PING AN SECURITIES COMPANY LTD. Top Pick A-shares Guidebook

Financials and Real Estate Sector: ( Stock Code: 000024 ) Analyst: Liu Xihui 86-755-22627484 / [email protected]

CHINA MERCHANTS PROPERTY DEVELOPMENT CO., LTD. 招商局地产控股股份有限公司

Rating: Buy Current (Aug9): ￥63.50 Target: ￥70.50 Co Visit: High

Management Information Major Shareholders & Type of Shares Chairman Sun Chengming Name Type % CFO Huang Peikun China Merchants Shekou Industrial Zone Tradable A 23.82 Co Sec. Chen Yu Hong Kong Panorama Investment B-shares 10.14 Tel. 0755-26818600 China Merchants Securities (HK) B-shares 4.8 Website www.cmpd.cn Foxrot International Limiter Tradable A 2.99

Ended Core revenue Net profit Growth ratio EPS Dividend PE Dividend yield May 10, 07 (RMB Million) (RMB Million) (%) (RMB) (RMB) (x) (%) 2004A 3,476 360 61.9 0.58 0.15 112.4 0.23 2005A 2,659 422 17.2 0.68 0.15 95.9 0.23 2006A 2,939 568 34.7 0.92 0.02 70.9 0.03 2007E 4,580 763 34.3 0.9 0.025 72.4 0.04 2008E 7,312 1,195 56.7 1.41 0.03 46.2 0.05

PING AN SECURITIES Contact: Ms. Qiu Xiaojin [email protected] This is prepared for clients of Ping An Securities Company Ltd. and other professionals. The information and points contained herein do not form bids or inquiries of the said securities and are only for reference. PING AN SECURITIES COMPANY LTD. China Top Pick A-shares Guidebook

Ping An Research – (CHINA MERCHANTS PROPERTY DEVELOPMENT CO., LTD.)

Business Description: The company was established in in 1994 which is a pioneer developer in China and also one of the three core business of China Merchants Group. It is listed in Shenzhen Stock Exchange (SC: 000024) and Singapore Stock Exchange (SC: 200024). At the end of 2006, the company’s total asset exceeds RMB 14.2 billion. It had over 40 large-scaled property projects in Shenzhen, , , , , , , , Zhangzhou and other large and middle cities respectively, with an accumulated development area exceeding 8 million square meters.

Investment Points: 1. With a complete business mode, the company has an improved industrial chain and a capability resisting risks. Currently, the company has 5.42 million square meters of land reserves for planned construction areas and has preliminarily accomplished a nationwide layout for its property business. The company’s held properties for lease presented an upside trend, from which the company could gain stable rent returns. The properties to be added for lease in 2007 are the office building project in New World Plaza. 2. China Merchants Group has clearly positioned the company as an unified carrier of property development. Currently, real estate development business’s proportion in China Merchants is 23% and its profit contribution is 11%, therefore, real estate business is awaited for further development and can obtain the substantial shareholder’s support and commitment. 3. In China Merchants Group’s real estate development and operation business, the company is positioned in the development and operation of specific projects. Other two property carriers Shekou Industrial Zone Company and Zhangzhou Development Zone Company are responsible for construction of tracts of development zones and primary land development and operation within the development zones, of which, Shekou Industrial Zone Company currently possess approximately 2 million square meters of resources and a part of hotel business. 4. After completion of the Hong Kong – Shenzhen Western Corridor, it will significantly enhance the company’s performance and value. From the viewpoint of the company’s development and the substantial shareholder’s business positioning, after the finish, the Western Corridor is forecast to provide a good opportunity for the parent company’s assets injection; we estimate the most likely one is the quality assets in the Shekou area. 5. If the parent company’s assets injection is not taken into account, in a short-term view, its A-share valuation is basically reasonable. The company’s EPS is forecast to be RMB 0.90 and RMB 1.41 respectively in 2007 and 2008 after the share conversion and the private placement. Integrating the results of the relative valuation and the absolute valuation, we think the company’s value would be approximately at RMB 70.50. 6. Reasons for optimism on the company and the rating. What we are optimistic to is the company’s unique business mode, the substantial shareholder’s support, finish of the Western Corridor’s lifting the company’s performance and finish of the Western Corridor’s providing likelihood for the parent company’s assets injection, and its B-shares have certain price difference against its A-shares and have a lower premium to the revalued net asset per share, therefore, “BUY” rating is given to its A-shares and “STRONG BUY” rating is given to its B-shares.

Risk Warning: Uncertainties exist in its equity incentives and the assets injection; its share price suffers a relatively large impact from its substantial shareholder.

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