Hong Kong

29 May 2012 Initiating Coverage

BUY Properties A Proxy Kong Landlord Share price: HKD21.25 Target price: HKD26.02 Archetypal HK landlord with strong brand equity. Swire Properties (SP) is a leading developer, owner and operator of mixed-use commercial properties in HK and China with a well-established record Ivan CHEUNG, CFA of creating long-term value through designing, developing and [email protected] managing transformational mixed-use projects in urban areas. Going by (852) 2268 0634 its portfolio of mixed-use investment properties, we expect this major HK landlord to be able to replicate its success in core and affluent cities

across China. With a target net gearing of 20% for FY12F, SP guided a payout of 50% of its underlying profit over the economic cycle.

Stock Information Three key growth drivers in the medium term. In our view, SP’s Description: Swire Properties, a leading HK landlord, has a portfolio of 25.1m sq ft of investment and development medium-term growth initiatives would centre on (1) increasing GFA properties in HK, China, USA and the UK. through expansion and redevelopment in HK, (2) gaining critical mass via its vast investment portfolio in China, and (3) launching Ticker: 1972 HK Shares Issued (m): 5,850 development projects in a timely manner in HK, China and the US. Market Cap (USDm): 15,999 Short-term catalysts include stronger-than-expected sales of its HK 3-mth Avg Daily Turnover (USDm): 8.5 luxury residential properties and stronger-than-expected rental HSI: 18,801 Free Float (%): 18.0 reversions in its office and retail investment portfolios.

Major Shareholders: % Narrower discount for pure-play landlord. We believe that SP should Swire Pacific 82.0 trade at a premium valuation over other HK landlords (average discount John Swire and Sons 8.0 of 32%) given its expertise in property management and tenancy expiry, as well as premium strategy in managing the tenant mix. The continual

expansion of Pacific Place and Island East, its two main exposures in Key Indicators HK, ensures sustainable and long-term growth of its quality portfolio. ROE – annualised (%) 3.80 Net debt (HKDm): 31,019 Initiate with BUY and TP of HKD26.02. We value SP using the cap NTA/shr (HKD): 30.7 rate and DCF methodologies for, respectively, its investment and Interest cover (x): 6.1 development properties, and applying a target discount of 20%, being

the long-term average of its parent, Swire Pacific. We estimate that SP has a revalued net asset value of HKD190.2b, or HKD32.52 per share. Historical Chart We believe the valuation is justified given SP’s strong brand equity and 31.0 sustainable growth. Our TP of HKD26.02 suggests an upside of 22.4% 29.0 27.0 from current levels. We initiate coverage with a BUY recommendation. 25.0 23.0 Swire Properties Limited – Summary Earnings Table 21.0 FYE Dec (HKDm) 2010A 2011A 2012F 2013F 19.0 Revenue 8,871 9,581 15,051 14,784 17.0 EBITDA 6,741 6,297 8,632 8,366 15.0 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Recurring Net Profit 3,833 4,372 6,766 6,759 Recurring Basic EPS (cents) 67.36 74.74 115.66 115.54 PRICE PRICE REL. TO HANG SENG INDEX Recurring EPS growth (%) 7.43 10.94 54.76 (0.11) Source: Bloomberg DPS (cents) 0.00 18.00 52.05 51.99

PER 31.55 28.43 18.37 18.39 Performance: EV/EBITDA (x) 24.06 24.33 18.09 18.67 52-week High/Low HKD22.45/HKD16.62 Div Yield (%) 0.00 0.85 2.45 2.45 P/BV(x) 0.77 0.71 0.69 0.68 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) (2.1) 9.1 N/A N/A N/A Net Gearing (%) 23.33 15.73 17.25 16.94 Relative (%) 7.4 22.1 N/A N/A N/A ROE (%) 2.66 2.62 3.80 3.72 ROA (%) 2.02 2.06 3.06 2.98 Consensus Net Profit (HKDm) N/A N/A 6,717 6,392 Source: Company data, Kim Eng Securities

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Swire Properties Limited

37-year performance record

Solid development history; listed by way of introduction. SP ventured into the development business in the mid-1970s, turning the former Taikoo Dockyard site into the 10.3m-sq-ft , a private residential estate in , Island. Over the past 30 years, it continued to expand its investment property portfolio, targeting mainly office buildings and commercial complexes. In January this year, SP was listed in HK by way of introduction. The existing shareholders of Swire Pacific (SPA: 19 HK and SPB: 87 HK) were entitled to the distribution in specie of SP at a ratio of seven shares of SP for every 10 shares of SPA (or 50 shares of SPB) owned. After the listing, SPA and SPB collectively own 82% of SP, while public shareholders own 10% and John Swire and Sons (JSS), the major shareholder of Swire Pacific, owns the remaining 8%.

Proactive enhancement of investment property value. SP is adept at maximising the earnings and value of its completed properties through active asset management. It will seek to reinforce assets through enhancement, redevelopment and new additions, as well as ensure optimal mix of retail tenants and early renewal negotiations with office tenants. The long-term goal is to maintain consistently high levels of service. By doing so, SP will maximise the occupancy and earnings potential of its investment property portfolio.

Sustainable development increases brand loyalty. Increasingly, tenants are scrutinising the green credentials of landlords and buildings. SP aims to be at the forefront of sustainable development by launching energy-efficient buildings through the innovative use of design, materials and new technology. It will continue to design projects that will have the necessary scale, mix of uses and transport links to become key commercial hubs and to transform the areas in which they are located.

Figure 1: Property portfolio of Swire Properties Attributable GFA (m sq ft) Office Retail Hotels Residential Total Completed Investment Properties 12.5 4.9 1.4 0.6 19.4 Hong Kong 10.5 2.4 0.7 0.6 14.2 China 2.0 2.5 0.2 0.0 4.7 Overseas 0.0 0.0 0.5 0.0 0.5

Investment Properties Under Development 2.0 2.1 1.3 0.3 5.7 Hong Kong 0.1 0.0 0.0 0.1 0.2 China 0.9 1.6 1.1 0.1 3.7 Overseas 1.0 0.5 0.2 0.1 1.8

Grand Total 14.5 7.0 2.7 0.9 25.1 Source: Company data, Kim Eng Securities

HKD18.8b funding from sale of Festival Walk. SP guided a payout ratio of 50% of its core earnings over the economic cycle. Its net gearing stood at 15.7% as at end-2011 and has hovered around 23.3-32.9% over the past five financial years. Net debt at end-2011 was HKD27.7b, down from HKD36.8b a year ago. The decline arose from the repayment of inter-group funding from Swire Pacific, using the proceeds from the sale of Festival Walk and cash from its operations, partially offset by higher debt levels in China.

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Swire Properties Limited

Healthy net gearing; equity financing risk is low in medium term. SP’s net gearing decreased by 7.6ppts to 15.7% as at end-2011. Cash and undrawn committed facilities totalled HKD9.2b as at March 2012, versus HKD7.4b as at end-2011. Upon maturity of the inter-group funding provided by Swire Pacific, SP will obtain new funding (as necessary) on a stand-alone basis without recourse to Swire Pacific, according to the company. We believe that SP will maintain a strong balance sheet with a view to investing in and financing its projects in a disciplined and targeted manner. Debt financing will be a key source of fund, and SP reveals that it aims to maintain exposure to a range of debt maturities as well as debt types and lenders. Its current debt profile reflects a mix of revolving and bank term loans, medium term notes and perpetual securities.

Lock-up period of 180 days since listing. Note that both Swire Pacific and JSS have a lock-up period on SP of 180 days after listing, and this will expire on 18 July 2012. While we believe that the risk of raising new capital through share issuance, either top-up or otherwise, is minimal in view of SP’s healthy balance sheet, it is possible that JSS may seek to reduce its 8% stake, as the family owns 468m shares estimated to be worth USD1.25b. SP has also gained approval from the HKEx that a lower public float percentage of 10% or more is allowed for the company.

Figure 2: RNAV breakdown by property types and location

China Properties Overseas Hotels Under Properties 3.5% Development 4.4% 5.9%

HK Properties Under Development 5.6%

China Investment HK Investment Properties Properties (Completed) (Completed) 9.3% 71.4%

Source: Company data, Kim Eng Securities

Figure 3: Property portfolio breakdown by geographical location (in GFA terms)

Overseas 9.2%

Hong kong China 57.4% 33.5%

Source: Company data, Kim Eng Securities

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Swire Properties Limited

HK investment portfolio - Office

An experienced office developer and manager since the 1980s. Starting in 1979 with an industrial building, Warwick House in Quarry Bay with 555k sq ft, SP has grown over the last 33 years and currently owns 8.45m sq ft of completed office buildings in HK. There is another 227k sq ft in GFA of office space in the development pipeline. The construction of 28 Hennessy Road, formerly Tai Sang Commercial Building with GFA of 146k sq ft, and refurbishment of 8 Queen’s Road East, formerly Sincere Insurance Building with GFA of 81k sq ft, will both be completed this year. The target monthly rentals for these two office buildings are HKD70-80psf and HKD50psf, respectively.

Completion pipeline kicked-in in the late 1980s. Major completions of SP’s office developments took place during the 1990s, after completion of another two industrial buildings, Cornwall House and Somerset House, in 1984 and 1988 respectively. Over the period of 11 years from 1993 to 2003, SP completed five office buildings in Quarry Bay with total GFA of 2.52m sq ft. In 1985, SP commenced the planning for Pacific Place. One Pacific Place and Two Pacific Place were completed in 1998 and 1990 respectively, with total office GFA of 1.56m sq ft. The 711k-sq-ft Mall was completed in 1998. Three Pacific Place was completed in 2004 by redeveloping old buildings on Wing Fung Street.

Extended to Taikoo Shing in early 1990s. The success of the Pacific Place complexes was extended to another major commercial hub, Island East. As the developer of the large-scale 10-phase Taikoo Shing, SP completed three other office buildings, City Plaza Four and City Plaza Three in 1991 and 1992, respectively. City Plaza One, atop the 1.1m-sq-ft shopping mall City Plaza (completed in phases since 1983), was completed in 1997 with a GFA of 629k sq ft.

Redevelopment to grow portfolio. Over the period 1993-2003, its major office development portfolio at Taikoo Place, Quarry Bay, was completed in phases. Apart from the 1.54m-sq-ft One Island East which was completed in 2008, there are six office buildings and three techno centres owned by SP with aggregate attributable GFA of 4.65m sq ft. Somerset House, with GFA of 923k sq ft, was approved to be redeveloped into grade A offices with GFA of approx. 895k sq ft, to be completed in 2015. We expect that SP will also redevelop the other two techno centres, Warwick House and Cornwall House, in the medium term. Note that the current asking rent of techno centres are in the low to mid HKD20s, while that of the Island East portfolio are in the high HKD30s- low HKD40s.

Figure 4: Office portfolio and rental trends Current FY12F avg FY13F avg Stake GFA Car Park Attr GFA asking rent rent change rent change Completed Building District (%) (sq ft) Bays (sq ft) (HKD psf pm) (%) (%) 1988 One Pacific Place Admiralty 100 863,266 0 863,266 100 +3 to +5 Flat 1990 Two Pacific Place Admiralty 100 695,510 0 695,510 100 +3 to +5 Flat 2004 Three Pacific Place Admiralty 100 627,657 111 627,657 90 +3 to +5 Flat 1997 City Plaza One Quarry Bay 100 628,785 0 628,785 40-45 +5 +3 to +5 1992 City Plaza Three Quarry Bay 100 447,714 10 447,714 40-45 +5 +3 to +5 1991 City Plaza Four Quarry Bay 100 556,431 0 556,431 40-45 +5 +3 to +5 1993 Devon House Taikoo Place 100 803,452 311 803,452 38-45 +3 to +5 +3 to +5 1994 Dorset House Taikoo Place 100 609,540 215 609,540 38-45 +3 to +5 +3 to +5 1998 Lincoln House Taikoo Place 100 333,353 164 333,353 38-45 +3 to +5 +3 to +5 1999 Oxford House Taikoo Place 100 501,253 182 501,253 38-45 +3 to +5 +3 to +5 2003 Cambridge House Taikoo Place 100 268,795 0 268,795 38-45 +3 to +5 +3 to +5 2008 One Island East Taikoo Place 100 1,537,011 0 1,537,011 55-60 +5 Flat 1994 PCCW Tower Taikoo Place 50 620,148 217 310,074 38-45 +3 to +5 +3 to +5 1998 625 King’s Road North Point 50 301,065 84 150,533 38-45 +3 to +5 +3 to +5 1999 Citigate Outlets Office Tung Chung 20 160,522 0 32,104 20 +3 to +5 Flat Total 8,365,478 Source: Company data, Kim Eng Securities

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Swire Properties Limited

A series of redevelopment efforts in the pipeline. SP is actively consolidating its ownership of several old buildings in the neighbouring areas of Pacific Place in Admiralty and Taikoo Place in Hong Kong to extend the geographical reach of its commercial property portfolio.

1. Extension of Taikoo Place. SP has completed the acquisition of an old building at 23 Tong Chong Street, next to its office complex Taikoo Place in Quarry Bay. It will be redeveloped into a serviced apartment block with GFA of 75k sq ft. According to local media, SP has also been actively consolidating existing buildings in neighbouring streets (Hoi Wan, Hoi Kwong and Hoi Tai Streets) for further extension of Taikoo Place.

2. Taikoo Place redevelopment. SPL will also redevelop its three techno centers, namely Somerset House, Cornwall House, and Warwick House, in Taikoo Place. In March 2011, the Town Planning Board approved the plans for redevelopment of these three techno centres into two grade-A office towers, providing a combined GFA of about 2m sq ft. SP initially plans to commence redevelopment of Somerset House in 2013 with GFA of 895k sq ft, once it has obtained vacant possession.

3. Pacific Place Three extension and other office building developments nearby. On top of two new office towers in Wan Chai to be completed in end- 2012, the extension of Three Pacific Place nearby will be done by redeveloping the adjacent old residential buildings into a 27-storey grade-A office building, providing a total GFA of 118,600 sq ft.

Figure 5: Redevelopment pipeline of office spaces Completed Building District Stake GFA (sq ft) Car Park Bays Attr GFA (sq ft) 1979 Warwick House Taikoo Place 100 554,934 285* 863,266 1984 Cornwall House Taikoo Place 100 338,369 0 695,510 1988 Somerset House Taikoo Place 100 923,364 0 627,657 1968/2012 8 Queen's Road East Wan Chai 100 81,346 0 81,346 2012 28 Hennessy Road Wan Chai 100 145,390 0 145,390 Total 285 2,413,169 * Aggregate among 3 techno-centres. Source: Company data, Kim Eng Securities

Strata titles in Wan Chai for further footprint extension. According to market sources, SP substantially acquired Po Wah Building (46-56 Queen’s Road East), opposite to Three Pacific Place and 28 Hennessy Road, at the end of 2011. The ownership has not been reaching the 80% compulsory auction threshold, in our view, but we believe that SP will continue to acquire strata titles in adjacent locations, such as Landale and Anton Streets. SP also owns approx. 14,000 sq ft of retail space in the adjacent Star Street area.

HK office market outlook. According to Jones Lang LaSalle’s report in mid-April, the vacancies of overall office market falls to lowest level in 20 years, at 3.8% for March 2012, below the 4% recorded when the market peaked in April 2008. Against the situation of growth in stock of 6m sq ft since 2008, the trend of demand for office space in HK continued, despite the slight prevailing slowdown in leasing activities. A positive net take-up of 697k sq ft in 1Q12 was recorded, while Central offices’ vacancy rate remains low at below 5% mark despite a slight negative net take-up recorded in the district during the first quarter.

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Swire Properties Limited

SP’s office portfolio is more defensive. We believe that SP will benefit from the current situation as its core office development, Pacific Place has a more competitive current asking rent of approx. HKD90-100 psf pm, versus grade-A Central offices’ over HKD110. Consolidation of the financial services industry will continue, and the demand from key players in the sector from the USA and Europe continues to be weak, offsetting growth from China and South East Asia. Besides, the outlook for medium-sized non-financial sector tenants remained strong, such as legal, IT, hedge fund managers and retail sectors. Some existing tenants in Central will continue to take up space in other non-core areas, such as Island East and Kowloon East, which in-turn will benefit SP on the other front with its exposure in non-core commercial districts such as Taikoo Place and Taikoo Shing.

Key valuation assumptions. We expect that the monthly rent for core office space will rose by 3-5% YoY in FY12F, and remain flat in FY13F. Non-core districts such as Island East are more defensive than Central and Admiralty, and we forecast a 3-5% rental growth for both FY12F and FY13F. The full year contribution from 28 Hennessy Road and 8 Queen’s Road East will commence in FY13F, offsetting the revenue loss from the redevelopment of Somerset House. We expect that the occupancy ratio will be 80% for both new office towers in FY13F. We apply a cap rate of 5.75% to 6.25% to SP’s office spaces in HK.

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Swire Properties Limited

HK investment portfolio – Retail

Two flagship commercial complexes – Pacific Place and City Plaza. SP commenced the development of the famous residential estate, Taikoo Shing in 1977, in 10 phases. With aggregate residential GFA of 10.3m sq ft over 12,690 units, SP commenced development of City Plaza (CP) Mall in the late 1970s. The project has been completed in phases since 1983. Currently, the 1.1m-sq-ft GFA complex is virtually fully let with diversified tenants such as F&B outlets, fashion, consumer electronics stores, cinemas and an ice-skating ring. Another major commercial mall, Festival Walk (completed in 1998) was sold to Mapletree of Singapore in 2011 for HKD18.8b.

Continuous enhancement in tenant mix. The Pacific Place complex is another key SP development. The site, formerly Victoria Barracks, was acquired by Swire Pacific in 1985. Two office towers, three hotels and a mall were initially developed on the 637k sq ft site. The Mall has a GFA of 711k sq ft and completed in phases over 1988-1990. Lately, the modernization of PP Mall was undertaken and is largely completed. The Harvey Nichols flagship Asian store will be introduced, taking up space formerly occupied by Lane Crawford. A beauty gallery will also be created to house retailers of upscale cosmetics and skincare brands, filling a gap in consumer product offerings as a result of Lane Crawford’s departure. We believe that the continuous shuffling of tenants will help SP in sustaining its positive rental reversion over the long run.

Other commercial complexes in non-core districts. Other major retail complexes include 100%-owned Taikoo Shing neighbourhood shops, with over 331k sq ft. SP owns 100% of the retail area. 60%-owned Island Place and North Point were completed in 1996, being a JV with China Motor Bus (26). 20%- owned Citygate Outlets has a total GFA of over 462k sq ft. Located near the HK International Airport and along the MTRC Tung Chung line, the complex targets footfalls from tourists and local residents.

Figure 6: Retail portfolio in HK Completed HK Investment – Retail District Stake GFA (sq ft) Car Park Bays Attr GFA (sq ft) 1988 Pacific Place Mall Admiralty 100 711,182 470 711,182 1983 Citiplaza Mall Quarry Bay 100 1,105,227 834 1,105,227 1977 Commercial Areas of TKS Quarry Bay 100 331,079 3,826 331,079 1996 Island Place, 500 King's Road North Point 60 150,223 288 90,134 1999 Star Crest, 9 Star Street Wan Chai 100 13,112 83 13,112 1992 21-29 Wing Fung Street Wan Chai 100 14,039 0 14,039 1998 Tung Chung Crescent Tung Chung 20 36,053 0 7,211 1999 Citigate Outlets Tung Chung 20 462,439 1,156 92,488 Total 6,657 2,364,472 Source: Company data, Kim Eng Securities Hong Kong retail market outlook. Strong consumer demand, particularly from visitors from mainland China and South East Asia, is expected to continue in 2012. Yet, competition for retail space is expected to remain keen amid recent strength in transaction prices of retail shops. We believe that SP will continue to apply its strength in managing its tenant mix by monitoring consumer preferences and brand popularity to ensure the maximisation of retail sales.

Key valuation assumptions. We expect that a 5% YoY growth p.a. in monthly rent will be achieved in Pacific Place Mall over the next two financial years, thanks to continuous positive reversions and a reshuffle of tenants. The net rental growth at Citiplaza Mall’s will be flattish over the same period, similar to that of other non-core retail properties such as the Taikoo Shing commercial areas, Island Place in North Point and Citigate Outlet in Tung Chung. The occupancy rate will remain stable at 95-100% at all complexes. We apply a cap rate of 6.0- 6.5% to SP’s retail spaces in HK.

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Swire Properties Limited

HK investment portfolio – Hotel and residential

Extend its exposures to upmarket hotels. SP owns various stakes in six HK hotels which were completed over 1988 and 2009. The latest additions were two upmarket hotels, EAST and The Upper House, located at Taikoo Shing and PP, respectively. EAST is a 345-room hotel with GFA of 200k sq ft, while The Upper House is located above The JW Marriott Hotel in Pacific Place. The latter is a luxury hotel with 117 rooms targeted at corporate clients.

Owned minor stakes in 4 other hotels. SP owns 20% stakes in each of the four following hotels: JW Marriott, Conrad, Island Shangri La and Novotel Citygate Hong Kong Hotel. Total attributable GFA is 385k sq ft, with attributable number of rooms at 424. Occupancy levels at the JW Marriott, Conrad and Island Shangri La, all located in PP, remain high at over 97%, while Novotel Citygate HK Hotel (Tung Chung) has an occupancy of 75%.

Pacific Place Apartment with over 443k sq ft. The company also owns four residential properties for rental income, with GFA of 484k sq ft. The largest development is PP Apartments atop PP Mall with GFA of 443k sq ft and 270 serviced suites located within the Conrad Hotel, PP. The development was completed in 1990. Three other projects with 14 houses/apartment units are located in traditional luxury districts, with total GFA of 41k sq ft.

Figure 7: HK Hotel Portfolio Completed Hotel City Stake GFA (sq ft) Number of rooms 2009 EAST Hong Kong 100 199,633 345 2009 The Upper House Hong Kong 100 158,738 117 2014 23 Tong Chong Street Hong Kong 100 62,099 TBC 1988 JW Marriott Hong Kong 20 525,904 602 1990 Conrad Hong Kong 20 555,590 513 1991 Island Shangrila Hong Kong 20 605,728 565 2005 Novotel Citygate Hong Kong 20 236,653 440 Total 2,582 Source: Company data, Kim Eng Securities

Figure 8: HK Residential properties (for investment) portfolio Completed Apartments District Stake GFA (sq ft) 1990 Pacific Place Apartments Admiralty 100 443,075 1981 Rocky Bank 6 Deep Water Road Island South 100 14,768 1980 House B 36 Island Road Island South 100 2,644 1965 38 Mount Kellett Road Mid Levels 100 23,224 Total 483,711 Source: Company data, Kim Eng Securities

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Swire Properties Limited

Investment portfolio – Mixed-use developments in China

JV/Acquired projects from existing partners. SP entered the mainland market in 2001 and signed an agreement with Guangzhou Daily Group to develop TaiKoo Hui, Guangzhou, the following year. In 2006, SP acquired a 50% interest in HKR (480)’s Dazhongli project in . Two years later, SP acquired an 80% interest in the project company to develop Sanlitun Village in Beijing. It also formed a 50:50 JV with Sino-Ocean Land (3377) to develop the INDIGO project in the same year.

Owns four completed mixed-use projects... Currently, SP owns a portfolio of four retail complexes in Beijing and Guangzhou with total retail GFA of 2.87m sq ft. In addition, it owns two office developments, Taikoo Hui in Guangzhou (where approx. 99% of the retail space is currently being leased) and INDIGO in Beijing, with attributable GFA of 1.97m sq ft. Acquisitions of all the investment properties were completed during 2007-2011.

…with four more under development. SP continues to develop mixed-use complexes in China. Over the next four financial years, four projects are expected to be completed in Beijing, Guangzhou, Shanghai and Chengdu, which will add 3,71m sq ft and 642k sq ft of investment and development properties, respectively, to its mainland portfolio. The Hotel/Service apartment portion of Taikoo Hui, Guangzhou is expected to be completed this year. Office space for the project was handed over to tenants from August 2011, while the hotel and serviced apartments are scheduled to open in the second half of this year.

Figure 9: China’s completed and under development investment properties Completed Building District Stake GFA (sq ft) Car Park Bays Attr GFA (sq ft) Retail 2007 Sanlitun Village South Beijing 80 776,909 2007 863,266 2007 Sanlitun Village North Beijing 80 519,399 2007 695,510 2008 Beaumonde Retail Guangzhou 100 90,847 2008 627,657 2011 Taikoo Hui Guangzhou 97 1,484,743 2011 628,785

Office 2011 Taikoo Hui Guangzhou 97 1,723,424 0 1,671,721 2011 INDIGO Beijing 50 595,464 411 297,732 2014 Daci Temple Project Chengdu 50 1,018,988 0 509,494 2015 Dazhongli Project Shanghai 50 904,967 499 452,484

Hotels No. of rooms 2016 Dazhongli Project Shanghai 50 3,469,398 124 2012 INDIGO Beijing 50 1,297,762 433 2014 Daci Temple Project Chengdu 50 1,405,225 100 Total attr to SP 329 5,746,649 Source: Company data, Kim Eng Securities

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Swire Properties Limited

A net add of 4.4m sq ft over the next four years. The retail and hotel portions of INDIGO, Beijing, with attributable GFA of 650k sq ft (50%-owned), will also be completed later this year. The Daci Temple project in Chengdu (acquired in 2010) and Dazhongli Project in Shanghai are expected to be completed in 2014 and 2016, respectively. A total of 2.44m sq ft in GFA will be added from these two projects. The estimated total GFA of its mainland projects will increase from 4.7m sq ft in 2011 to 9.1m in 2016 and beyond.

China investment property market outlook. In our view, the investment property market in China will remain challenging in the medium term. However, mall operators with expertise in brand and tenant mix management will be successful, by attracting renowned international brands and affluent consumers. We expect that SP will be able to replicate its success at the City Plaza and Pacific Place malls in core cities such as Beijing, Shanghai and Guangzhou, and other affluent cities with increasing spending power. Upon the completion of Daci Temple in Chengdu and Dazhongli in Shanghai in 2014 and 2015 respectively, contributions from the China investment property segment will improve. We apply a cap rate of 6.25% to 6.75% to SP’s investment properties in China.

Figure 10: China investment portfolio pipeline in GFA terms

SLT & BM TKH INDIGO DT DZL 10 9 8 7 6 5 4 3 2 1 0 2011 2012 2013 2014 2015 2016 and onwards

Source: Company data, Kim Eng Securities

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Swire Properties Limited

Investment portfolio - Rest of the world

SP owns five completed properties in the UK (4) and USA (1), all of which are hotels. 75%-owned Mandarin Oriental, located at South Brickell Key, Miami, Florida was completed in 2000 with 326 rooms. It has an attributable GFA of 259k sq ft with 450 car park bays. Four completed hotels were located in various parts of the UK with a total GFA of 196k sq ft, and a total of 266 guest rooms.

Mixed-use complex in Miami to be completed in 2015-2018. SP owns a development project for investment purposes in Miami, Florida, which is expected to be developed into two phases, with total GFA of 1.79m sq ft. The first phase will comprise retail and office space, plus a hotel and serviced apartments, with 1.05m sq ft and 1,900 car park bays. Construction is scheduled to commence in mid-2012 with completion of phase I expected in 2015. Phase II will comprise 742k sq ft of office space and 1,241 car park bays, and completion is expected in 2018.

Figure 11: Overseas completed and under-development investment property portfolio Stake GFA Car Park Completed Hotel City (%) (sq ft) Bays 2010 The Montpellier Chapter Cheltenham 100 36,662 61 2001 The Magdalen Chapter Exeter 100 23,030 59 2003 Hotel Seattle Brighton 100 48,416 71 1855 Avon Gorge Hotel Bristol 100 87,608 75 2000 Mandarin Oriental Miami, USA 75 345,000 326 2015-2018 Brickell CitiCentre Miami, USA 100 1,791,000 3,141 Source: Company data, Kim Eng Securities

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Swire Properties Limited

Property trading segment – Hong Kong

SP has long history of property development in HK. As early as 1975, redevelopment of the former Taikoo Dockyard site into one of Hong Kong’s first major private housing estates, Taikoo Shing, began. It has a total of 10 phases with 12,690 units and residential GFA of 10.3m sq ft. The whole project was completed over 1977-1985. In 1994, the company also completed a two-block project, Robinson Place, at Mid-Levels. Since early 2000s, SP has completed four other residential development projects, all targeted at the luxury segment, in traditional upmarket districts on HK Island.

Figure 12: HK Development properties for sale Total GFA Attr GFA Attr Car Park Completion Project District Stake (sq ft) Car Park Bays (sq ft) Bays 2012 Azura Mid Levels West 88 206,306 45 180,518 39 2013 Argenta Mid Levels West 100 75,805 28 75,805 28 2014 33 Seymour Road Mid Levels West 100 165,792 0 165,792 0 2016 92-102 Caine Road Mid Levels West 100 195,531 43 195,531 43 2013 Sai Wan Terrace Quarry Bay 80 151,944 69 121,555 55 2013 148 Argyle Street Mong Kok 50 88,555 56 44,278 28 2015 Cheung Sha Lantau Island 100 64,412 0 64,412 0 Hold 8-10 Wong Chuk Hang Road Aberdeen 50 382,500 39 191,250 20 2010 5 Star Street Wan Chai 100 1,996 0 1,996 0 1998 Tung Chung Cresent Tung Chung 20 0 75 0 15 1998 Belair Monte Fanling 8 47,751 17 3,820 1 Total 1,044,957 229 Source: Company data, Kim Eng Securities

Bookings for luxury projects to commence this year. SP currently has seven high-end residential projects under development, with attributable GFA of approx. 850k sq ft. It is SP’s strategy to acquire and develop residential properties for sale in scarce-supply locations, such as the Mid-Levels district of , to maximise profits. In addition, SP has about 230k sq ft. of mid-to-high end residential projects under development in other urban districts. AZURA is expected to be booked in 2012, while Argenta and 148 Argyle Street will become the profit drivers of the HK property development segment in 2013.

Strategic position in the group. We believe that the HK property development segment, although small in size in terms of SP’s property portfolio, will provide a smoothing effect for the group’s net profit, at the time when development/re- development of investment properties is ongoing. The focus in high-end housing and strong demand (investment and upgrading) from both mainland and overseas buyers should continue to bode well for this segment, in our view. Note that it is possible that SP will reshuffle some of its development projects in non- core districts, in enhancing return and focusing more on top-end developments.

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Swire Properties Limited

Property trading segment – China and the rest of the world

Three development projects in Florida in various phases of construction. SP currently owns 3 property development projects in the USA for sale. The 2 BCC sites adjoining the existing Brickell CitiCentre site in Miami, USA were acquired in Apr 2011. A mixed-use development of 2.9m sq ft has been approved for the site, comprising retail and office space as well as a hotel with service apartments and residential components, over the two phases of the development. Completion is expected in 2015-2016. Two other residential sites in Florida with attributable GFA of 1.01m sq ft are on hold.

Two completed development projects for sale. The company also owns two completed development projects for sale. The total attributable GFA of these two projects located in Florida is 77.2k sq ft, along with 84 car park bays. ASIA is located in Miami Florida with residential GFA of 67.7k sq ft and 55 car park bays. It was completed in 2008 and 93 out of 123 available units were closed as at end- 2011. For the River Court project in Florida, an attributable retail/office GFA of 9.4k sq ft and 29 car park bays will be redeveloped. SP has a 75% interest in this project.

Mainland office tower in Chengdu for sale in 2014. For Daci Temple project in Chengdu, China, SP plans to complete 642k sq ft of office GFA and 250 car park bays for sale in 2014. Currently, together with the other components (retail, hotel and serviced apartments) of the project, site formation is in progress. The office space is for sale while the other portions of the development will be retained for investment purposes.

Growth in China and other areas. Over the medium term, SP revealed that it will seek residential development opportunities in Mainland China. These are likely to be ancillary to their mixed-use developments; however, in the right locations and cities they may also consider standalone residential development opportunities. The luxury positioning of SP will be replicated in other parts of China, as it has a competitive advantage in developing and marketing in this segment. SP will also consider selectively expanding across the world; an office in Singapore was formed lately to explore opportunities for development of projects in the region.

Figure 13: China and Rest of World development properties for sale Total GFA Total Car Park Attr GFA Attr Car Park Completion Project District Stake (sq ft) Bays (sq ft) Bays 2008 ASIA Miami, Florida 100 67,728 55 67,728 55 1966 River Court Florida, USA 75 12,586 38 9,440 29 N/A South Brickell Key Miami Florida 100 421,800 395 421,800 395 N/A Fort Lauderdale Florida USA 75 787,414 1,050 590,561 788 2015 Brickell Citi Centre Miami Florida 100 1,100,000 1,200 1,100,000 1,200 2014 Daci Temple Project Chengdu 50 1,284,075 499 642,038 250 Total 2,831,566 2,716 Source: Company data, Kim Eng Securities

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Swire Properties Limited

Valuation

Currently SP is trading at a 34.7% discount to our RNAV of HKD32.52 per share (assumed beta of 0.91 and WACC of 10.1%, using parent Swire Pacific’s historical data). This compares with Swire Pacific’s average 20% discount, and standard deviation of 16%. We initiate coverage on SP with a BUY rating and a TP of HKD26.02 per share, representing a 20% target discount to RNAV. At current levels, SP offers a potential share price upside of 22.4%.

Figure 14: RNAV Breakdown for Swire Properties HKD per % of Gross Property Item HKDm share Assets HK Investment Properties (Completed) 159,877 26.70 71.4 Office 104,774 17.91 46.8 Retail 42,708 7.30 19.1 Residential 8,685 1.48 3.9 Others 3,711 0.63 1.7 China Investment Properties (Completed) 20,842 3.56 9.3 Office 9,090 1.55 4.1 Retail 10,687 1.83 4.8 Others 1,065 0.18 0.5 HK Properties Under Development 12,489 2.13 5.6 Residential 8,163 1.40 3.6 Office 2,898 0.50 1.3 Others 1,429 0.24 0.6 China Properties Under Development 13,155 2.25 5.9 Office 4,754 0.81 2.1 Retail 5,345 0.91 2.4 Others 3,056 0.52 1.4 Overseas Properties 9,807 1.68 4.4 Residential 7,513 1.28 3.4 Office 385 0.07 0.2 Others 1,908 0.33 0.9 Hotels 7,872 1.35 3.5 Hong Kong 5,533 0.95 2.5 China 297 0.05 0.1 Overseas 2,042 0.35 0.9 Total Property Assets 224,042 38.30 100.0 Other Assets/(Liabilities) (2,798) Net Cash/(Debt) (31,019) Revalued Net Asset Value (RNAV) 190,225 32.52 RNAV Per Share 32.52 Current Share Price 21.25 (Discount)/Premium to RNAV (34.65) Source: Company data, Kim Eng Securities

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Swire Properties Limited

INCOME STATEMENT BALANCE SHEET FYE Dec (HKDm) 2010A 2011A 2012F 2013F FYE Dec (HKDm) 2010A 2011A 2012F 2013F

Revenue 8,871 9,581 15,051 14,784 Fixed Assets 6,533 6,634 7,022 7,477 EBITDA 6,741 6,297 8,632 8,366 Other LT Assets 191,250 201,416 207,604 212,093 Depreciation & Amortisation 252 292 328 350 Cash/ST Investments 1,042 1,180 861 711 Operating Profit (EBIT) 6,489 6,005 8,304 8,016 Other Current Assets 6,887 9,004 8,992 8,597 Interest (Exp)/Inc (1,237) (1,477) (1,353) (1,123) Total Assets 205,712 218,234 224,478 228,879 Associates 1,686 1,007 1,095 1,190 One-offs 20,480 20,940 0 0 ST Debt 4,094 1,687 4,687 4,687 Pre-Tax Profit 27,418 26,475 8,046 8,082 Other Current Liabilities 10,806 15,476 14,932 15,127 Tax (1,324) (1,296) (1,263) (1,307) LT Debt 28,556 20,250 20,250 20,250 Minority Interest (49) (53) (16) (16) Other LT Liabilities 3,900 4,246 4,246 4,246 Net Profit 26,045 25,126 6,766 6,759 Minority Interest 479 532 547 558 Recurring Net Profit 3,833 4,372 6,766 6,759 Shareholders' Equity 157,877 176,043 179,816 184,010 Total Liabilities-Capital 205,712 218,234 224,478 228,879 Revenue Growth % 6.5 8.0 57.1 (1.8) EBITDA Growth (%) 32.4 (6.6) 37.1 (3.1) Share Capital (m) 5,690 5,850 5,850 5,850 EBIT Growth (%) 31.6 (7.5) 38.3 (3.5) Gross Debt/(Cash) 37,878 28,880 31,880 31,880 Net Profit Growth (%) 50.9 (3.5) (73.1) (0.1) Net Debt/(Cash) 36,836 27,700 31,019 31,169 Recurring Net Profit Growth (%) 7.4 14.1 54.8 (0.1) Working Capital 1,582 774 1,306 716 Tax Rate % 4.8 4.9 15.7 16.2

CASH FLOW RATES & RATIOS FYE Dec (HKDm) 2010A 2011A 2012F 2013F FYE Dec 2010A 2011A 2012F 2013F

Profit before taxation 27,418 26,475 8,046 8,082 EBITDA Margin % 76.0 65.7 57.4 56.6 Depreciation 252 292 328 350 Op. Profit Margin % 73.1 62.7 55.2 54.2 Net interest receipts/(payments) (1,469) (1,664) (1,353) (1,123) Net Profit Margin % 293.6 262.2 45.0 45.7 Working capital change (1,101) 930 (532) 589 Net Margin Ex. El % 43.2 45.6 45.0 45.7 Cash tax paid (435) (485) (1,263) (1,307) ROE % 2.7 2.6 3.8 3.7 Others (incl'd exceptional items) (21,753) (19,848) 0 0 ROA % 2.0 2.1 3.1 3.0 Cash flow from operations 2,912 5,700 5,226 6,591 Dividend Cover (x) N/A 0.5 2.7 2.6 Capex (7,839) (6,587) (5,500) (3,700) Interest Cover (x) 5.2 4.1 6.1 7.1 Disposal/(purchase) 1,213 18,305 0 0 Asset Turnover (x) 0.0 0.0 0.1 0.1 Others 1,353 0 0 0 Asset/Debt (x) 5.4 7.6 7.0 7.2 Cash flow from investing (5,273) 11,718 (5,500) (3,700) Debtors Turn (days) 47.4 73.1 48.3 50.1 Debt raised/(repaid) 2,344 (9,297) 3,000 0 Creditors Turn (days) 827.8 1,247.5 499.0 524.0

Equity raised/(repaid) 0 4,500 0 0 Inventory Turn (days) 227.8 259.9 163.3 155.8 Dividends (paid) (9) (12,451) (3,045) (3,042) Net Gearing % 23.3 15.7 17.3 16.9 Others 11 12 0 0 Debt/ EBITDA (x) 5.5 4.4 3.6 3.7 Cash flow from financing 2,346 (17,236) (45) (3,042) Debt/ Market Cap (x) 0.4 0.3 0.3 0.3 Change in cash (15) 182 (319) (150)

PER SHARE DATA 2010A 2011A 2012F 2013F FYE Dec (HKD)

EPS 0.7 0.7 1.2 1.2 CFPS (0.0) 0.0 (0.1) (0.0) BVPS 27.7 30.1 30.7 31.5 SPS 1.6 1.6 2.6 2.5 EBITDA/share 1.2 1.1 1.5 1.4 DPS 0.0 0.2 0.5 0.5

Source: Company data, Kim Eng Securities

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Swire Properties Limited

RESEARCH OFFICES REGIONAL ECONOMICS P K BASU Suhaimi ILIAS Regional Head, Research & Economics Chief Economist (65) 6432 1821 [email protected] . Singapore | Malaysia (603) 2297 8682 [email protected] WONG Chew Hann, CA Regional Head of Institutional Research Luz LORENZO (603) 2297 8686 [email protected] Economist

THAM Mun Hon . Philippines | Indonesia (63) 2 849 8836 [email protected] Regional Strategist (852) 2268 0630 [email protected] Chaiyachoke SUWISUTTANGKUL

ONG Seng Yeow Economist Regional Products & Planning . Thailand (852) 2268 0644 [email protected] (662) 658 6300 [email protected]

MALAYSIA SINGAPORE THAILAND WONG Chew Hann, CA Head of Research Stephanie WONG Head of Research Mayuree CHOWVIKRAN Head of Research (603) 2297 8686 [email protected] (65) 6432 1451 [email protected] (66) 2658 6300 ext 1440 [email protected] . Strategy . Strategy . Strategy . Construction & Infrastructure . Small & Mid Caps Maria BRENDA SANCHEZ LAPIZ Co-Head of Research Desmond CH’NG, ACA Gregory YAP Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 (603) 2297 8680 [email protected] (65) 6432 1450 [email protected] [email protected] . Banking - Regional . Technology & Manufacturing LIAW Thong Jung . Telcos - Regional Andrew STOTZ Strategist (603) 2297 8688 [email protected] Wilson LIEW (66) 2658 6300 ext 1399 . Oil & Gas (65) 6432 1454 [email protected] [email protected]

. Automotive . Hotel & Resort Suttatip PEERASUB . Shipping . Property & Construction (66) 2658 6300 ext 1430 [email protected] ONG Chee Ting James KOH . Media (603) 2297 8678 [email protected] (65) 6432 1431 [email protected] . Commerce . Plantations . Logistics Sutthichai KUMWORACHAI Mohshin AZIZ . Resources (66) 2658 6300 ext 1400 [email protected] (603) 2297 8692 [email protected] . Consumer . Energy . Aviation . Small/ Mid cap . Petrochem . Petrochem YEAK Chee Keong, CFA Termporn TANTIVIVAT . Power (65) 6433 5730 [email protected] (66) 2658 6300 ext 1520 [email protected] YIN Shao Yang, CPA . Healthcare . Property (603) 2297 8916 [email protected] . Offshore & Marine Woraphon WIROONSRI . Gaming – Regional Alison FOK (66) 2658 6300 ext 1560 [email protected] . Media (65) 6433 5745 [email protected] . Banking & Finance . Power . Services Jaroonpan WATTANAWONG WONG Wei Sum, CFA . S-chips (66) 2658 6300 ext 1404 [email protected] (603) 2297 8679 [email protected] Bernard CHIN . Transportation . Property & REITs (65) 6433 5726 [email protected] . Small cap. LEE Yen Ling . Transport Suchot THIRAWANNARAT (603) 2297 8691 [email protected] . Shipping (66) 2658 6300 ext 1550 [email protected] . Building Materials . Aviation . Automotive . Manufacturing . Construction Materials . Technology INDONESIA . Soft commodity Katarina SETIAWAN Head of Research LEE Cheng Hooi Head of Retail (62) 21 2557 1125 [email protected] [email protected] VIETNAM . Consumer . Technicals Michael KOKALARI, CFA Head of Research . Strategy +84 838 38 66 47 [email protected] . Telcos . Strategy HONG KONG / CHINA Lucky ARIESANDI, CFA Nguyen Thi Ngan Tuyen Edward FUNG Head of Research (62) 21 2557 1127 [email protected] +84 844 55 58 88 x 8081 [email protected] (852) 2268 0632 [email protected] . Base metals . Food and Beverage . Construction . Coal . Oil and Gas Ivan CHEUNG . Oil & Gas Ngo Bich Van (852) 2268 0634 [email protected] Rahmi MARINA +84 844 55 58 88 x 8084 [email protected] . Property (62) 21 2557 1128 [email protected] . Banking . Industrial . Banking Nguyen Quang Duy Ivan LI . Multifinance +84 844 55 58 88 x 8082 [email protected] (852) 2268 0641 [email protected] Pandu ANUGRAH . Rubber . Banking & Finance (62) 21 2557 1137 [email protected] Dang Thi Kim Thoa Jacqueline KO . Auto +84 844 55 58 88 x 8083 [email protected] (852) 2268 0633 [email protected] . Heavy equipment . Consumer Staples . Consumer . Plantation Nguyen Trung Hoa Andy POON . Toll road +84 844 55 58 88 x 8088 [email protected] (852) 2268 0645 [email protected] Adi N. WICAKSONO . Steel . Telecom & equipment (62) 21 2557 1130 [email protected] . Sugar Samantha KWONG . Generalist . Macro (852) 2268 0640 [email protected] Anthony YUNUS

. Consumer Discretionaries (62) 21 2557 1134 [email protected] Alex YEUNG . Cement (852) 2268 0636 [email protected] . Infrastructure . Industrial . Property HAN Catherine C Arwani PRANADJAYA (852) 2268 0631 [email protected] (62) 21 2557 1129 [email protected] . Cement . Technicals Anita HWANG, CFA | Jacky WONG, CFA [email protected] | [email protected] PHILIPPINES (852) 2268 0142 | (852) 2268 0107 Luz LORENZO Head of Research . Special Situations +63 2 849 8836 [email protected] . Quants . Strategy

Laura DY-LIACCO INDIA (63) 2 849 8840 [email protected] Jigar SHAH Head of Research . Utilities (91) 22 6623 2601 [email protected] . Conglomerates . Oil & Gas . Telcos . Automobile Lovell SARREAL . Cement (63) 2 849 8841 [email protected] Anubhav GUPTA . Consumer (91) 22 6623 2605 [email protected] . Media . Metal & Mining . Cement . Capital goods . Mining . Property Kenneth NERECINA Haripreet BATRA (63) 2 849 8839 [email protected] (91) 226623 2606 [email protected] . Conglomerates . Software . Property . Media . Ports/ Logistics AM Ganesh R Katherine TAN (91) 226623 2607 [email protected] (63) 2 849 8843 [email protected] . Telecom . Banks . Contractor . Construction Darpin SHAH (91) 226623 2610 [email protected] . Banking & Financial Services Gagan KWATRA (91) 226623 2612 [email protected] . Small Cap

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Swire Properties Limited

Definition of Ratings Kim Eng Research uses the following rating system: BUY Total return is expected to be above 15% in the next 12 months HOLD Total return is expected to be between -15% to +15% in the next 12 months SELL Total return is expected to be below -15% in the next 12 months

Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

Some common terms abbreviated in this report (where they appear): Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax

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Swire Properties Limited

 Malaysia  Singapore  London  New York Maybank Investment Bank Berhad Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Securities Maybank Kim Eng Securities USA (A Participating Organisation of Maybank Kim Eng Research Pte Ltd (London) Ltd Inc Bursa Malaysia Securities Berhad) 9 Temasek Boulevard 6/F, 20 St. Dunstan’s Hill 777 Third Avenue, 21st Floor 33rd Floor, Menara Maybank, #39-00 Suntec Tower 2 London EC3R 8HY, UK New York, NY 10017, U.S.A. 100 Jalan Tun Perak, Singapore 038989 50050 Kuala Lumpur Tel: (44) 20 7621 9298 Tel: (212) 688 8886 Tel: (603) 2059 1888; Tel: (65) 6336 9090 Dealers’ Tel: (44) 20 7626 2828 Fax: (212) 688 3500 Fax: (603) 2078 4194 Fax: (65) 6339 6003 Fax: (44) 20 7283 6674

Stockbroking Business:  Hong Kong  Indonesia  India Level 8, Tower C, Dataran Maybank, Kim Eng Securities (HK) Ltd PT Kim Eng Securities Kim Eng Securities India Pvt Ltd No.1, Jalan Maarof Level 30, Plaza Bapindo 2nd Floor, The International 16, 59000 Kuala Lumpur Three Pacific Place, Citibank Tower 17th Floor Maharishi Karve Road, Tel: (603) 2297 8888 1 Queen’s Road East, Jl Jend. Sudirman Kav. 54-55 Churchgate Station, Fax: (603) 2282 5136 Hong Kong Jakarta 12190, Indonesia Mumbai City - 400 020, India

Tel: (852) 2268 0800 Tel: (62) 21 2557 1188 Tel: (91).22.6623.2600 Fax: (852) 2877 0104 Fax: (62) 21 2557 1189 Fax: (91).22.6623.2604

 Philippines  Thailand  Vietnam  Saudi Arabia Maybank ATR Kim Eng Securities Maybank Kim Eng Securities In association with In association with Inc. (Thailand) Public Company Kim Eng Vietnam Securities Anfaal Capital 17/F, Tower One & Exchange Plaza Limited Company Villa 47, Tujjar Jeddah Ayala Triangle, Ayala Avenue 999/9 The Offices at Central World, 1st Floor, 255 Tran Hung Dao St. Prince Mohammed bin Abdulaziz Makati City, Philippines 1200 20th - 21st Floor, District 1 Street P.O. Box 126575 Rama 1 Road Pathumwan, Ho Chi Minh City, Vietnam Jeddah 21352 Tel: (63) 2 849 8888 Bangkok 10330, Thailand Fax: (63) 2 848 5738 Tel : (84) 838 38 66 36 Tel: (966) 2 6068686 Tel: (66) 2 658 6817 (sales) Fax : (84) 838 38 66 39 Fax: (966) 26068787 Tel: (66) 2 658 6801 (research)

 South Asia Sales Trading  North Asia Sales Trading Connie TAN Eddie LAU [email protected] [email protected] Tel: (65) 6333 5775 Tel: (852) 2268 0800 US Toll Free: 1 866 406 7447 US Toll Free: 1 866 598 2267   www.maybank-ke.com | www.kimengresearch.com | www.kimeng.com.hk  

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Policies of Kim Eng Securities (Hong Kong) Limited (“KESHK”):  Research analysts who publish investment research are not directly supervised by, and do not report directly to, investment banking or sales and trading personnel.  Research analysts’ compensation or remuneration should not be linked to any specific investment banking function or to recommendations in research.  Research analysts or their associates are prohibited from dealing in the securities or any derivatives of any companies the research analysts review/analyse/cover.  Research analysts or their associates are prohibited from holding any directorship or other position in any company the research analysts review/analyse/cover.

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This report has been produced as of the date hereof and the information herein maybe subject to change. Maybank Kim Eng Research Pte Ltd ("MBKERPL") in Singapore has no obligation to update such information for any recipient. Recipients of this report are to contact MBKERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), MBKERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

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The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

© 2012 Kim Eng Securities (Hong Kong) Limited. All rights reserved. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of Kim Eng Securities (Hong Kong) Limited. Kim Eng Securities (Hong Kong) Limited accepts no liability whatsoever for the actions of third parties in this respect.

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