股

票

研 [Table_Title] Van Liu 刘斐凡 Company Report: Powerlong Real Estate (01238 HK) 究 (86755) 2397 6672 EquityResearch 公司报告： 宝龙地产 (01238 HK) [email protected]

6 May 2019 Expected[Table_Summary Fast] Growth with Low Valuation, Maintain "Buy" 预期较快增长且低估值，维持“买入”

 We expect fairly fast revenue growth rate. Sales target and saleable [Table_Rank] resources in 2019 will reach RMB50.0 bn (indicating 21.8% YoY growth) and Rating: Buy Maintained RMB90.2 bn (indicating 55.4% target sale-through rate), respectively. With 公 sufficient saleable resources, we expect fairly fast contracted sales growth. 评级： 买入 (维持)

司 We also expect rental income to increase at a CAGR of 29.8% in 2018-2021.

报  We expect Powerlong's margins to be consolidated. Gross margin is 6[Table_Price-18m TP目标价] : HK$4.85 告 expected to remain at around 37.0% between 2019-2021 due to low unit land Revised from 原目标价: HK$5.00 cost (16.5% of ASP in 1Q19). CompanyReport Share price 股价: HK$3.820  Funding costs are expected to decrease along with relatively high expected net gearing ratio of over 88. 6% during 2019-2021. 2018 underlying net profit missed our expectation by 27.4% on less GFA delivered and Stock performance higher-than-expected LAT. We revise down underling net profit in 2019F 股价表现 and 2020F by 26.6% and 6.3%, respectively. [Table_QuotePic]  Therefore, we revise down the Company's target price from HK$5.00 to HK$4.85, which represents a 52% discount to the Company's 2019E NAV of HK$10.10 per share, 6.9x underlying 2019 PER and 0.7x 2019 PBR.

Alongside a low valuation, we maintain "Buy". Risks: lower-than-expected

证 contracted sales and failure in commercial project operations.

券 告

研 报 我们预计公司将有较快的收入增长。2019 年销售目标及可售资源分别为人民币 500 亿元

（预示 21.8%的同比增长）和人民币 902 亿元（暗示 55.4%的去化率）。基于充足的可售

究 究

货源，我们预计快速的合约销售增速。我们也预计租金收入在 2018-2021 年以 29.8%的复 报 研 合增长率增长。

告

券 我们预计宝龙的利润率将被巩固。由于低的单位地价（2019 年第一季度销售均价的

EquityResearch Report 16.5%），毛利率将在 2019 到 2021 年维持在 37.0%左右。 Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y [Tab 证 股价变动 1 个月 3 个月 1 年  融资成本预计下降，伴随着 2019-2021 年预计超过 88.6%的相对较高的净资产负债率。由 Abs. % le_I 于更少面积结转和高于预期的土地增值税，2018 年核心净利低于我们预期 27.4%。我们 绝对变动 % (5.4) 7.9 (6.6)

Rel. % to HS Index

将 2019 年及 2020 年的核心净利分别下调 26.6%以及 6.3%。 nfo1 相对恒指变动 % (5.9) 0.4 (7.1) Avg. Share price(HK$)  因此，我们将公司目标价从 5.00 港元下调至 4.85 港元，相当于较 10.10 港元的 2019 年 平均股价（港元） 4.0 3.9 3.7

] 房 每股净资产有 52%的折让，也分别相当于 6.9 倍 2019 年核心市盈率和 0.7 倍 2019 年市净 Source: Bloomberg, Guotai Junan International. 地 率。基于低估值，我们维持“买入”。风险：低于预期的房屋销售和一些商业运营项目的失 败运营。 产 行 业

Property Sector

Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结Profit ] 收入 股东净利 每股净利 每股净利变动 市盈率 每股净资产 市净率 每股股息 股息率 净资产收益率

12/31 (RMB m) (RMB m) (RMB) (△ %) (x) (RMB) (x) (RMB) (%) (%) [Tab

2017A 15,593 3,337 0.841 35.0 3.8 6.383 0.5 0.165 5.2 13.9 le_I 2018A 19,594 2,837 0.710 (15.6) 4.7 6.299 0.5 0.203 6.1 10.8 nfo2 2019F 25,830 3,793 0.876 23.4 3.7 6.948 0.5 0.227 7.0 13.2 2020F 37,272 4,982 1.150 31.3 2.8 7.775 0.4 0.322 9.9 15.6 中] 2021F 48,537 6,038 1.394 21.2 2.3 8.765 0.4 0.404 12.4 16.9 外 宝 [Table_BaseData]Shares in issue (m) 总股数 (m) 3,997.3 Major shareholder 大股东 Hoi Kin Hong 46.0% 龙运 Market cap. (HK$ m) 市值 (HK$ m) 15,269.7 Free float (%) 自由流通比率(%) 54.1 地 3 month average vol. 3 个月平均成交股数(‘000) 2,808.1 FY19 Net gearing (%) FY19 净负债/股东资金 (%) 99.2 输 产 52 Weeks high/low (HK$) 52 周高/低 (HK$) 5.000 / 2.610 FY19 Est. NAV (HK$) FY19 每股估值（港元） 10.1

Source: the Company, Guotai Junan International.

See the last page for disclaimer Page 1 of 10

Powerlong Real Estate (01238 HK) (01238 PowerlongEstate Real

[Table_PageHeader]Powerlong Real Estate (01238 HK)

Fundamentals bounced back in Mar. 2019. During Jan.-Mar. 2019, YoY increase in commodity house sales increased 2.80

ppts compared to that during Jan.-Feb. 2019. Investment maintained a strong YoY growth] rate1 r . Sa ourcesM t ofh fundsg i R for_ reale l estateb a T [

development enterprises rebounded to 5.9%. We see fundamentals bouncing back alongside some stimulative measures

related to policy and credit environment.

Figure 1: Cumulative House Sales Amount in Figure 2: Cumulative House Sales GFA in China

16,000 70.0% 2,000 45.0% 6 May 2019 40.0% 14,000 60.0% 1,800 1,600 35.0% 12,000 50.0% 1,400 30.0% 10,000 1,200 25.0% 40.0% 20.0% 8,000 1,000 30.0% 15.0% 6,000 800 10.0% 600 4,000 20.0% 5.0% 400 0.0% 10.0% 2,000 200 -5.0%

0 0.0% 0 -10.0%

15 17 16 18

16 18 19 17

16 17 15 18

16 17 18

16 18 19 17

15 16 17 18

- - - -

- - - -

- - - -

- - -

- - - -

- - - -

Jul Jul Jul Jul

Jan Jan Jan Jan

Mar Mar Mar Mar

Sep Nov Sep Sep Nov Nov Sep Nov

May May May Amount Sold of Commodity Houses (LHS)(RMB bn) GFA Sold of Commodity Houses (LHS)(sq.m. mn) Amount Sold of Residential Houses (LHS) (RMB bn) GFA Sold of Residential Houses (LHS) (sq.m. mn) Amount Sold YTD YoY of Commodity Houses (RHS) GFA Sold of Commodity Houses (RHS)

Amount Sold YTD YoY of Residential Houses (RHS) ] 2 r a M t h g i R _ e l b a T [

GFA Sold of Residential Houses (RHS)

Source: National Bureau of Statistics of China, Guotai Junan International. Source: National Bureau of Statistics of China, Guotai Junan International.

Figure 3: Key Property Development and Sales Data

30.0% 15.8%

20.0% 1.0% 22.5% 7.0% 17.2%14.2% 6.5% 8.1% 1.3% 10.0% 7.7% 9.5% 3.0% 10.5% 6.9% 7.0% 0.0%

-7.6% (01238 HK)

2014 2015 2016 2017 2018 2019F -10.0% -4.4% -10.7%-14.0% -14.0% -7.8% -8.7% -20.0% -3.4%

-31.7% 宝龙地产 -30.0%

-40.0%

GFA Newly Started YTD YoY Land Area Sold YTD YoY Investment YTD YoY GFA Sold of Commodity Houses

Source: National Bureau of Statistics of China, Guotai Junan International.

External environment is likely to ease at a slower rate than our previous expectation due to a rebound in fundamentals. Powerlong Real Estate Targeted policies will be maintained to promote the steady and sound development of the property sector. In Apr. 2019, the Political Bureau of the Central Committee reiterated the topic of "housing for living, not for speculation". Considering the stable development of the property sector and recovery in fundamentals, we expect that governments will slow down its steps in advancing loosening measures in the external environment. However, with downside pressure in the property sector in 2H19, we expect easing measures to be published by local governments in 2H19. Overall, for the policy and monetary environment, the key note of healthy property market maintenance will not change.

The Property market is likely to rebound. We see some stimulative measures related to policy and credit environment. With strong rigid demand, we expect some sales rebound in the Shanghai property market.

We expect fairly fast contracted sales growth in 2019 but with low attributable rates. In 2018, contracted sales amounted to RMB41.036 bn, up 96.5% YoY, achieving 117.2% of the Company’s 2018 sales target. Sales target and saleable resources in 2019 will reach RMB50.0 bn (indicating 21.8% YoY growth) and RMB90.2 bn (indicating 55.4% target sale-through rate),

respectively. Around 70.0% of its saleable resources are located in tier-1 and tire-2 cities. That is, we expect fast contracted

Report sales growth alongside abundant saleable resources. During 1Q18, contracted sales amounted to RMB10.675 bn, up 60.7%

YoY.

Company

See the last page for disclaimer Page 2 of 10 [Table_PageHeader]Powerlong Real Estate (01238 HK)

Figure 4: Powerlong’s 2019 Saleable Resources Breakdown Figure 5: Powerlong’s 2019 Saleable Resources

] 1 r a M t h g i R _ e l b a T [ by Region Breakdown by Product Type

Central/West China, 2% Others, 6%

Hainan, 11% 6 May 2019 Bohai Rim, 5% Residential, Commercial, 60% 34% Yangtze River Delta, 75%

Source: the Company. Source: the Company.

Figure 6: The Company's Contracted Sales

6.00 40,000

] 2 r a M t h g i R _ e l b a T [ 35,000 5.00 30,000 4.00 25,000 3.00 20,000 15,000 2.00 10,000 1.00

5,000

0.00 0

16 16 18 18 17 17

17 18 19 16 17 18

16 16 17 17 18 18 19

------

------

Jul Jul Jul

Jan Jan Jan

Mar Mar Mar Mar

Nov Sep Nov Sep Nov Sep

May May May

Contracted Sales(bn RMB)(LHS) ASP (RMB/sq.m.)(RHS) (01238 HK)

Source: the Company.

宝龙地产 Alongside accelerating investment property portfolio expansion, we expect fast rental income growth. As at the end of 2018, the Company had a total rental GFA of 2,856,744 sq.m. for malls in operation. The Company is going to add another 7, 8 and 7 new malls in 2019, 2020 and 2021, respectively. With recently opened malls gradually turning into mature ones and new malls being added to the portfolio, we expect rental income to increase by more than double from RMB1,124 mn in 2018 to RMB2,457 mn in 2021, or at a CAGR of 29.8% in 2018-2021.

Powerlong Real Estate The Company strengthened its land parcels exposure in the Yangtze River Delta region. During 2018, the Company acquired 29 parcels of land for an attributable land acquisition cost of RMB12,395 mn. The total GFA amounted to 5,736,646 sq.m. Unit land cost came to approximately RMB4,337/sq.m. 75.6% of newly acquired land parcels were exposed in the Yangtze River Delta region.

Land bank quality has decreased but low proper unit land cost could stabilize the Company's gross margin. As at the end of 2018, the Company's land bank had a total GFA of 21.205 mn sq.m., of which, tier-1 cities (10.4%) and tier-2 cities (48.9%) accounted for 59.3% of the Company’s total land bank. Shanghai accounted for the largest proportion of the Company's land bank with GFA of 1,379,279 sq.m., or 10.7% of its total land bank. We think the Company's land bank quality has fallen, along with land bank in lower-tier cities increasing, The Company's unit land cost amounted to RMB2,486/sq.m., 16.5% of ASP in 1Q19. We think that the low proper unit land cost is likely to drive the Company's gross margins to stability over the next three years.

Report

Company

See the last page for disclaimer Page 3 of 10 [Table_PageHeader]Powerlong Real Estate (01238 HK)

Figure 7: Powerlong's Land Bank Distribution by City Tier in Figure 8: Powerlong's Land Bank Distribution by City

] 1 r a M t h g i R _ e l b a T [

Terms of GFA as at the End of 2018 Tier in Terms of Amount as at the End of 2018

Tier-1 Cities, Tier-1 Cities, 10.4% 17.4% Tier-3 / Tier-4

Tier-3 / Tier-4 Cities, 32.7% 6 May 2019 Cities, 40.7%

Tier-2 Cities, 48.9% Tier-2 Cities, 49.9%

Source: the Company. Source: the Company.

Table 1: Powerlong's Land Bank Distribution as at End of 2018 Region Province / Municipality City GFA (sq.m.) Proportion

] 2 r a M t h g i R _ e l b a T [

Shanghai Shanghai 1,379,279 6.5% Ningbo 2,271,338 10.7% Hangzhou 1,999,135 9.4% Jinhua 1,127,468 5.3% Zhejiang Shaoxing 934,032 4.4%

Wenzhou 798,326 3.8%

Zhoushan 636,662 3.0% Jiaxing 118,316 0.6%

Yangtze Nanjing 1,054,867 5.0%

(01238 HK)

River Delta Xuzhou 923,782 4.4% Suzhou 754,209 3.6%

Yancheng 476,028 2.2% 宝龙地产 Jiangsu Nantong 469,162 2.2% Wuxi 431,757 2.0% Changzhou 419,900 2.0% Huaian 397,792 1.9% Zhenjiang 288,785 1.4%

Anhui Fuyang 30,175 0.1% Powerlong Real Estate

Bohai Yantai 828,909 3.9% Shandong Dongying 191,857 0.9% Economic Qingdao 132,927 0.6% Rim Tianjing 715,978 3.4% Quanzhou 1,392,806 6.6% West Taiwan Ningde 378,180 1.8% Fujian Straits Zhangzhou 227,285 1.1% Xiamen 82,028 0.4% Xinxiang 456,014 2.2% Henan Luoyang 179,460 0.8% Midwest Chongqing Chongqing 7,547 0.0%

Sichuan Bazhong 89,759 0.4%

Hainan Hainan Haikou 1,871,295 8.8% Report Total 21,204,519 100.0% Source: the Company, Guotai Junan International.

Company

See the last page for disclaimer Page 4 of 10 [Table_PageHeader]Powerlong Real Estate (01238 HK)

Funding costs are expected to decrease but exchange losses may rise riding on rising uncertainties in trade

negotiations between China and the US. The weighted average funding cost in 2018 was] 1 6.48r %a , M slightlyt h increasingg i R _ 0.19e l pptsb a T [

comparing that in 2017. Considering fast contracted sales growth and investment property portfolio expansion, we expect net

gearing ratio to maintain a high level of over 88.6% during 2019-2021. Despite a high leverage ratio, we expect limited financial risks riding on that the Company's recurring income has covered its interest expenses.

Figure 9: Powerlong’s Debt Maturity Profile in 2018 Figure 10: Powerlong’s Debt Structure in 2018 6 May 2019

Over 5 Years, 7.4% Others, 7.4% Corporate Within 1 Year, Bond, 19.3% 34.0% 2-5 Years, Bank Loan, 28.6% 49.7% Trust, 8.3%

Senior Note, 1-2 Years, 15.3% 30.0%

] 2 r a M t h g i R _ e l b a T [

Source: the Company. Source: the Company.

2018 underlying net profit missed our expectation by 27.4% riding on less-than-expected GFA delivered and higher-than-expected land appreciation tax ("LAT"). Top line increased by 25.7% YoY to RMB19,594 mn in 2018. Gross profit amounted to RMB7,553 mn, up 44.5% YoY. Given higher exchange loss and more land appreciation tax paid, net profit decreased 15.0% YoY to RMB2,837 mn, which missed our expectation. If we exclude after-tax fair value gains on IPs and exchange losses, underlying net profit only increased 7.5% YoY to RMB2,133 mn, which also missed our expectation. The

Company recorded gross margin gain of 5.0 ppts YoY. Underlying net profit margin slightly decreased 1.8 ppts YoY to 10.9%. Net (01238 HK) gearing ratio increased by 8.9 ppts YoY riding on less-than-expected cash collections from contracted sales. Cash balance elevated 58.4% YoY to RMB15,776 mn.

宝龙地产 Table 2: Comparison of the Company’s Balance Sheet and Income Statement in 2017 and 2018 RMB mn 2017 2018 Change Total revenue 15,593 19,594 25.7% Gross profit 5,225 7,553 44.5% GPM 33.5% 38.5% 5.0 ppts NP (Inc. after-tax fair value gains on IP and exchange losses) 3,337 2,837 -15.0%

NP (Ex. after-tax fair value gains on IP and exchange losses) 1,985 2,133 7.5% Powerlong Real Estate NPM (Inc. after-tax fair value gains on IP and exchange losses) 21.4% 14.5% -6.9 ppts NPM (Ex. after-tax fair value gains on IP and exchange losses) 12.7% 10.9% -1.8 ppts DPS (HK$ cent) 16.5 20.3 23.1% Underlying EPS (RMB cent) 50.0 49.2 -1.5% Cash and cash equivalents 9,962 15,776 58.4% Total asset 95,491 132,055 38.3% Stock of properties 20,761 41,793 101.3% Total debt 35,536 47,358 33.3% Shareholders' equity 25,337 27,287 7.7% ROE 13.9% 10.8% -3.1 ppts Net gearing ratio 92.2% 101.1% 8.9 ppts Source: the Company, Guotai Junan International.

Report

Company

See the last page for disclaimer Page 5 of 10 [Table_PageHeader]Powerlong Real Estate (01238 HK)

We have decreased underlying profit estimations. We expect Powerlong's contracted sales rate to maintain fairly fast growth

due to tightening policy easing for the commercial pipeline and sufficient saleable resources] 1 inr highera M -t tierh cities.g i InR addition,_ e l b wea T [

expect fast rental income growth. However, GFA delivered should be lower than our previous assumptions. Therefore, we revise

down 2019F and 2020F total revenue by 26.8% and 14.6% to RMB25,830 mn and RMB37,272 mn, respectively. With low unit land costs, we expect that gross margin in 2019F and 2020F will remain at a stable level of over 36.0%. We also expect LAT to be higher than our previous assumptions. Overall, we have revised down underlying profit estimations in 2019F and 2020F by

26.6% and 6.3% to RMB2,577 mn and RMB3,664 mn, respectively. Along with less cash collections from contracted sales, we 6 May 2019 revise up net gearing ratios in 2019F and 2020F by 0.4 ppts and 5.9 ppts, respectively.

Table 3: Revisions to 2018-2020 Profit Estimations RMB mn New estimation Old estimation Change 2019F 2020F 2021F 2019F 2020F 2021F 2019F 2020F 2021F

Total revenue 25,830 37,272 48,537 35,282 43,644 n.a. -26.8% -14.6% n.a. Gross profit 9,510 13,873 17,962 11,822 13,675 n.a. -19.6% 1.5% n.a. Operating profit 9,699 13,183 16,469 11,722 13,103 n.a. -17.3% 0.6% n.a. Net profit 3,793 4,982 6,038 4,844 5,364 n.a. -21.7% -7.1% n.a. Underlying profit 2,577 3,664 4,595 3,509 3,912 n.a. -26.6% -6.3% n.a.

Gross margin 36.8% 37.2% 37.0% 33.5% 31.3% n.a. ] 3.32 r pptsa M t h 5.9g pptsi R _ e l n.a.b a T [

Operating profit margin 37.5% 35.4% 33.9% 33.2% 30.0% n.a. 4.3 ppts 5.3 ppts n.a. Net profit margin 14.7% 13.4% 12.4% 13.7% 12.3% n.a. 1.0 ppts 1.1 ppts n.a. Underlying net profit margin 10.0% 9.8% 9.5% 9.9% 9.0% n.a. 0.0 ppts 0.9 ppts n.a. ROE 13.2% 15.6% 16.9% 15.4% 14.2% n.a. -2.1 ppts 1.4 ppts n.a.

ROCE 4.6% 5.4% 5.8% 5.8% 5.5% n.a. -1.3 ppts -0.1 ppts n.a.

ROA 2.6% 2.9% 3.0% 3.4% 3.1% n.a. -0.8 ppts -0.2 ppts n.a. Net gearing ratio 99.2% 96.5% 88.6% 98.9% 90.6% n.a. 0.4 ppts 5.9 ppts n.a.

Source: Guotai Junan International. (01238 HK)

We revise down TP. Given sufficient saleable resources in higher-tier cities, contracted sales should grow fairly fast. Rental

income will grow rapidly. Gross margins will likely stabilize. Funding costs are expected to decrease. The Company's valuation 宝龙地产 has also remained at a low level. Based on the current share price, the Company's 2019F, 2020F and 2021F PER is only 3.7x, 2.8x and 2.3x, respectively. However, as we have revised down underlying net profit, we revise down the Company’s target price from HK$5.00 to HK$4.85, which represents a 52% discount to the Company’s revised 2019E NAV of HK$10.10 per share, 6.9x underlying 2019 PER and 0.7x 2018 PBR. We maintain Powerlong's investment rating as "Buy". Risks: (1) lower-than-expected contracted sales and (2) failures in commercial project operations.

Powerlong Real Estate Table 4: Breakdown of Powerlong’s 2019 NAV NAV Summary Results 2019F Development Properties (RMB mn) 40,374 Investment Properties (RMB mn) 31,911 Total Gross Asset Value (RMB mn) 72,285 (Net Debt)/Net Cash (35,106) NAV (RMB mn) 37,179 No. of Outstanding Shares 4,332 NAV/share (RMB) 8.58 Exchange Rate 0.85 NAV/share (HK$) 10.10 TP Discount to NAV 52%

Price Target (HK$) 4.85

Source: the Company, Guotai Junan International. Report

Company

See the last page for disclaimer Page 6 of 10 [Table_PageHeader]Powerlong Real Estate (01238 HK)

Figure 11: Powerlong’s 3-Year Historical P/B Figure 12: Powerlong’s 3-Year Historical P/E

] 1 r a M t h g i R _ e l b a T [

6 May 2019

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

] 2 r a M t h g i R _ e l b a T [

(01238 HK)

宝龙地产 Powerlong Real Estate

Report

Company

See the last page for disclaimer Page 7 of 10 [Table_PageHeader]Powerlong Real Estate (01238 HK)

Table 5: Peers Comparison PE PB Company Stock Code Mkt Cap (HK$ m) Last Price HK$ ] 1 r a M t h g D/Y%i R _ ROEe l EV/EBITDAb a T [

2019F 2020F 2021F 2019F 2020F 2021F 2019F 2019F 2019F HK listed large developers with major revenue from mainland

China Overseas Land & 00688 HK 321,016.7 29.300 7.0 6.0 5.4 1.0 0.9 0.8 3.8 15.1 3.8 ChinaInvest Evergrande 03333 HK 328,790.2 25.050 5.4 5.0 4.4 1.7 1.4 1.1 9.9 35.1 9.9 ChinaGroup Resources Land 01109 HK 237,384.7 34.250 8.4 7.3 6.2 1.3 1.2 1.0 4.7 16.5 4.7 CountryLtd Garden 02007 HK 275,951.2 12.740 5.6 4.9 4.3 1.5 1.2 1.0 5.5 29.9 5.5

LongforHoldings Group Co Holdings 00960 HK 174,348.0 29.300 8.9 7.4 6.3 1.6 1.4 1.2 4.8 19.0 4.8 6 May 2019 ChinaLtd Co Ltd-H 02202 HK 375,086.8 30.400 7.0 6.2 5.5 1.6 1.3 1.1 4.8 23.6 4.8 China Holdings 01918 HK 179,519.5 40.500 6.2 4.9 4.0 2.0 1.4 1.1 3.5 34.1 3.5 AgileLtd Group Holdings 03383 HK 46,691.2 11.920 4.9 4.3 3.9 0.8 0.8 0.7 9.4 16.9 9.4 ShimaoLtd Property 00813 HK 78,575.5 23.800 6.0 4.9 4.1 1.0 0.8 0.7 6.6 17.1 6.6 GuangzhouHoldings Ltd R&F 02777 HK 49,688.9 15.420 3.4 2.8 2.4 0.6 0.5 0.4 12.0 17.5 12.0 BbmgProperties Corp -- H 02009 HK 44,511.3 2.710 6.2 5.7 5.9 0.4 0.4 0.4 2.9 6.9 2.9 Sino-Ocean Group 03377 HK 27,112.9 3.560 5.9 4.5 4.2 0.4 0.4 0.4 7.5 7.3 7.5 ChinaHolding Jinmao Ltd Holdings 00817 HK 59,401.9 5.130 7.6 5.9 4.7 1.2 1.0 0.9 5.3 15.6 5.3 HopsonGroup Development 00754 HK 19,228.8 8.640 9.4 8.6 n.a. n.a. n.a. n.a. 3.1 n.a. 3.1 ZhenroHoldings Properties 06158 HK 22,387.9 5.430 6.0 4.3 3.5 1.1 0.9 0.8 n.a. 17.9 n.a. KwgGroup Group Ltd Holdings Ltd 01813 HK 29,360.2 9.250 4.9 4.0 3.2 0.8 0.7 0.6 7.8 16.0 7.8 Co Ltd 00123 HK 28,487.4 1.840 7.1 6.1 6.3 0.5 0.5 0.5 5.8 7.9 5.8

Shenzhen Investment 00604 HK 26,079.8 3.090 7.3 6.7 6.2 0.6 0.5 ] 2 r 0.5a M t h 5.7g i R _ 7.8e l b 5.7a T [

RonshineLtd China 03301 HK 18,538.1 10.760 3.9 3.1 2.4 0.9 0.7 0.6 6.5 26.0 6.5 YuzhouHoldings Properties Ltd Co 01628 HK 19,249.4 4.010 3.6 3.0 2.8 0.7 0.6 0.5 9.4 21.4 9.4 03900 HK 14,475.0 6.670 4.8 4.5 4.0 0.4 0.3 0.3 4.5 7.3 4.5 ChinaHoldings Aoyuan Group 03883 HK 26,189.7 9.780 6.1 4.2 3.2 1.7 1.4 1.1 6.6 28.0 6.6 SohoLtd China Ltd 00410 HK 14,610.7 2.810 25.1 23.2 17.6 0.4 0.4 0.4 3.4 1.4 3.4 Median 6.1 4.9 4.3 0.9 0.8 0.7 5.6 17.0 5.6

Simple Average 7.0 6.0 5.0 1.0 0.9 0.7 6.1 17.7 6.1

Weighted Average 6.7 5.8 5.0 1.3 1.1 1.0 5.7 22.7 5.7

HK listed mid-small developers with major revenue from (01238 HK)

Chinamainland Overseas Grand 00081 HK 14,206.9 4.150 4.8 3.9 3.1 0.6 0.6 0.5 4.4 13.0 4.4 PolyOceans Property Group Co 00119 HK 11,863.4 3.240 4.0 3.7 2.7 0.4 0.3 0.3 7.0 10.0 7.0 ShanghaiLtd Industrial 00563 HK 7,793.8 1.620 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

ModernUrban De Land China Co 01107 HK 3,432.7 1.230 4.1 3.6 3.5 0.5 0.4 0.4 6.8 12.5 6.8 宝龙地产 PowerlongLtd Real Estate 01238 HK 15,269.7 3.820 3.3 2.7 0.1 0.4 0.4 0.4 10.1 13.1 10.1 CHoldin C Land Holdings Ltd 01224 HK 7,065.8 1.820 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 01777 HK 8,647.9 1.500 6.3 5.2 n.a. 0.5 0.5 n.a. 5.0 6.8 5.0 YuexiuGroup CoReal Estate 00405 HK 16,814.7 5.390 18.9 18.5 n.a. 1.0 1.0 1.2 6.2 8.1 6.2 CentralInvestmen China Real 00832 HK 10,105.7 3.700 5.8 3.9 3.7 0.9 0.7 0.7 6.0 15.2 6.0 ChinaEstate Sce Group 01966 HK 15,473.0 3.750 3.9 3.1 2.7 0.7 0.6 0.5 8.0 19.4 8.0

TopHoldings Spring Ltd International 03688 HK 3,145.6 2.270 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Powerlong Real Estate BeijingHld Capital Land 02868 HK 8,660.0 2.860 n.a. n.a. n.a. n.a. n.a. n.a. 8.6 n.a. 8.6 ZhongLtd-H An Real Estate 00672 HK 1,656.0 0.285 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. BeijingLtd North Star Co 00588 HK 14,797.8 3.050 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. ChinaLtd-H South City 01668 HK 9,902.9 1.220 2.9 2.4 x 0.3 0.3 0.2 5.9 7.2 5.9 ShuiHoldings On Land Ltd 00272 HK 15,398.8 1.910 7.0 6.1 18.2 0.3 0.3 0.3 5.7 4.2 5.7 Glorious Property 00845 HK 3,039.1 0.390 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. MedianHoldings 4.4 3.8 2.9 0.5 0.5 0.4 6.2 11.3 6.2

Simple Average 6.1 5.3 4.5 0.6 0.5 0.5 6.7 11.0 6.7

Weighted Average 6.7 5.9 4.9 0.6 0.5 0.5 6.8 11.0 6.8

Source: Bloomberg.

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Company

See the last page for disclaimer Page 8 of 10 [Table_PageHeader]Powerlong Real Estate (01238 HK)

Financial Statements and Ratios

[Table_IncomeStatement] [Table_BalanceSheet] ] 1 r a M t h g i R _ e l b a T [ Income Statement Balance Sheet

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F

Total Revenue 15,593 19,594 25,830 37,272 48,537 Property and equipment 3,529 3,371 3,708 4,078 4,486

- Sales of properties 13,302 16,667 22,082 32,177 41,849 JVs 4,187 4,127 4,295 4,462 4,629

- Rental Income 1,804 2,249 2,872 3,880 5,097 Investment properties 39,218 45,659 52,123 59,446 66,963

- Other Income 487 678 876 1,215 1,591 Other Non-current Assets 3,097 2,030 2,104 2,181 2,262

Cost of sales (10,368) (12,041) (16,320) (23,398) (30,575) Total Non-current Assets 50,030 55,187 62,229 70,168 78,340 6 May 2019

Gross Profit 5,225 7,553 9,510 13,873 17,962 Cash & Cash Equivalents 9,387 14,840 16,098 17,044 19,901

- Change in Fair Value of IPs 2,135 2,501 2,911 3,323 3,790 Restricted cash 576 936 889 845 802

- SG&A (1,395) (2,267) (2,958) (4,268) (5,559) Properties for Sale 20,761 41,793 52,017 61,437 68,469 - Other Gains, Net 558 216 236 255 275 Trade and Other Receivables 10,559 16,980 22,226 31,796 41,229 Operating Profit 6,523 8,003 9,699 13,183 16,469 Other Current Assets 4,178 2,319 3,006 4,164 5,342

- Finance income/(costs), net (573) (1,377) (575) (690) (767) Total Current Assets 45,461 76,868 94,236 115,286 135,742

- Others 197 187 206 227 249 Total Assets 95,491 132,055 156,466 185,454 214,083

Profit before Tax 6,148 6,813 9,330 12,719 15,951

Income Tax (2,280) (3,166) (4,100) (5,709) (7,122) Accounts payable 21,027 37,170 53,661 71,106 86,163

Profit after Tax 3,868 3,648 5,230 7,010 8,829 Short-term borrowings 9,756 12,977 14,275 15,702 17,273

Non-controlling Interest (531) (811) (1,437) (2,028) (2,791) Other current liabilities 4,720 8,386 6,974 7,323 7,689

Shareholders' Profit / Loss 3,337 2,837 3,793 4,982 6,038 Total Current Liabilities 35,503 58,533 74,910 94,131 111,124

] 2 r a M t h g i R _ e l b a T [ Adjusted net profit 1,985 2,133 2,577 3,664 4,595 Long-term borrowings 25,780 34,380 37,818 41,600 45,760

Basic EPS 0.841 0.710 0.876 1.150 1.394 Other long-term liabilities 4,734 6,336 6,684 7,055 7,452

Underlying EPS (RMB) 0.500 0.492 0.595 0.846 1.061 Total Non-current Liabilities 30,514 40,717 44,502 48,655 53,213 Total Liabilities 66,017 99,250 119,413 142,786 164,337

[Table_CashFlowStatement] Cash Flow Statement

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Total Shareholders' Equity 25,337 27,287 30,099 33,685 37,972 Minority Interest Operating activities 4,137 5,517 6,954 8,982 11,774

Profit Before Taxation 6,148 6,813 9,330 12,719 15,951 Total Equity 29,474 32,805 37,053 42,667 49,746

Share of profit of investments (197) (187) (206) (227) (249) [Table_FinancialRatio]

Depreciation 159 200 210 231 254 Financial Ratios (01238 HK) Finance costs 573 1,377 575 690 767 2017A 2018A 2019F 2020F 2021F

Others (2,669) (2,684) (2,911) (3,323) (3,790) Revenue Growth (%) 9.1 25.7 31.8 44.3 30.2

Changes in Working Capital: 290 (596) 3,292 586 963 Gross Profit Growth (%) 9.4 44.5 25.9 45.9 29.5 宝龙地产 Net Cash from Operations 4,304 4,923 10,289 10,677 13,896 Reported Net Profit Growth (%) 35.4 -15.0 33.7 31.3 21.2

Interest Paid (1,952) (2,683) (3,372) (3,807) (4,126) Underlying EPS Growth (%) 10.3 -1.5 20.8 42.2 25.4

Income Taxes Paid (1,032) (1,155) (3,549) (5,134) (6,522)

Cash from Operating Activities 1,320 1,086 3,368 1,736 3,248 Gross Margin (%) 33.5 38.5 36.8 37.2 37.0

Investing activities Operating Profit Margin (%) 41.8 40.8 37.5 35.4 33.9

Purchase of PPE (516) (130) (547) (602) (662) Adjusted Net Margin (%) 12.7 10.9 10.0 9.8 9.5

Purchase of IPs (1,217) (2,883) (3,553) (4,000) (3,726) ROE (%) 13.9 10.8 13.2 15.6 16.9 Powerlong Real Estate Other investing cash flow (6,454) (5,704) (318) (330) (343) ROCE (%) 5.7 4.0 4.6 5.4 5.8 Cash from Investing Activities (8,187) (8,718) (4,418) (4,932) (4,731) ROA (%) 3.8 2.5 2.6 2.9 3.0

Financing activities

Debt raised/(repaid) 5,134 9,462 2,992 5,209 5,730 Net Gearing Ratio 92.2 101.1 99.2 96.5 88.6

Dividends paid (735) (902) (982) (1,396) (1,751) Debt to Equity Ratio 128.0 151.5 147.3 140.3 131.9

Interests paid 2,881 2,970 298 327 360

Other financing cash flow 10 1,548 (0) (0) 0 Underlying P/E (x) 6.4 6.8 5.5 3.8 3.1

Cash from Financing Activities 7,290 13,077 2,308 4,141 4,340 P/E (Basic) (x) 3.8 4.7 3.7 2.8 2.3

Net Changes in Cash 423 5,445 1,259 946 2,856 P/E (Diluted) (x) 3.8 5.1 3.7 2.8 2.3

Cash at Beg of Year 8,974 9,387 14,840 16,098 17,044 P/B (x) 0.5 0.5 0.5 0.4 0.4

Exchange Losses (10) 8 0 0 0 Dividend Yield (%) 5.2 6.1 7.0 9.9 12.4

Cash at End of Year 9,387 14,840 16,098 17,044 19,901

Source: the Company, Guotai Junan International.

Report

Company

See the last page for disclaimer Page 9 of 10 [Table_PageHeader]Powerlong Real Estate (01238 HK)

Company[Table_CompanyRatingDefinition] Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

Time Horizon: 6 to 18 months

Rating Definition

Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%;

or the fundamental outlook of the company or sector is favorable. 6 May 2019 Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

] 2 r a M t h g i R _ e l b a T [ or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

[DISCLOSURETable_DISCLOSUREOFINTERESTS OF INTERESTS ] (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report.

(3) Except for VALUE A SHARE (03095 HK),CAM SCSMALLCAP (03157 HK),HAITIANTIAN (08227 HK),CSOP MSCI-R (CNY) (83149 (01238 HK) HK),KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),BANK OF GANSU (02139 HK),BINHAI INVESTMENT (02886 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report.

(4) Guotai Junan and its group companies have had investment banking relationships with the issuer mentioned in this Research Report 宝龙地产 within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

Powerlong Real Estate DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in

any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject

Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.

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© 2019 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793

Website: www.gtja.com.hk

Company

See the last page for disclaimer Page 10 of 10