otherwise be obtained through land auctions. DPS (HK$) 0.78 0.96 1.24 1.44 Currently, Times typically yields GPM of >60% from primary Div Yield (%) 5.1 6.3 8.1 9.5 Net Gearing (%) 62.6 71.4 74.7 75.2 developments of old factories, and total cost of old villages would ROE (%) 27.1 26.6 27.5 26.6 normally be at c.50% discount to land prices at public auctions. Book Value (HK$) 10.44 13.55 16.43 19.80 Potential catalysts: Policy supports on redevelopments in P/Book Value (X) 1.5 1.1 0.9 0.8 Guangzhou; potential stimulus relating the development of GBA. Earnings Rev (%): New New New Consensus EPS (RMB) 2.76 3.42 4.18 Valuation: Other Broker Recs: B: 17 S: 0 H: 0 Our TP is based on 5.2x FY20F PE, which is equivalent to the mid- cap GBA players’ average 1-year forward PE in 2019. Source of all data on this page: Company, DBS Bank (Hong Kong) Limited (“DBS HK”), Thomson Reuters Key Risks to Our View: Adverse changes in redevelopment policy; GBA market slowdown or policy tightening. At A Glance Issued Capital (m shrs) 1,834 Mkt Cap (HK$m/US$m) 27,840 / 3,580 Major Shareholders (%) Shum Chiu Hung 61.5 Free Float (%) 38.5 3m Avg. Daily Val. (US$m) 13.01 GICS Industry: Real Estate / Real Estate Management & Development

ed-JS/ sa- CS /DL Company Guide

Times China Holdings

Table of Contents

SWOT Analysis 3

Investment summary 4

Growth drivers and critical factors to watch 10

Financials and peer’s comparison 16

Valuation 20

Key risks 23

History and company background 25

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Company Guide

Times China Holdings

SWOT Analysis

Strengths Weaknesses • High exposure to the GBA region • Concentrated presence within southern China with ample exposure in Tier 3/4 cities

• Strong track record, good pipeline of redevelopment projects in the GBA with a high percentage in factory • Uncertain timeline in conversion of its urban redevelopment redevelopment pipeline

• High earnings visibility supported by ample unbooked sales • Relatively thin landbank

• Strong presence in urban redevelopment - particularly in Guangzhou and Foshan – is starting to bear fruit

Opportunities Threats • Redevelopment policies in Guangzhou and Foshan, where • Ongoing trade war and Hong Kong’s unresolved social most of the company’s urban redevelopment projects are unrest may lead to slower than expected development located in, are turning more supportive. in the GBA

• Low cost landbank from urban redevelopment as well as • Rising interest from leading developers to enter the earnings upside from faster-than-expected conversion of its economic region and thus creating an increasingly robust redevelopment project pipeline to offer buffer competitive environment against potential margin compression

• Uncertainty in redevelopment policies • Room for SG&A and finance cost improvement

• Uncertainty over the housing policy and economic environment in the GBA region

Source: DBS HK

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Company Guide

Times China Holdings

Investment summary Percentage of landbank in GBA by GFA (Jun-19)

Potential to be a leading regional player in the Greater Bay 100% Area (GBA) led by its GBA-centric expansion strategy. Times 90% China has accelerated land acquisitions in 2019, spending 80% c.Rmb26.8bn for 5.3m sm of new projects in 9M19, which 70% has already more than doubled the amount spent in 2018, demonstrating the fastest growth among comparable peers. 60% Accordingly, we believe Times China’s presales growth will 50% be strong and the company is well capable of entering the 40% Rmb100bn presales club in 2020. Meanwhile, in line with its 30% expansion strategy that is focused in the GBA, c.72% of the 20% consideration paid for acquisitions was spent on projects located in the GBA or nearby cities, which is only second to 10% Yuexiu (123 HK) but much higher than other GBA players 0% Times Logan Kaisa KWG Aoyuan such as KWG (1813 HK, 54%), Logan (3380 HK, 53%), and Aoyuan (3883 HK, 11% by GFA). We therefore expect the Source: Company, DBS HK company’s market share in GBA to increase alongside its strong presales. Percentage of landbank in GBA by saleable resources (Jun-19) 2019 YTD land acquisitions spilt by region 100% 100% 90% 90% 80% 80% 70% 60% 70% 50% 40% 60% 30% 20% 50% 10% 40% 0%

30%

CIFI COLI

KWG 20%

Times

Logan

R&F**

COGO

Zhenro

Midea*

Vanke*

Yuzhou

Longfor Yuexiu*

CR Land* CR 10%

Aoyuan^^

Zhongliang China SCE* China Future Land Future 0% Times Logan Kaisa KWG Aoyuan * Country GBA YRD Central Western Others Source: Company, DBS HK * Jan-Oct land acquisition **Jan-Sep land acquisition Strong team in place for redevelopment projects with a well- ^ On gross basis established track record. Having identified urban ^^ on GFA terms redevelopment business as a strategic focus for growth since Source: Company, DBS HK 2011, Times China made its move early in the game and has

assembled one of the largest teams with a staff strength of Existing landbank has the largest exposure to GBA. As at >1,000 for origination of redevelopment projects. This is Jun-19, c.88% of the company’s landbank in terms of GFA higher than Kaisa’s c.600, Aoyuan’s 450, Logan’s c.200, and (or 89% in terms of estimated saleable resources) is located is similar to Evergrande’s >1,000 staff. It has spent >Rmb8bn in the GBA or nearby cities, which is the highest across other since commencing operations in this segment and well-known GBA players. Times China also has the highest successfully converted >20 projects that were either sold to portion of contracted sales (c.93% in terms of value) from other developers or were retained by its own. Thanks to its the GBA and nearby cities in 1H19. Given the greater focus established track record - particularly on redevelopments in and resources to be devoted into the region and its soon-to- Guangzhou - the company has a notable edge when bear fruit rich redevelopment project pipeline, we believe obtaining new projects in the city. In 2019, Times China was Times China is well on the way to become a regional leader appointed as the cooperative developer partner for three of within the Bay Area in the future. the thirteen old village redevelopment projects that have

publicly announced the selection of cooperative enterprises in Guangzhou, which is only second to Shenglong Group in terms of number of projects obtained.

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Company Guide

Times China Holdings

Old village redevelopment projects officially appointed a cooperative partner in 2019 in Guangzhou

Da te of Proje c t Appointed developer a ppoinme nt 番禺区东环街蔡边一村旧村改造项目 Jan-19 Shenglong Group 番禺区沙湾镇福涌村旧村改造项目 Ma r-19 Time s China 从化区城郊街东风村旧村改造项目 Mar-19 Zhuguang Group 从化区江埔街联星社区经济联合社西华居民小组旧村改造项目 Mar-19 Yongsheng Real Estate 增城区新塘镇群星村旧村更新改造项目 Apr-19 Shenglong Group 黄埔区九龙镇汤村村旧村改造项目 Jun-19 Shenglong Group 花都区横潭村河西经济社旧村全面改造项目 Jun-19 Time s China 番禺区南村镇里仁洞村旧村庄更新改造项目 Jul-19 Guangzhou City Construction 花都区田美村东南经济社旧村全面改造项目 Aug-19 GZ R&F 番禺区南村镇新基村旧村改造项目 Sep-19 番禺区洛浦街沙溪村旧村庄更新改造项目 Sep-19 Shenglong Group 增城区新塘镇官湖村旧村全面改造项目 Oc t-19 Time s China 增城区朱村街山田村旧村全面改造项目 Dec-19 Dahua Group Source: Guangzhou Public Resources Trading Center, DBS HK

otherwise. Based on Times China’s average funding cost of Sizeable pipeline of redevelopment projects. As at Jun-19, c.7.6% in 1H19, our analysis suggests that the company can Times China held a rich redevelopment project pipeline that secure higher gross margin as well as net present value is expected to bear fruit during 2019-21 (44 projects with (NPV) from redevelopment projects, on the basis that 1) for c.12.5m sm of planned GFA or >Rmb150bn of saleable factory redevelopment projects, Times China can achieve resources based on our estimates). The company also has 41 >35% gross margins in the primary development stage; or other projects with planned GFA of c.15.5m sm completing 2) total conversion costs (including demolition costs, after 2021. It is also eyeing to clinch a portion of >500 conversion premium and compensation payments) for its old potential new projects in the region to further expand its village redevelopment projects can be kept <85% of the redevelopment pipeline. cost of a similar piece of land (after conversion) in the open market. Given that Times China has generally been achieving Well controlled cost to ensure similar/superior cash flows >60% GPM in the primary development stage of its factory compared with projects obtained in the open market. redevelopment projects and that most of its old village Besides execution risk in redevelopment projects, a common redevelopment projects are obtained at an average discount concern shared by investors relates to potentially slower of c.50% versus open market land prices, we are confident cashflow for redevelopment projects as compared to those of the company’s ability to manage and secure healthy obtained through open market auctions. Our cashflow cashflows in its redevelopment projects. comparison analysis (using a typical Guangzhou redevelopment project flow as example) highlighted

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Company Guide

Times China Holdings

Cash flow analysis – factory redevelopment vs usual secondary projects

Prima ry de ve lopme nt Secondary development

Fa c tory Ide ntifying Re c e ive s Land converted Filiing redevelopment plan to Comme nc e Pre sa le s re de ve lopme nt (Rmb re de ve lopme nt a pprova l from for public la nd Project delivery local gov for approval construction c omme nc e d psm) opportunities loc a l gov a uc tion

Ye a r 0 Ye a r 1 Ye a r 2 Ye a r 3 Ye a r 4 Ye a r 5 Ye a r 6 Ye a r 7 Purchase of factory (2,000) interest Demolition costs (3,000) Land premium received (after sharing with local gov) 10,000 Land premium paid during land auction (20,000) Construction costs (1,200) (4,800) Presales proceeds 35,616 Ne t c a sh flow (Prima ry + (2,000) - - (3,000) (10,000) (1,200) 35,616 (4,800) Se c onda ry) Ne t c a sh flow (only (20,000) (1,200) 35,616 (4,800) se c onda ry) NPV for prima ry+se c onda ry de ve lopme nt 6,854 NPV of secondary project 5,385 Re quire d GPM from prima ry de ve lopme nt for e quiva le nt NPV 34.0% *Assumes Times would purchase the project in public auction for secondary development Source: Company, DBS HK

Assumptions on the analysis (factory redevelopment) Assumptions Assumed gross margin from primary development (%) 50% Assumed sharing ratio with local government (%) 50% Assumed construction cost (Rmb psm) 6,000 Assumed % construction costs paid at 1st year (for secondary developments) 20% Secondary development GPM (%) 27% Times China's avg funding cost 7.6% Source: Company, DBS HK

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Company Guide

Times China Holdings

Cash flow analysis – old village redevelopment vs usual secondary projects

Identify old village with redevelopment opportunities; obtain villagers' intention for redevelopment and Comme nc e persuade them to choose Times China as coordinator; re de ve lopme file redevelopment plan, negotiate with local Comme nc e Comme nc e Proje c t nt according Old village authorities and obtain approval; netogtiate with construction pre sa le s de live ry to approved re de ve lopme nt villagers regarding compensation plans, obtain full pla n a gre e me nt from villa ge rs a nd a pprova l from loc a l authorities

Ye a r 0 - 7 Ye a r 8 Ye a r 9 Ye a r 10 Ye a r 11 Demolition costs (3,000) Conversion premium (3,200) Compensation payment (6,400) Construction cost (1,200) (4,800) Presales proceed 30,137 Ca shflow ------(6,200) (7,600) 30,137 (4,800) NPV 5,338 GPM 38%

Ac quire proje c t from Comme nc e Comme nc e Proje c t Ordinary Secondary se c onda ry construction pre sa le s De live ry proje c t ma rke t Ye a r 0 Ye a r 1 Ye a r 2 Ye a r 3 Land acquisition cost (16,000) Construction cost (1,200) (4,800) Presales proceed 30,137 Ca shflow (16,000) (1,200) 30,137 (4,800) NPV 4,704 GPM 27%

Required disocunt between total conversion cost and open land market price for 15% equivalent NPV (%) Source: Company, DBS HK

Assumptions on the analysis (old village redevelopment) Assumptions Assumed construction cost (Rmb/sm) 6,000 % construction costs paid at 1st year 20% Secondary project GPM (%) 27% Times China's avg funding cost (%) 7.60% Assumed demolition costs (Rmb/sm) 3,000 Assumed land price under open auction (Rmb/sm) 16,000 Assumed % of conversion premium versus open market land price 20% % of compensation premium to open market land price 40% Total conversion costs as % of open market land price 79% Source: Company, DBS HK

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Company Guide

Times China Holdings

Conversion progress in 2019 was well on track. We which is equivalent to a total converted GFA of c.2.4m sm. understand Times China is expecting to convert 2.0-2.5m sm Four of the seven projects have entered into Times China’s redevelopment projects in 2019. Based on local news reports landbank for secondary development, with the remainder and company announcements, we believe Times China has three sold to KWG, Poly, and Zhenro at an aggregate successfully converted a total of seven projects, four of which consideration of c.Rmb9.2bn. were completed in 1H19 and the remainder three in 2H19,

Converted redevelopment projects Consideration Project name City Status GFA (Rmb mn) Converted 1H19 - converted into Times Guangzhou Luogang Guangzhou landbank in July 2019 at AV of Rmb4,062/sm 759,000 3,082 (Hongwei village project) and sales office opened in Jan 1, 2020 Guangzhou Tianhe Finance Converted and land sold to KWG at Rmb3.7bn Guangzhou 98,900 3,707 City Project in July Foshan Nanhai Lishuizhou Foshan Converted into Times' landbank in 1H19 256,700 3,102 Village Project Foshan Chancheng Factory Foshan Converted 2H19 and sold to Poly 385,557 4,237 Project Converted and land sold to Zhenro at Foshan Lishui Factory Project Foshan 91,967 1,221 Rmb1.2bn in end Nov,2 019 南海区桂城街道平南项目 Foshan Converted into Times' landbank in Dec 2019 233,500 1,422 Converted 1H19 and included in Times' Jiangmen Jianhao project Jiangmen 620,000 603 landbank at AV of Rmb973/sm T otal 2,445,624 17,374 Land sold to 3rd parties 576,424 9,164 Source: Company, DBS HK

The provincial government of Guangdong expediting the in 2018. We expect the company to record another progress of redevelopment projects. It is in the provincial Rmb3.1bn in 2019 and Rmb3.7bn in 2020. government’s interest to speed up the overall progress of urban redevelopment (old factories, old villages, and old towns) in Guangdong. In Sep-19, the provincial government issued a guidance that allows developers to apply for compulsory evictions for redevelopment projects that have obtained >two-thirds of villagers’ approval (rather than the previous 100%) on the compensation plan. In Dec-19, the State Taxation Administration of Guangdong Province also released a guidance to add clarity on tax-related matters during the redevelopment process. We believe these are encouraging signs that indicates the province’s strong intention to continually support and accelerate the progress of redevelopment projects in the region. Times China is in an ideal position to benefit from this trend.

Increasing earnings and cash flow contribution from redevelopment projects. With its established track record, we believe Times China’s sizeable redevelopment pipeline will soon start to bear fruit, with cash inflow from redevelopment projects and revenue contribution expected to accelerate going forward. Times China recorded Rmb2.8bn in revenue solely from the recognition of income from the primary development phase of its old factory redevelopment projects

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Company Guide

Times China Holdings

Ample room to grow in a growing market. We believe the Residential property sales in GBA and nearby cities GBA will become an economic powerhouse for China in the next decade aided by existing policies and future initiatives for Rmb bn the region. Based on our estimates, GDP in the GBA is 1,400 50% expected to expand at c.5.3% CAGR while population to 1,200 40% increase >2.2% CAGR from 2017 to 2030F. In 11M19, 1,000 30% residential sales in Guangdong reached Rmb1,252bn (+14% 800 20% y-o-y) on c.74m sm GFA sold (+6%) and ASP of c.Rmb16,900/sm (+7%) and accounted for c. 10% of total 600 10% residential property sales in China. Going forward, we expect 400 0% growth within this region and its contribution to China’s total 200 -10% to remain on a strong positive trend, well supported by solid 0 -20%

population and economic growth. We estimate Times China’s

2011

2012

2013

2014

2015

2016 2017 market share in GBA and nearby cities was 4.5% in 2018, 2018 which indicates plenty of room for Times China to grow GBA Residential property sales (Rmb bn)11M19 through market share consolidation. y-o-y growth (%) (RHS)

Note: includes Guangzhou, Shenzhen, Dongguan, Foshan, Huizhou, Forecast GDP growth in GBA Zhongshan, Zhuhai, Qingyuan, Jiangmen and Zhaoqing Source: Company, DBS HK Rmb 300,000 Times China’s market share in GBA and nearby cities 250,000 5.3% CAGR 5.0% 200,000 4.5% 150,000 4.0% 6.7% CAGR 3.5% 100,000 3.0% 50,000 2.5% 2.0% 0

1.5%

2007

2008

2009

2010

2011

2012

2013

2014

2015 2016

2017 1.0% 2022F 2030F Source: Company, DBS HK 0.5% 0.0% Forecasted population growth in GBA 2013 2014 2015 2016 2017 2018

Note: includes Guangzhou, Shenzhen, Dongguan, Foshan, Huizhou, m Zhongshan, Zhuhai, Qingyuan, Jiangmen and Zhaoqing 120 CAGR = 2.2% Source: Company, DBS HK

100 CAGR = 2.1% Among the cheapest play among GBA proxies - Initiate with 80 BUY. The company has already locked in 89%/80% of our estimated earnings contribution from just property 60 development for FY19/20F. Currently trading at 3.9x FY20F PE and offers 6.3%/8.1% FY19F/FY20F dividend yield, Times 40 China’s valuations are currently lagging comparable GBA 20 peers’ 4.8x FY20F PE and 6.7%/8.1% FY19F/FY20F dividend yield. Players of a similar scale are also trading at a higher 0 valuation of 5.2x FY20F PE and 6.4%/8.0% FY19F/FY20F

dividend yield. Factoring in the abovementioned qualities of

2007 2008 2009 2010 2012 2013 2014 2015 2017 2011 2016 2022F 2030F Times China, we believe the counter’s discounted valuation Source: Company, DBS HK versus most of its GBA peers is unjustified. Our TP of HK$19.89 is pegged to 5.2x FY20F PE, which is equivalent to the average 1-year forward PE of mid-cap GBA players in 2019. Our TP also represents a 39% discount to current NAV.

Page 9

Company Guide

Times China Holdings

Growth drivers and critical factors to watch Potential saleable resources from redevelopment project Successful conversion of urban redevelopment projects pipeline by city

Times China has sizeable portion of its pipeline as old factory Huizhou Qingyuan 1% 1% Shenzhen redevelopment projects in Guangzhou and Foshan, which Zhuhai 3% would typically require the land to be put on land auction 2% upon conversion. As such, the recognition of benefits from a Jiangmen completed factory redevelopment projects would typically 3% come under two parts: 1) recognition of revenue (and accordingly profits) as a fraction of land premium after the sale of land by the government through public tender is Foshan completed; and 2) redeveloped land successfully acquired by Guangzhou 33% 57% Times China (if the final land price meets Times China’s profitability requirements). As there will be immediate earnings increment upon conversion and the completion of a public land auction, Times China’s ongoing progress in converting its redevelopment pipeline would be key to monitor and could notably affect its share price more than its *Estimated with project pipeline stated as at Dec-18 peers. The company’s Tianhe Finance City Project in Source: Company, DBS HK Guangzhou would be a case in point, where Times China’s share price reacted positively after the news of KWG winning the redeveloped land at c.Rmb37bn in Feb-19.

As at Jun-19, Times China has 85 urban redevelopment projects that are expected to offer a total GFA of c.28m sm upon full conversion. Among them, 44 projects are expected to be completed in 2019-21, and estimated to offer total GFA of c.12.5m sm (or >Rmb150bn of saleable resources under our estimate). The company currently expects a total conversion of c.2.0-2.5m sm for FY19 (incl. 1.5m sm converted in 1H19), c.3.0-3.5m sm in FY20 and c.4.0-4.5m sm for FY21. Faster than expected conversion may offer upside potential to both the company’s earnings as well as strengthening its landbank.

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Company Guide

Times China Holdings

Policies related to Greater Bay Area presales growth this year with a decent chance to enter the Rmb100bn club. As at Jun-19, c.88% of Times China’s landbank in terms of GFA is located in the Greater Bay Area or at nearby cities (or Contracted sales c.89% of GAV according to our estimate). The counter is (Rmb bn) therefore exposed to the overall development of the 70 100% economic region, and the market generally views the counter as the proxy for the economic region. Accordingly, the overall 60 80% economic development and policy environment of the GBA is 50 60% key to monitor. Like other GBA proxies, announcements of 40 relevant policies regarding the region has influenced the 40% company’s share price (see chart 2 below). The unveiling of 30 20% details regarding the overall development of the region, as 20 well as intentions of provincial and local governments to 10 0% accelerate urban redevelopment projects within the region are cases in point. We expect more details on development in 0 -20% the GBA to be unveiled and further stimulate share price 2011 2012 2013 2014 2015 2016 2017 2018 1H19 performance. Contracted Sales (LHS) Contracted Sales Growth (RHS)

Source: Company, DBS HK GAV by economic region

Historical sell-through rates

non-GBA 100% 11% 90% 80% 70% 60% 50% GBA 40% 89% 30% 20% 10%

0% Source: Company, DBS HK 2014 2015 2016 2017 2018 1H19

Monthly contracted sales Source: Company, DBS HK

Contracted sales is one of the key leading indicators that Land acquisitions reflects the future financial performance of developers, as it directly gives an idea of the amount of projects that a Rapidly rising land costs as a result of active scale expansion developer can deliver to homebuyers, and recognise by developers in the past 2-3 years has triggered investor revenue/profit upon completion. This is no different for Times concerns over developers’ profitability, particularly with local China. We see a positive correlation between Times China’s governments’ strong control over selling prices in respective monthly presales growth versus its 1-year forward PE multiple cities. This is no different in the case of Times China, where over the past four years (See Chart 1 below). land prices in the GBA has risen substantially alongside heated developer interests since the GBA development plan Times China reported presales of Rmb10.7bn in Dec-19, up was unveiled. The ability for the company to secure quality 58% y-o-y. This translates to full-year presales of Rmb78.4bn land at reasonable cost is therefore a key factor to monitor. and have exceeded its 2019 presales target of Rmb75bn. Sell- through rate picked up in Nov-Dec and concluded the year at c.60% even without offering significant price discounts. While the official presales target for 2020 is yet to be announced, we expect the company to aim for >20%

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Company Guide

Times China Holdings

Land transaction details in public auctions within 8 GBA Gross margin trend cities 32%

m sm Rmb/sm 30% 31% 50 10,000 31% 45 9,000 28% 28% 40 8,000 28% 28% 35 7,000 26% 30 6,000 26% 26% 24% 25 5,000 25% 24% 20 4,000 22% 15 3,000 10 2,000 20% 5 1,000 0 0 18%

16%

2010

2011

2012

2013

2014

2015

2016

2017 2018

10M19 2010 2011 2012 2013 2014 2015 2016 2017 2018

GFA (m sm) (LHS) AV (Rmb/sm) (RHS) Source: Company, DBS HK

*Note: 8 GBA cities includes Guangzhou, Shenzhen, Zhuhai, Jiangmen, Times China intends to deepen its presence within the Zhongshan, Foshan, Dongguan, Zhaoqing Source: WIND, DBS HK Greater Bay Area in the next 3-5 years before actively expanding into other regions. The company has started on Despite the rising land costs in the past few years in the cities this initiative but in a slow and measured manner. It has within the Greater Bay Area, Times China’s average land cost assembled teams and tapped into one or two projects within as % of contracted ASP was kept below 25%, demonstrating key cities in other potential economic regions to accumulate its capability to maintain and replenish its landbank at operational experience. As at Jun-19, c.12% of the reasonable costs. The gross margins of its landbank at current company’s landbank in terms of GFA is located out of the contracted ASP stand at c.26-28%, with contracted sales and Greater Bay Area, with the majority in Changsha, Hangzhou, unbooked sales at a similar range as well. etc. The company currently intends to spend c.50% of attributable presales proceeds collected in the year for land replenishment (including premium payable on the acquired Average land cost as % of contracted ASP redeveloped land), with a profitability hurdle of c.26-28% in terms of GPM. Rmb/sm 18,000 30% Given the increasingly competitive and expensive land 16,000 25% markets, Times China’s strategy of gradually converting 14,000 redevelopment projects that are typically obtained at lower 12,000 20% land costs (and generate higher gross margins of c.30-40%) 10,000 15% 8,000 versus acquiring land directly from public auctions should 6,000 10% enable the company to maintain and expand its landbank at 4,000 reasonable cost. 5% 2,000 0 0% 2013 2014 2015 2016 2017 2018 1H19 Landbank AV (LHS) Contracted ASP (LHS) Land cost as % of Contracted ASP (RHS)

Source: Company, DBS HK

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Company Guide

Times China Holdings

friction from switching between stocks and high-yield bonds. Landbank by city (Jun-19) If the dividend and bond yield spread widen to a certain extent, these investors would then switch to equity given a better risk-reward profile, vice versa. Zhaoqing, Others, 3.0% 12.0% Guangzhou Looking at the dividend-bond yield spread for Times China, , 15.6% the widest spreads were 4.08ppt in Feb-18, 2.22ppt in Oct- 18, 3.02ppt in Jan-19, 2.31ppt in May-19 and 2.3ppt in Oct- Jiangmen, Foshan, 19, which was then followed by share price increase of 30- 12.0% 12.6% 94% before the spread bottomed out. With a wider spread Dongguan, of 3.86ppt currently versus its latest peak in Oct-19, there 4.4% appears to be room for Times China’s dividend-bond yield Qingyuan, Zhongshan, spread to narrow and for share price to rise. 6.1% Huizhou, 25.4% 5.4% Zhuhai, 3.5% Southbound shareholding interests

Similar to other small-mid cap developers, southbound Source: Company, DBS HK shareholding interest has been a driver of Times China’s share

price performance since its inclusion into both the Dividend and bond yield spread and Shenzhen Stock Connect in Sep-18. Southbound

shareholding interest in Times China has increased A common feature shared among smaller cap property substantially from nil to 6.84% in slightly more than one year developers is the correlation between their dividend-offshore and share price performance has been stellar. Alongside bond yield (with the earliest maturity) spread versus their Times China’s decent fundamentals and its unique exposure respective share prices (see chart below). We believe this is in to the Greater Bay Area, we expect southbound shareholding part influenced by its investor base that is likely of a smaller on the counter to remain strong and offer support to its share scale, and 1) are more risk tolerant and seeking for high yield price performance. and high return investment instruments; and 2) face less

Chart 1: Monthly contracted sales growth to 1-year forward PE

(x) 5.5 175%

5.0 125% 4.5

75% 4.0

3.5 25%

3.0 -25% 2.5

2.0 -75%

Jun-17 Jun-18 Jun-19

Feb-17 Oct-18 Feb-19 Oct-19 Oct-17 Feb-18

Apr-18 Apr-19 Apr-17

Dec-17 Dec-18 Dec-16 Dec-19

Aug-17 Aug-19 Aug-18

1-year forward PE (x) Monthly presales yoy growth (%)

Source: Bloomberg Finance L.P., Company, DBS HK

Page 13

Company Guide

Times China Holdings

Chart 2: Share price to GBA related policies

HK$ 18 6 16 5 14

12

10

8 4 3 6

4 2

2 1

0

Jul-16

Jul-17

Jul-18

Jul-19

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jun-16

Jun-17

Jun-18

Jun-19

Oct-16

Oct-17

Oct-18

Oct-19

Feb-16

Feb-17

Feb-18

Feb-19

Apr-16

Sep-16

Apr-17

Sep-17

Apr-18

Sep-18

Apr-19

Sep-19

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

Nov-16

Nov-17

Nov-18

Nov-19

Mar-16

Mar-17

Mar-18

Mar-19

Aug-16

Aug-17

Aug-18

Aug-19

May-16

May-17 May-18 May-19 No. Da te Polic y The development of Greater Bay Area was first mentioned in the report on government works by 1 Mar-17 Premier Li The development plan of Greater Bay Area was proposed to the National Development and Reform 2 Jul-17 Commission 3 Feb-19 Issued the Outline Development Plan for the Greater Bay Area Guangdong Province issued policies to accelerate redevelopment processes for old factories, old 4 Sep-19 villages and old towns (三旧) The Central government allows for Hong Kong and Macau residents to be entitled the same 5 Nov-19 treatments as local residents within nine Greater Bay Area cities when looking to purchase homes. State Administration of Taxation issued a guideline to offer more clarity on tax-related matters involving 6 Dec-19 the redevelopment of old factories, old villages and old towns Source: Bloomberg Finance L.P., Company, DBS HK

Chart 3: Share price to dividend-bond yield spread

HK$ Yield spread (%) 18.0 9.0

16.0 7.0 14.0

12.0 5.0

10.0 3.0 8.0

6.0 1.0

4.0 -1.0 2.0

0.0 -3.0

Jul-19 Jul-17 Jul-18

Jan-17 Jan-18 Jan-19 Jan-20

Jun-17 Jun-18 Jun-19

Oct-17 Oct-18 Oct-19

Feb-17 Feb-18 Feb-19

Apr-19 Sep-19 Apr-17 Sep-17 Apr-18 Sep-18

Dec-17 Dec-18 Dec-19

Nov-17 Nov-18 Nov-19

Mar-17 Mar-18 Mar-19

Aug-17 Aug-18 Aug-19

May-17 May-18 May-19 Price Dividend-bond yield spread

Source: Bloomberg Finance L.P., Company, DBS HK

Page 14

Company Guide

Times China Holdings

Share price to southbound shareholding interests

HK$

17 8.00%

7.00% 15 6.00% 13 5.00%

11 4.00%

3.00% 9 2.00% 7 1.00%

5 0.00%

Jul-19

Jul-19

Jan-19

Jan-19

Jan-20

Jun-19

Oct-18

Oct-18

Feb-19

Oct-19

Sep-18

Apr-19

Sep-19

Sep-19

Dec-18

Dec-18

Dec-19

Nov-18

Nov-19

Nov-19

Mar-19

Mar-19

Aug-19

May-19 May-19

Price Southbound shareholding interests (%)

Source: Bloomberg Finance L.P., Company, DBS HK

Page 15

Company Guide

Times China Holdings

Financials and peer’s comparison Gross margin to remain stable at 30-31%. With 1) stable 26- 28% gross profit margin for Times China’s Rmb50bn Earning to grow at a steady 3-year CAGR of 29%. We expect unbooked sales; and 2) gradual increase in profit contribution the company’s revenue to grow at a steady 3-year CAGR of from the higher margin urban redevelopment projects (GPM 23%. However, with expected improvement in net profit of c.60%+), we expect the company’s blended gross margin margins alongside rising contribution from urban to remain largely stable at 29-31% for FY19F-FY21F or is redevelopment projects, Times’ core earning CAGR will likely equivalent to an aggregated gross margin compression of be higher at 29% based on our estimates, which is on par to c.1.1ppt in FY19F-FY21F. comparable peers’ average. Less margin compression compared with peers. This 3-year core earning CAGR among comparable peers compares favourably with comparable peers, which in general are expected to witness a more pronounced drop of gross 70% profit margins of c.4.0ppt during FY19-21. 60% 50% Gross margin trend 40% % Average: 28% 30% 35 20% 30

10% 25 0%

20

CIFI

R&F KWG

Agile* 15

Logan*

Yuexiu*

Shimao*

Longfor* CR Land* CR

China SCE China 10

China Jinmao China Times China* Times

China Aoyuan* China 5 Source: Company, DBS HK 0

2020 revenue have been >90% locked in. Times has

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019F 2020F Rmb50bn unbooked sales in Jun-19 and achieved Rmb47bn 2021F contracted sales in 2H19. Assuming a consolidated interest Source: Company, DBS HK level of 90% in the company’s presales and a relatively conservative booking assumption, Times China have already Expected margin compression in FY19F-21F among locked in over 90% of our estimated revenue of Rmb42bn, comparable peers despite the exclusion of potential revenue contribution from urban redevelopment projects during 2H19.

Revenue lock-in analysis

CIFI Logan* China* Times R&F Aoyuan* China Shimao* Yuzhou* Jinmao China Yuexiu* SCE China Agile* KWG Longfor* Rmb (m) 2019 2020 2.0 1H19 revenue 15,943 Unbooked sales as at Jun-19 50,000 0.0 To be recognised in 2H19 25,000 -2.0 To be recognised in 2020 25,000 Revenue from 60% recognisable presales in 2020 -4.0 Consolidated interest 90% 90% -6.0 Revenue locked in 38,443 22,500 Average = 4.0 ppt DBS revenue estimates 42,112 53,152 -8.0 Lock-in ratio 91% 42% -10.0 Consolidated presales in 2H19 (90% interest) 47,040 -> 5% bookable in 2H19 2,117 -12.0 -> 60% bookable 2020 25,402 Expected revenue locked in 40,560 47,902 Source: Company, DBS HK DBS revenue estimates 42,112 52,244 Lock-in ratio 96% 92% SG&A to presales ratio to hold steady. As Times China will primarily focus on deepening its presence within existing Source: Company, DBS HK cities in the Greater Bay Area, administrative expense as % of

presales is expected to remain steady or even drop slightly

Page 16

Company Guide

Times China Holdings

given anticipated benefits from potential economies of scale. Core net margin trend But the impact is expected to be largely offset by the potential increase in resources required to complete the 14% conversion of its redevelopment projects. Accordingly, the net 12% impact on administrative expenses is expected to be largely neutral. Selling expenses as a percentage of presales is also 10% expected to remain stable with potential benefits from scale economies offset by higher sales incentives required under a 8% generally more competitive physical market. 6%

4% SG&A to presales ratio 2% 12% 0%

10%

2013

2014

2015

2016

2017

2018

2019F

2020F 2021F

8% Source: Company, DBS HK

6% Average CNPM in FY19F-FY21F of comparable peers: 4% Times’ CNPM is on par to peers’ average z 2% 30%

0% 25%

20%

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019F 2020F 2021F Average = 11.8% 15% Source: Company, DBS HK 10% SG&A to presales ratio of Times China and peers 5%

8.0% 0% CIFI

7.0% R&F

KWG Agile*

6.0% Logan*

Yuexiu*

Shimao*

Yuzhou*

Longfor* CR Land* CR

5.0% SCE China China Jinmao China 4.0% China* Times 3.0% Aoyuan* China Source: Company, DBS HK 2.0%

1.0% Expect 30% dividend payout ratio on core earnings. Times 0.0%

China adheres to a dividend payout policy with reference to

CIFI

R&F BCL Agile

Kaisa its reported core earnings (which includes income from urban

KWG

Logan

Yuexiu

Zhenro

Shimao

Aoyuan Yuzhou Longfor

CR Land CR redevelopments) of the year. The company has kept its

Ronshine

China SCE China Sino-Ocean

Times China Times dividend payout ratio at no less than 30% since 2016 and we China Jinmao China expect this trend to be maintained going forward. 1H19 FY2018

Source: Company, DBS HK

Core net margin to be maintained at c.12%. Taking into account the expectedly stable income stream from JV/associate level projects, we expect the company’s core net margin to be steady at c.12.1-12.8% in the upcoming three years, moderately better than the average of c.11.7% among comparable peers between FY19F-FY21F.

Page 17

Company Guide

Times China Holdings

Dividend payout policy Senior notes in issue

Rmb (m) A mount Expiry Callable Issue date (US$m) Coupon Date date 2,500 50% Jan-17 375 6.25% Jan-20 Dec-19 2,000 40% Apr-17 225 5.75% Apr-22 Apr-20 Nov-17 300 6.60% Mar-23 Nov-20 1,500 30% Jan-18 500 6.25% Jan-21 Jan-20 Jun-18 450 7.85% Jun-21 Jun-20 1,000 20% Nov-18 300 10.95% Nov-20 n.a. 500 10% Feb-19 500 7.63% Feb-22 Feb-21 Jul-19 500 6.75% Jul-23 Jul-22 0 0% Source: Company, DBS HK

2013 2014 2015 2016 2017 2018

2019F 2020F 2021F Onshore bonds in issue Dividend declared (LHS) A mount Expiry Puttable Dividend payout ratio (RHS) Issue date (Rmb m) Coupon Date date Source: Company, DBS HK Jul-15 1,816 7.50% Jul-20 n.a Sep-17 1,100 8.20% Sep-22 Sep-20 Average funding cost to see reduction. With most of the Sep-17 500 7.75% Sep-20 Sep-19 company’s refinancing for 2019 out of the way in 1H19 and Aug-18 2,200 8.40% Aug-21 Aug-20 a stable PBOC rate in China, it is expected that the average Oct-18 1,700 8.40% Oct-21 Oct-20 funding cost of the company will be maintained at c.7.5% for Dec-18 1,100 7.50% Dec-21 Dec-20 the full year which is still higher than most of its comparable Dec-18 1,900 8.10% Dec-23 Dec-21 peers. Whilst Times China has one of the highest financing Jan-19 1,100 7.50% Jan-22 Jan-21 costs versus comparable peers at its current level, we believe Jun-19 500 6.80% Jun-24 n.a it is possible for the company’s average funding cost to trend Source: Company, DBS HK lower from 2021 as several of its high cost onshore and offshore bonds at c.8%-11% will come due or become Average borrowing cost of Times China and peers puttable/callable during 2020 (as compared to c.6.8% that the company was successful in achieving both on- and offshore in Jun-19 and Jul-19). 10.0% 9.0% 8.0% Average funding cost 7.0% 6.0% 12% 5.0% 4.0% 11% 3.0% 2.0% 10% 1.0% 0.0%

9%

CIFI

R&F

BCL

Agile

Kaisa

KWG

Logan

Yuexiu

Zhenro

Shimao

Yuzhou

Aoyuan Longfor

8% Land CR

Ronshine

China SCE China

Sino-Ocean Times China Times

7% Jinmao China 1H19 FY2018 6%

5% Source: Company, DBS HK

2014 2015 2016 2017 2018 1H19 Refinancing pressure is manageable with decent on- and Source: Company, DBS HK offshore credit environment. As at Jun-19, bank and other

borrowings for Times China stood at c.Rmb50bn, with c.39% denominated in HKD or USD with no hedging instruments. In terms of refinancing, c.20% of its existing borrowings will come due/become puttable within one year, and 46% in 1-2 years. The company currently has on hand an onshore bond quota of c.Rmb8bn and has applied for additional offshore

Page 18

Company Guide

Times China Holdings

bond quota from the NDRC for refinancing purposes. With a Land acquisition and AV fairly liquid credit environment both in the on- and offshore bond markets, we believe Times China is well within reach to (Rmb bn) (Rmb/sqm) deal with its upcoming refinancing needs at favourable 20 6,000 18 borrowing costs. 5,000 16 14 Debt breakdown by type (Jun-19) 4,000 12 Bank loans 10 3,000 (unsecured) 8 , 12.6% 6 2,000 4 Bank loans 1,000 Corporate 2 bonds, (secured), 23.2% 12.0% 0 0 2013 2014 2015 2016 2017 2018 1H19 Syndicat Other e loans, borrowings Land acquisition premium (LHS) AV (RHS) 2.9% (unsecured) , 1.6% Source: Company, DBS HK Senior notes, 36.0% Other Net gearing ratio borrowings (secured), 130% 11.7% 120%

Source: Company, DBS HK 110%

100% Debt breakdown by Maturity (Jun-19) 90% > 4 years 3-4 years 4% 80% 6% 70% 60% < 1 year, 20% 50%

2-3 years 40% 24% 2012 2013 2014 2015 2016 2017 2018 1H19

Source: Company, DBS HK

1-2 years Gearing ratio of Times China and peers 46%

250%

200% Source: Company, DBS HK 150% Gearing ratio to edge up slightly alongside settlement of 100% unpaid land premium. In 1H19, Times China accelerated its land replenishment pace along with other developers given 50% an improved credit environment. Coupled with generally slower cash collection in 1H, gearing ratio in 1H19 rose 0%

slightly to 71%. In 2H19, Times China will be settling

CIFI

R&F BCL

Agile

Kaisa

KWG Logan

Rmb8bn of unpaid land premium brought forward. This, Yuexiu

Zhenro

Shimao

Aoyuan

Yuzhou

Longfor

CR Land CR Ronshine

partially offset by a typically higher cash collection ratio in 2H, SCE China

Sino-Ocean Times China Times would likely translate into a largely stable gearing ratio in Jinmao China Dec-19 of c.70-75%. Nevertheless, Times China’s balance sheet is still solid compared to sector average of c.88% (perp 1H19 FY2018 as debt) as at 1H19. There are still plenty of room for the company to gear up should land opportunities arise. Source: Company, DBS HK

Page 19

Company Guide

Times China Holdings

Valuation price of HK$19.89/sh is equivalent to 39% discount to Times China’s RNAV. TP of HK$19.89 based on 5.2x FY20F earnings. Using PE as the valuation method for the sector. Developers have shortened their development cycle by introducing NAV breakdown standardised products over the past few years in the attempt Rmb (m) to better control costs, reduce management complexities, and Property GAV 107,738 enhance investment returns. Accordingly, the sector’s Unpaid land premium (10,000) business model is becoming more like a factory production IP at cost 1,336 line. Hence, we view PE as a more relevant valuation method. T otal GA V 99,074 Compared with the traditional NAV valuation method, PE Total loan (as at Dec-18) (47,631) multiple better reflects developers’ ability to accelerate asset Cash and equivalent (as at Dec-18) 27,426 turnover (thus operating leverage) and securing profitability. Net debt (as at Dec-19) (20,205) Attributable interest 71% Benchmarking to PE of mid-cap GBA players. China property NAV 55,630 developers have been trading at an average 5.2x 1-year No. of shares 1,910 forward PE in 2019, with mid cap names at an average of NAV per share (Rmb) 29.12 5.4x and comparable mid-cap GBA players at 5.2x. Given HK$ to Rmb 0.90 Times China’s solid fundamentals, we believe the company NAV per share (HK$) 32.36 should at least re-rate to the average level of its comparable GBA peers. Source: Company, DBS HK

NAV valuation as a cross reference. NAV is another commonly Decent 6.3-8.1% FY19F-20F dividend yield. The company used method to value property developers. We have targets to distribute no less than 30% of its attributable core computed the value of development properties based on a profit for any particular financial year. Based on a 30% discounted cash flow model, and investment properties using dividend payout ratio, Times China’s current price would capitalisation rate. We use NAV as a reference point for the translate to a decent 6.3% and 8.1% dividend yield for valuation as well. FY19F and FY20F. The sector’s FY19F/FY20F dividend yield currently averaged at 5.6%/6.8%, where mid-caps are RNAV at HK$32.36/sh. We estimate Times China’s FY19 gross estimated to deliver dividend yields of 6.4%/8.0% for asset value (GAV) at Rmb99.1bn, based on following FY19F/FY20F. assumptions: Undemanding valuations with decent upsides from current (i) Property prices remain flat during our forecast period. level. We believe Times China’s fundamentals are at least at similar levels to its comparable peers, yet its current valuation (ii) WACC of 8.9% in calculating GAV for development of 3.9x FY20F PE is notably behind mid-cap GBA peers’ 4.8x. properties average funding cost of 7.6%; and This, coupled with a decent FY19F/FY20F dividend yield, offers an attractive opportunity for investors to accumulate the stock for its undervalued fundamentals. (iii) Investment properties at book value.

The China property sector is trading at 38% discount to RNAV on average with mid cap’s at 37% discount. Our target

Page 20

Company Guide

Times China Holdings

Sector valuation PE

A v erage Peak T rough Sector 1-y ear 2-y ear 1-y ear 2-y ear 1-y ear 2-y ear V aluations forw ard PE forw ard PE forw ard PE forw ard PE forw ard PE forw ard PE 2007 21.83 13.47 213.28 20.33 11.03 8.07 2008 8.64 6.57 22.28 13.57 3.96 3.10 2009 13.05 9.66 28.84 13.13 5.71 4.32 2010 9.99 8.24 17.99 11.63 8.24 6.71 2011 6.46 5.18 8.74 7.09 3.79 2.99 2012 5.92 5.05 7.75 6.67 4.12 3.42 2013 6.68 5.47 7.81 6.67 5.18 4.29 2014 5.90 4.00 7.27 5.61 4.95 3.40 2015 5.75 4.89 7.34 6.26 4.57 3.88 2016 5.76 5.15 6.81 6.22 4.50 4.03 2017 7.37 5.95 10.47 7.79 5.12 4.75 2018 6.05 4.75 8.32 6.27 4.48 3.48 2019 5.25 4.26 6.23 4.95 4.12 3.47 2020 5.14 4.30 5.23 4.95 5.08 4.19

Source: Bloomberg Finance L.P., DBS HK

Mid cap valuation PE A v erage Peak T rough 1-y ear 2-y ear 1-y ear 2-y ear 1-y ear 2-y ear Mid-cap forw ard PE forw ard PE forw ard PE forw ard PE forw ard PE forw ard PE 2007 23.60 13.28 422.66 20.66 11.65 8.71 2008 7.52 6.21 21.92 12.88 2.83 2.55 2009 12.84 9.65 18.69 13.89 5.78 4.48 2010 11.11 9.17 17.12 11.62 9.14 7.49 2011 6.99 5.45 10.05 7.72 3.94 3.09 2012 6.06 5.28 7.79 6.88 4.21 3.61 2013 5.98 4.89 7.72 6.81 4.84 3.92 2014 4.29 3.48 5.80 4.69 3.83 3.04 2015 4.92 4.23 6.12 5.21 4.02 3.40 2016 5.13 4.31 6.28 5.24 3.83 3.33 2017 6.35 5.23 8.68 7.10 4.76 4.01 2018 5.95 4.72 7.62 6.21 4.22 3.36 2019 5.40 4.40 6.48 5.19 3.97 3.36 2020 5.16 4.44 5.30 5.17 5.07 4.30 Source: Bloomberg Finance L.P., DBS HK

PE valuation of comparable mid-cap GBA players

2019 Ave ra ge PE Pe a k PE Trough PE 1-y forwa rd 2-yr forwa rd 1-y forwa rd 2-yr forwa rd 1-y forwa rd 2-yr forwa rd Aoyuan 5.55 3.94 7.24 5.06 3.31 2.44 GZ R&F 3.24 2.75 3.85 3.22 2.54 2.14 Kaisa 4.39 3.53 5.89 5.45 2.48 2.59 KWG 4.08 3.28 6.00 4.88 2.75 2.27 Logan 5.82 4.66 6.63 5.28 4.80 3.85 SZI 7.38 6.86 8.89 8.56 6.18 5.54 Times 3.88 3.07 5.04 4.06 2.58 2.04 Yuexiu 6.99 6.22 7.90 6.88 5.42 5.02 Ave ra ge 5.17 4.29 6.43 5.42 3.76 3.24 Source: Bloomberg Finance L.P., DBS HK

Page 21

Company Guide

Times China Holdings

Peers valuation table

3-mth daily Net Disc/ 14-J an Mk t trading 12-m EPS gth PE PE Yield Yield ROE ROE Gearing P/Bk NAV (Prem) Price Cap v alue Recom target 20F 21F 20F 21F 20F 21F 20F 21F 1H19A 20F to NA V Company Name Code HK$ US$bn US$m HK$ % % x x % % % % % x HK$ % Large cap China Overseas* 688 HK 29.60 41.7 48.2 BUY 35.00 13 16 6.8 5.9 4.2 5.1 13.6 14.0 33.8 0.9 39.0 24.1 CR Land* 1109 HK 36.45 33.4 68.0 BUY 37.50 14 n.a. 8.7 n.a. 4.0 0.0 15.1 0.0 47.5 1.3 44.5 18.1 China 'H'* 2202 HK 32.50 50.9 19.0 BUY 35.40 17 n.a. 6.6 n.a. 5.3 0.0 24.2 0.0 35.8 1.4 31.1 (4.5) Country Garden* 2007 HK 12.20 34.3 30.4 BUY 13.65 9 9 5.3 4.8 5.7 6.2 26.8 24.4 58.5 1.3 18.2 33.0 Evergrande* 3333 HK 22.45 38.2 36.1 BUY 28.55 6 3 6.2 6.0 8.1 8.3 29.1 26.1 152.1 1.7 45.8 51.0 Longfor* 960 HK 36.75 28.3 19.4 BUY 33.00 26 21 9.7 8.1 4.7 5.6 20.6 22.1 53.0 1.9 38.0 3.3 * 813 HK 30.15 12.8 15.0 BUY 32.00 26 17 6.6 5.6 6.2 7.2 19.5 20.2 64.4 1.2 37.0 18.4 China 1918 HK 45.15 25.9 85.3 NR n.a. 25 21 5.3 4.4 3.9 5.2 29.5 34.8 224.1 1.5 n.a. n.a. A v erage 17 14 6.9 5.8 5.3 4.7 22.3 17.7 83.6 1.4 20.5 Mid cap * 3383 HK 11.88 6.0 7.1 BUY 11.10 12 17 5.0 4.2 9.1 10.6 15.0 16.1 128.2 0.7 14.9 20.2 China Aoyuan* 3883 HK 12.52 4.3 10.6 BUY 14.47 50 26 4.6 3.6 8.7 11.0 39.4 39.3 64.2 1.6 n.a. n.a. China Jinmao Hldgs* 817 HK 6.08 9.2 13.1 HOLD 5.66 27 25 7.7 6.1 5.1 6.4 18.6 15.0 122.1 1.3 9.0 32.4 CIFI Holdings 884 HK 6.27 6.4 14.1 NR n.a. 24 22 5.0 4.1 7.0 8.6 25.0 23.7 81.7 1.1 n.a. n.a. Future Land 1030 HK 8.98 6.8 18.6 NR n.a. 31 18 5.1 4.3 6.6 7.8 28.4 33.2 117.2 1.4 n.a. n.a. Guangzhou R&F 2777 HK 14.08 2.3 19.5 NR n.a. 18 15 2.8 2.5 13.6 15.6 18.7 16.8 219.0 0.5 n.a. n.a. KWG Property 1813 HK 11.50 4.7 10.5 NR n.a. 17 19 5.2 4.4 7.5 9.2 18.0 15.6 77.2 0.8 n.a. n.a. Logan Property* 3380 HK 12.74 9.0 8.5 BUY 14.59 21 26 5.5 4.3 7.3 9.2 31.8 33.0 75.4 1.6 16.3 21.7 Shenzhen Inv 604 HK 3.04 3.5 1.8 NR n.a. 11 10 6.6 6.0 6.4 6.5 8.6 8.0 30.1 0.5 n.a. n.a. Sino-Ocean Land 3377 HK 3.21 3.1 1.6 BUY 6.68 45 13 4.4 3.9 11.2 12.3 9.9 7.1 85.6 0.4 8.9 64.0 Times China 1233 HK 15.18 3.8 13.2 NR n.a. 23 26 4.0 3.2 7.1 9.2 26.6 26.7 70.8 0.7 n.a. n.a. * 123 HK 1.77 3.5 4.0 BUY 2.20 19 n.a. 6.5 n.a. 6.1 0.0 8.6 0.0 63.6 0.5 3.2 44.0 A v erage 25 20 5.2 4.2 8.0 8.9 20.7 19.5 94.6 0.9 36.5 Small cap BJ Cap Land 'H' 2868 HK 2.35 0.3 1.8 NR n.a. 11 10 2.8 2.5 10.2 11.2 n.a. n.a. 319.7 n.a. n.a. n.a. China Merchants Land 978 HK 1.33 0.8 0.3 NR n.a. 25 13 2.6 2.3 9.7 10.9 8.6 n.a. 44.6 n.a. n.a. n.a. China SCE 1966 HK 4.50 2.4 5.8 NR n.a. 29 19 4.2 3.5 7.8 9.0 19.9 18.0 70.9 0.8 n.a. n.a. China South City^^ 1668 HK 0.99 1.0 1.4 BUY 2.77 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. COGO 81 HK 5.65 2.5 4.4 BUY 5.79 21 15 4.5 3.9 4.5 5.1 17.3 17.0 27.0 0.7 7.8 27.3 Gemdale Props 535 HK 1.03 2.1 1.2 NR n.a. 35 15 3.4 2.9 n.a. n.a. 22.4 22.5 63.7 0.8 n.a. n.a. Greenland 337 HK 3.53 1.3 0.7 NR n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 58.9 1.2 n.a. n.a. Greentown 3900 HK 11.06 3.1 6.7 NR n.a. 6 5 7.5 7.1 3.4 3.6 6.7 7.5 121.4 0.7 n.a. n.a. Hopson Dev 754 HK 8.26 2.4 0.8 NR n.a. 23 17 5.0 4.3 6.0 7.0 n.a. n.a. 59.6 0.3 n.a. n.a. Joy City * 207 HK 0.89 1.6 0.4 BUY 1.77 17 n.a. 8.2 n.a. 4.9 0.0 4.6 0.0 55.9 0.4 3.0 69.8 Kaisa Group 1638 HK 4.05 3.2 7.3 NR n.a. 19 19 5.4 4.5 6.3 8.1 15.1 14.3 190.6 0.7 n.a. n.a. LVGEM 95 HK 2.70 1.8 2.3 NR n.a. n.a. n.a. n.a. n.a. n.a. n.a. 17.0 15.0 121.3 0.1 n.a. n.a. Minmetals Land 230 HK 1.36 0.6 0.1 NR n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 131.7 n.a. n.a. n.a. Modern Land (China) 1107 HK 1.22 0.4 0.1 NR n.a. 19 25 3.2 2.6 7.4 9.2 15.3 13.1 77.4 0.3 n.a. n.a. Poly (Hong Kong) 119 HK 3.46 1.6 1.8 NR n.a. (25) 2 3.9 3.8 6.2 6.6 9.5 11.8 74.0 0.4 n.a. n.a. Powerlong 1238 HK 5.22 2.8 8.0 NR n.a. 28 21 4.8 3.9 8.7 10.3 14.5 12.2 97.5 0.8 n.a. n.a. Road King 1098 HK 14.96 1.4 0.9 NR n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.0 0.0 86.6 n.a. n.a. n.a. Ronshine China 3301 HK 10.10 2.2 4.2 NR n.a. 31 21 3.2 2.7 8.0 10.0 23.1 23.2 80.8 0.7 n.a. n.a. Soho China* 410 HK 3.16 2.1 3.4 BUY 3.64 22 23 37.1 30.2 0.0 0.0 1.1 1.3 42.8 0.4 6.1 47.9 SRE Group 1207 HK 0.06 0.2 0.0 NR n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.0 0.0 72.8 n.a. n.a. n.a. Sunshine 100 China 2608 HK 1.40 0.5 0.0 NR n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.0 0.0 203.1 n.a. n.a. n.a. Wuzhou Int'l 1369 HK 0.04 0.0 0.0 NR n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.0 0.0 n.a. n.a. n.a. n.a. Yuzhou Properties* 1628 HK 4.28 2.9 4.4 BUY 5.09 20 9 3.7 3.4 9.4 10.2 22.8 21.6 88.5 0.8 9.9 56.5 Zhenro Properties 6158 HK 5.27 3.0 7.9 NR n.a. 34 26 4.8 3.8 5.4 7.3 23.4 20.6 109.4 1.1 n.a. n.a. Zhong An 672 HK 0.23 0.2 0.1 NR n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 35.3 n.a. n.a. n.a. A v erage# 20 16 4.2 3.6 6.6 7.5 12.3 11.5 96.4 0.7 55.6 Average (Overall)# 21 17 5.2 4.3 6.8 7.3 16.8 15.2 92.1 0.9 37.6~

^ Denominated in SGD for price ~ Simple average discount to NAV; Market cap weighted average NAV = 21% # Exclude outliners ~~Gross Gearing ^^ FY20: FY21; FY21: FY22 Source: Thomson Reuters, *DBS HK

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Company Guide

Times China Holdings

Key risks Rmb/HKD to share price

Execution risk in redevelopment projects. A key HK$ 18 1.30 differentiation point of Times China from its comparable 16 peers comes from its soon-to-bear-fruit redevelopment 1.25 14 1.20 project pipeline, which offers the company a key advantage 12 in terms of accessing lower cost land opportunities. In the 10 1.15 event where Times China’s conversion pace is slower than 8 1.10 expected, market perception on the company’s ability execute 6 1.05 redevelopment projects may be affected and would reflect 4 adversely on the company’s valuation. Slower-than-expected 2 1.00 conversion may also result in weakened financials. 0 0.95

Jul-17

Jul-18

Jul-19

Jan-17

Jan-18

Jan-19

Jan-20

Sep-17

Sep-18

Sep-19

Nov-17 Nov-18

Tighter-than-anticipated policy environment in the Greater Nov-19

Mar-17

Mar-18

Mar-19

May-17

May-18 May-19 Bay Area. Since the Greater Bay Area was identified as a key Price CNYHKD currency economic region for development by the central government, the area was greeted with strong interest from both Source: Company, DBS HK developers and homebuyers. Accordingly, a number of restrictive housing policies has been implemented in some Placement risk. Since listing, Times China announced one cities (mostly in form of purchasing and selling restrictions) to share placement in Apr-19 at time of historical high share keep the market from overheating. In the event where more price (at HK$14.54/sh, c.9% discount to previous closing stringent policies are implemented within the area, Times share price). This share placement caught investors by surprise China may face increasing pressure on operational side as as the company had stated that it had no interest in well as on the valuation front as market sentiment is affected. conducting share placements a month earlier during the annual results presentation. Accordingly, sentiment on the Rmb depreciation. As at Jun-19, Times China’s USD/HKD- counter was affected and share price performance has been denominated borrowings represented c.40% of outstanding flat over the following few months. In our view, share borrowings, and thus it is rational for us to see that there placement risk in the near term on the counter should be appears to be a seemingly positive relationship between low, given 1) the company had already conducted a share Times China’s 1-year forward PE valuation (as well as its share placement exercise in April this year; and 2) the company price) to Rmb/HKD movements since 2017. The company has should now be well aware of market perception after the not engaged in hedging activities for managing forex risks as several months of stagnant share price performance. at Jun-19. In the scenario where RMB meaningfully Nevertheless, in the event of another unexpected share depreciates, Times China’s share price and valuation could be placement, the market may react negatively and thus Times affected. China’s share price performance and valuation could come under pressure. Rmb/HKD to 1-year forward PE

(x) 6.0 1.30 5.0 1.25 1.20 4.0 1.15 3.0 1.10 2.0 1.05 1.0 1.00

0.0 0.95

Jul-17 Jul-19 Jul-18

Jan-17 Jan-18 Jan-19 Jan-20

Sep-17 Sep-18 Sep-19

Nov-17 Nov-18 Nov-19

Mar-17 Mar-18 Mar-19

May-17 May-18 May-19 1-year forward PE (x) CNYHKD currency

Source: Company, DBS HK

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Company Guide

Times China Holdings

CRITICAL FACTORS TO WATCH Contracted sales Critical Factors 100% Conversion of redevelopment projects. As at Jun-19, Times 80% China has 85 urban redevelopment projects offering c.28m sm GFA upon full conversion. Among them, 44 projects are 60% expected to be completed in 2019-21, representing c.12.5m 40% sm GFA (or >Rmb150bn of saleable resources based on our 20% estimate). The company expects total conversion in FY19 to be c.2.0-2.5m sm (incl. 1.5m sm converted in 1H19), c.3.0- 0%

3.5m sm in FY20 and c.4.0-4.5m sm in FY21. Faster than

2012

2013

2014

2015

2016

2017 2018 expected conversion would offer upside to both the company’s earnings as well as strengthening its landbank. Gross margin % 35 Monthly contracted sales growth. Times China reported 30 presales of Rmb10.7bn in Dec-19, up 58% y-o-y. This 25 translates to a full-year presales of Rmb78.4bn and have 20 exceeded its 2019 presales target of Rmb75bn. Sell-through 15 rate picked up in Nov-Dec and concluded the year at c.60% 10 5 even without offering significant price discounts. While the 0

official presales target for 2020 is yet to be announced, we

20…

20…

20…

2010

2011

2012

2013

2014

2015

2016 2017 expect the company to aim for >20% presales growth this 2018 year with a decent chance to enter the Rmb100bn club. SG&A to contracted sales

% Dividend-bond yield spread. Looking at the historical 12% dividend-bond yield spread for Times China, the widest 10% spreads were 4.08ppts in Feb-18, 2.22ppts in Oct-18, 8% 3.02ppts in Jan-19, 2.31ppts in May-19 and 2.3ppts in Oct- 6% 19, which was then followed by share price increases of 30- 4% 94% before the spread bottomed out. With a wider spread 2% of 3.86ppt currently versus its last peak in Oct-19, there 0%

appears to be room for Times China’s dividend-bond yield

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019F 2020F spread to narrow and share price to rise. 2021F Average funding cost GBA-related policies. As at Jun-19, c.88% of Times China’s 12% landbank in terms of GFA is located in GBA or nearby cities (or c.89% of GAV on our estimate). The counter is therefore 10% leveraged on the overall development of the GBA economic 8% region. Accordingly, announcements of relevant policies 6% regarding the economic region has influenced the company’s 4% share price. We expect more details regarding the economic 2% region to be unveiled and further stimulate share price 0%

performance.

2014 2015 2016 2017 2018 1H19 Southbound shareholding interests. Similar to other small-mid Dividend payout ratio cap developers, southbound shareholding interest has been a Rmb (m) driver of Times China’s share price performance since its 3,000 40% inclusion into both the Shanghai and-Shenzhen Stock 2,000 30% 20% Connect in Sep-18. Southbound shareholding interest in 1,000 Times China has increased substantially from nil to 6.9% in 10% slightly more than a year along with the stock’s stellar share 0 0%

price performance. Given Times China’s decent fundamentals

2013 2014 2015 2016 2017 2018

2020F 2021F and offering unique exposure into the Greater Bay Area, we 2019F Dividend declared (LHS) expect southbound shareholding on the counter to remain Dividend payout ratio (RHS) strong, lending support to its share price performance. Source: Company, DBS HK

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Company Guide

Times China Holdings

History and company background redevelopment projects. To-date, the company has successfully converted >20 projects and has a team of >1,000 Regional small-/mid-cap residential developer with deep roots staff responsible for the origination of urban redevelopment within the Greater Bay Area. Founded in 1999 by Mr. Shum projects. Times China also has 85 urban redevelopment and Mr. Guan, Times China started its journey with a projects in its pipeline with an estimated convertible landbank residential development project (Sweetland (翠逸花园)) in of c.28m sm; 44 projects are expected to be completed Guangzhou. The company later extended its reach to nearby during 2019-2021. cities within the bay area, with Foshan as the first city in 2006. It developed Times King City in Foshan, and expanded Shareholding structure to Zhongshan, Zhuhai and Qingyuan in 2007. The company started to look beyond the Greater Bay Area since 2011 as it tapped into Changsha, but its presence is still largely focused Shum Chiu Hung Public Shareholders within the Greater Bay Area. In 2019, Times China was ranked 46th in terms of gross contracted sales in China according to the CRIC database. As at Jun-19, c.88% of 61.54% 38.46% Times China’s c.23.1m sm of landbank is located within the Greater Bay Area or in nearby cities.

Times China Holdings Ltd. Well-established track record to foster redevelopment

opportunities in Guangzhou and Foshan. With its long Source: Company, DBS HK operating history within the region and the company’s early entry to tap on urban redevelopment projects (both old villages and old factory redevelopments), Times China has accumulated a promising track record in completing

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Company Guide

Times China Holdings

Management profile

Name Age Position Profile Mr. Shum, the founder of the Group, is primarily responsible for strategic development and overall operations of Times Group's business. With over 19 years of experience in the PRC real estate industry, Mr. Shum had been appointed as a standing member of the Mr. Shum Chairman and Guangzhou Committee of the 11th, 12th and 13th Chinese People's Political 48 Chiu Hung CEO Consultative Conference from 2007 to 2018, and has been the vice chairman of the 14th and 15th executive committee of Guangzhou Federation of Industry and Commerce and Guangzhou General Chamber of Commerce since September 2011. Mr. Shum graduated from Fudan University with an EMBA in 2006. Mr. Guan serves as Executive Director, Vice President and the chairman of standard and Chairman of innovation management committee. Mr. Guan has over 19 years of experience in real standard and Mr. Guan estate corporate management, having previously been the head of capital operations, 54 innovation Jianhui head of operation management, and head of corporate management for the Group. Mr. management Guan holds an EMBA from Peking University, and is currently a member of the 15th committee People's Congress of Guangzhou. Mr. Bai serves as Executive Director, Vice President and general manager of the General Guangzhou regional office, primarily responsible for project research and development, Manager of designing, procurement and project management in Guangzhou. Mr. Bai has over 19 Mr. Bai 51 Guangzhou years of experience in real estate corporate management, and holds an EMBA from Sun Xihong Regional Yat-Sen University. Mr. Bai was a member of the Guangzhou Committee of the Chinese Office People's Political Consultative Conference and is currently the chairman of Guangzhou Nansha District Association of Real Estate Property. Mr. Li serves as Executive Director, Vice President and Head of Audit, Supervision and Head of Audit, Legal Affairs, primarily responsible for audit, supervision and legal affairs. Mr. Li has over Mr. Li Supervision 13 years of experience in real estate corporate management, and holds a master's degree 44 Qiang and Legal in law from Hunan Normal University and an EMBA degree from Sun Yat-Sen University. Affairs Mr. Li is an arbitrator of China Guangzhou Arbitration Commission and was a member of the 15th People's Congress of Guangzhou Yuexiu District. Director of Mr. Shum Siu Hung serves as Executive Director and director of the investment and Mr. Shum investment development division, primarily responsible for land development and project pre- 44 Siu Hung and planning work. Mr. Shum Siu Hung is the younger brother of Mr. Shum, the Executive development Director, the Chairman of the Board and the Chief Executive Office of the Group. Head of Mr. Niu serves as Executive Director, Vice President and head of financial funding and financial costing department, primarily responsible for planning and management of financial Mr. Niu 39 funding and accounting, funding operation and taxation matters. Mr. Niu holds a master’s of business Jimin costing administration degree from Hong Kong Baptist University and an EMBA degree from department School of Finance of Renmin University of China. General Mr. Tao is the general manager of Shenzhen office since September 2016. Mr. Tao is Mr. Tao Manager of been a qualified accountant in the PRC and is a non-practicing member of the Chengjian 50 Shenzhen Guangdong Provincial Institute of Certified Public Accountants. Mr. Tao holds an EMBA g office degree from Sun Yat-Sen University. Mr. Wong is the Chief Financial Officer, primarily responsible for the financial reporting and investor relations related matters of the Group. Mr. Wong has over 20 years of working experience in finance, portfolio management and executive management, Mr. Wong Chief Financial 42 having previously been the principal head of Silverhorn asset management and US GMT Wing Nin Officer Capital prior to joining the Group in 2015. Mr. Wang holds an honours degree from the University of Pennsylvania and attended senior management course from the Harvard Business School.

Source: Company, DBS HK

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Company Guide

Times China Holdings

Balance Sheet: Leverage & Asset Turnover (x) Average funding cost to improve in 2020-21. We expect average funding cost to be largely stable at c.7.5% in FY19. There is room for improvement in 2020-21 as several of its high cost onshore and offshore bonds at c.8%-11% (vs c.6.8% achieved in Jun and Jul-19) will fall due/become puttable/callable.

Gearing ratio to edge up slightly with the settlement of unpaid land premium. Times China will be settling Rmb8bn of unpaid land premium in 2H19. This would be partially offset by a typically higher cash collection ratio, likely translate into ROE a slight increase in gearing ratio to c.70-75% in Dec-19.

Share Price Drivers: Faster-than-expected conversion of its redevelopment projects. A key differentiation of Times China to its comparable peers comes from its soon-to-bear-fruit redevelopment project pipeline that was accumulated thanks to its early entrance into the segment. Faster-than-expected conversion of its redevelopment pipeline would support its financial performance as well as market perception and valuations. Forward PE Band Stronger-than-expected presales and earnings growth. In the event where Times China reports stronger than anticipated presales/core earnings growth, this may boost market confidence as well as valuation on the stock.

Key Risks: Slower than expected development/tighter than anticipated policy environment in the GBA; slower than expected conversion pace in its redevelopment projects; further Rmb depreciation; unexpected share placement. PB Band Environment, Social, Governance: By upholding its core values of “Love, Focus and Create” and its corporate mission of “empowering more people to live with a lifestyle they aspire to”, Times China continuously promotes sustainable development and integrates ESG management into its daily business operations. In 2018, the company was awarded “2018 Best Employer in China Real Estate Industry”, “Award for Outstanding Contribution to Charity”, amongst others.

Company Background Source: Company, DBS HK Founded in 1999, Times China started its journey with a residential development project in Guangzhou. The company later started to extend its reach towards nearby cities within the bay area since 2006 and started to look beyond the Greater Bay Area region since 2011 by tapping Changsha. In 2019, Times China was ranked 46th in terms of gross contracted sales in China according to the CRIC database. As at Jun-19, c.88% of Times China’s c.23.1m sm of landbank is located within the Greater Bay Area or nearby cities.

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Company Guide

Times China Holdings

Segmental Breakdown (RMB m)

FY Dec 2017A 2018A 2019F 2020F 2021F Revenues (RMB m) Property development 22,473 30,779 37,949 48,087 59,513 Property investment 289 328 411 493 592 Property management 347 492 699 0 0 Urban redevelopment N/A 2,776 3,053 3,664 4,397 Total 23,110 34,375 42,112 52,244 64,501 Source: Company, DBS HK

Income Statement (RMB m) FY Dec 2017A 2018A 2019F 2020F 2021F Turnover 23,110 34,375 42,112 52,244 64,501 Cost of Goods Sold (16,660) (23,754) (29,019) (36,185) (45,309) Gross Profit 6,450 10,621 13,093 16,059 19,192 Other Opg (Exp)/Inc (1,804) (2,315) (2,390) (2,931) (3,605) Operating Profit 4,646 8,306 10,703 13,128 15,587 Associates Inc 225 (331) 267 292 351 Net Interest (Exp)/Inc (298) (519) (642) (726) (803) Exceptional Gain/(Loss) 716 883 0 0 0 Pre-tax Profit 5,288 8,339 10,328 12,694 15,135 Tax (1,947) (3,527) (4,749) (4,984) (5,994) Minority Interest (674) (412) (397) (1,027) (1,329) Net Profit 2,667 4,399 5,182 6,684 7,813 Core Profit 2,191 3,662 5,182 6,684 7,813

Sales Gth (%) 42.6 48.7 22.5 24.1 23.5 Net Profit Gth (%) 36.4 64.9 17.8 29.0 16.9 Core Profit Gth (%) 27.2 67.1 41.5 29.0 16.9 Gross Mgn (%) 27.9 30.9 31.1 30.7 29.8 Core Profit Margin (%) 9.5 10.7 12.3 12.8 12.1 Tax Rate 36.8 42.3 46.0 39.3 39.6

Source: Company, DBS HK

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Company Guide

Times China Holdings

Balance Sheet (RMB m) FY Dec 2017A 2018A 2019F 2020F 2021F

Fixed Assets 1,379 1,550 1,407 1,265 1,122 Invts in Assocs & JVs 4,734 5,582 5,582 5,582 5,582 Other LT Assets 9,598 11,563 11,563 11,563 11,563 Cash & ST Invts 17,207 27,426 25,700 25,182 24,848 Other Current Assets 73,195 88,514 118,584 153,013 199,785 Total Assets 101,379 129,052 157,254 191,022 237,318

ST Debt 6,030 7,312 7,312 7,312 7,312 Creditors 32,312 39,299 57,064 80,126 114,624 Other Current Liab 6,372 7,975 7,975 7,975 7,975 LT Debt 27,259 40,319 45,319 50,319 55,319 Other LT Liabilities 1,461 1,852 1,852 1,852 1,852 Minority Interests 12,374 15,344 15,741 16,767 18,096 Shareholder’s Equity 15,572 16,952 21,993 26,671 32,140 Total Capital 101,379 129,052 157,254 191,022 237,318

Share Capital (m) 1,767 1,834 1,910 1,942 1,942 Net Cash/(Debt) (16,082) (20,205) (26,930) (32,449) (37,783) Working Capital 34,512 41,240 53,545 64,911 77,186 Net Gearing (%) 57.5 62.6 71.4 74.7 75.2

Source: Company, DBS HK

Cash Flow Statement (RMB m) FY Dec 2017A 2018A 2019F 2020F 2021F

Profit Before Tax 5,288 8,339 10,328 12,694 15,135 Assoc. & JV Inc/(loss) (225) 331 0 0 0 Tax Paid (2,005) (2,210) (4,749) (4,984) (5,994) Depr/Amort 133 143 143 143 143 Chg in Wkg.Cap. (6,949) (2,745) (12,305) (11,366) (12,274) Other Non-Cash (2,407) (4,151) (818) (894) (803) Operating CF (6,585) (523) (7,402) (4,407) (3,794) Net chg in inv. (352) (204) 0 0 0 Assoc, MI, Invsmt (8,143) (6,875) 0 0 0 Investing CF (8,496) (7,079) 0 0 0 Net Chg in Debt 16,032 12,732 5,000 5,000 5,000 New Capital 0 0 1,413 0 0 Dividend (543) (760) (1,261) (1,555) (2,005) Other Financing CF 5,074 4,469 0 0 0 Financing CF 20,563 16,441 5,152 3,445 2,995 Chg in Cash 5,340 9,111 (1,725) (518) (334) Chg in Net Cash (7,162) (4,123) (6,725) (5,518) (5,334)

Source: Company, DBS HK

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Company Guide

Times China Holdings

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

*Share price appreciation + dividends

Completed Date: 15 Jan 2020 16:00:45 (HKT) Dissemination Date: 15 Jan 2020 16:22:39 (HKT) Sources for all charts and tables are DBS HK unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER

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

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

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

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

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

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

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

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

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS HK, DBSVS or their subsidiaries and/or other affiliates have proprietary positions in China Overseas Land & Investment Ltd (688 HK), Ltd (1109 HK), China Vanke Co Ltd (2202 HK), Country Garden Holdings Co Ltd (2007 HK), China (3333 HK), Longfor Group Holdings Ltd (960 HK), Shimao Property Holdings Ltd (813 HK), Agile Group Holdings Ltd (3383 HK), Guangzhou R&F Properties Co Ltd (2777 HK), Sino-Ocean Group Holding Ltd (3377 HK) and Zhenro Properties Group Ltd (6158 HK) recommended in this report as of 13 Jan 2020.

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

3. Compensation for investment banking services: DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from China Overseas Land & Investment Ltd (688 HK), China Resources Land Ltd (1109 HK), Ltd (3883 HK), China Jinmao Holdings Group Ltd (817 HK), Sino-Ocean Group Holding Ltd (3377 HK), China South City Holdings Ltd (1668 HK) and Hopson Development Holdings Ltd (754 HK) as of 31 Dec 2019.

4. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for China Overseas Land & Investment Ltd (688 HK), China Resources Land Ltd (1109 HK), China Aoyuan Group Ltd (3883 HK), China Jinmao Holdings Group Ltd (817 HK), Sino-Ocean Group Holding Ltd (3377 HK), China South City Holdings Ltd (1668 HK) and Hopson Development Holdings Ltd (754 HK) in the past 12 months, as of 31 Dec 2019.

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

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

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.

2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946.

DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws.

Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

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

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

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

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

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

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

DBS Bank (Hong Kong) Limited 13 th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong Tel: (852) 3668-4181, Fax: (852) 2521-1812

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DBS Regional Research Offices

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

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

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