China / Hong Kong Industry Focus Hong Kong Property Sector (Residential)

Refer to important disclosures at the end of this report

DBS Group Research . Equity 24 Sep 2020

Sheltering from the storm

HSI: 24,733 • Solid support from end-users

• Stable outlook amid challenges

• Most property developers exhibit strong earnings ANALYST visibility Jeff YAU CFA, +852 36684180 [email protected]

• Current sector valuation priced in > 30% property price decline, prefer SHKP (16 HK) and Sino Land Recommendation & valuation (83 HK) Company Price T arget Mk t Cap Recom

Solid support from end-users. Despite the COVID-led economic Price downturn, the residential sector, especially mass market, has Property Developers HK$ HK$ HK$bn exhibited strong resilience thanks to solid local end-user CK Asset Hldgs (1113 HK) 41.5 53.65 153 BUY demand. Unlike the previous economic downcycle, we have CSI Property (497 HK) 0.238 0.300 2 BUY not seen any major forced selling in the secondary market partly due to a benign interest rate environment which should Henderson Land(12 HK) 29.25 34.75 142 BUY have strengthened the holding power among existing owners. HKR Int'l (480 HK) 3.03 4.05 4 BUY Therefore, home prices have stayed broadly stable year-to- K Wah Int'l (173 HK) 3.71 4.33 12 BUY date. Mass market projects have outperformed the luxury Kerry Props (683 HK) 20.85 22.60 30 HOLD counterpart, which has been affected by lack of Mainland Lai Sun Dev (488 HK) 7.63 10.70 5 BUY buyers due to travel restrictions and quarantine measures. MTR Corp (66 HK) 39.65 38.00 244 HOLD Selected developers are now adopting a more flexible pricing strategy to expedite luxury home sales. New World Dev (17 HK) 39.20 43.35 100 BUY Sino Land (83 HK) 9.61 12.68 68 BUY Stable outlook amid challenges. Given intermittent sales SHKP (16 HK) 100.4 126.50 291 BUY disruption led by the pandemic, we expect property developers Tai Cheung (88 HK) 4.86 5.14 3 HOLD to launch more new projects when the window of sales opportunities emerges . While a benign interest rate Wharf Holdings (4 HK) 14.72 16.20 45 BUY Wing Tai Props (369 HK) 4.00 5.15 5 BUY environment and favourable new supply outlook continues to support the residential market, potential migration wave, intensifying US-China tensions and the prolonged economic Source: Thomson Reuters, DBS Bank (Hong Kong) Limited (“DBS HK”) downturn should remain as an overhang on housing demand. Closing prices at September 15, 2020 Overall, we forecast home prices to remain steady over the next nine months, with mass market projects continuing to outperform.

Stock recommendation. The property developer sector is trading at 49% discount to our appraised current NAV on a weighted average basis, >1SD below its 10-year average. The current valuation has priced in >30% fall in property prices across the broad which seems less likely given the benign interest rate environment. Thanks to encouraging project pre- sales, most property developers have strong earnings visibility which is overlooked by the market. This leads to our view that residential developers should continue to outperform office or retail landlords. Consistent good sell-through rates should improve the sentiment on the sector. Within the sector, we prefer Sun Hung Kai Properties due to its strong execution and attractive valuation. Sino Land should be a safe haven if the market turns shaky with its net cash holding making up of over 55% of market capitalisation.

ed- JS/ sa-CS / DL

Industry Focus

Hong Kong Property Sector (Residential)

Major project launches YTD

Launch Projects Location Dev eloper T otal Units % sold ASP Units sold (HK$psf) Jan-20 Wetland Seasons Park Ph 1 Tin Shui Wai SHKP 714 690 97% 12,500 Jan-20 15 Western Street Sai Ying Pun Vanke 104 28 27% 23,000 Jan-20 Dukes Place Jardine's Lookout CSI-led consortium 16 8 50% 67,800 Jan-20 IL PICCO Discovery Bay HKR 21 1 5% 27,300 Jan-20 West Park Sham Shui Po Hanison Construction 63 63 100% 18,600 Jan-20 The Richmond Mid-levels Henderson Land 90 78 87% 32,000 Feb-20 133 Portofino Sai Kung Sino Land 33 2 6% 26,900 Mar-20 Emerald Bay Ph 2 Tuen Mun China Evergrande 1,228 479 39% 16,300 Mar-20 Ocean Marini Tseung Kwan O Wheelock 503 473 94% 15,500 May-20 OMA by the Sea Tuen Mun Wing Tai Props-led consortium 517 364 70% 13,400 May-20 Wetland Seasons Park Ph 2 Tin Shui Wai SHKP 705 683 97% 13,000 May-20 Aquila Square Mile Tai Kok Tsui Henderson Land 488 126 26% 24,500 May-20 Ayton Ho Man Tin Easyknit International 60 14 23% 30,000 May-20 The Campton Cheung Sha Wan Vanke 467 286 61% 17,000 May-20 Central 8 Mid-levels Emperor International 99 40 40% 30,000 Jun-20 Sea to Sky Tseung Kwan O Cheung Kong Asset Holdings 1,422 795 56% 16,300 Jul-20 KOKO Hills Ph 1 Lam Tin Wheelock 413 90 22% 20,500 Jul-20 Regency Bay Ph 1 Tuen Mun SHKP 263 206 78% 18,500 Aug-20 Seacoast Royale Tuen Mun Hong Kong Ferry/Empire Group 611 578 95% 14,500 Aug-20 St. George's Mansions Ho Man Tin Sino Land 175 2 1% 50,000

Source: Local press, DBS HK

Pandemic-led sales disruption. Due to the COVID-19 outbreak, Hong Kong GDP growth primary market activities were temporarily suspended for almost two months and resumed from Mar-20 onwards. % 15 Worst economic performance on record. The COVID-19 10 outbreak has exacerbated the economic downturn which was 2Q20: -9% y-o-y initially led by the social unrest in 2019. The local economy 5 contracted 9.1% in 1Q20 and 9% in 2Q20, the worst on record. Labour market deteriorated sharply with 0 unemployment rate soaring to 6.2% in Jun-20, the highest since Jan-05. The unemployment rate would have been even (5) higher, if not for the introduction of employment support scheme. (10)

(15)

1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q16 1Q17 1Q18 1Q19 1Q20 1Q15

Source: Census and Statistics Department

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Industry Focus

Hong Kong Property Sector (Residential)

Unemployment rate Overall, over 95% of total units at Lohas Park Package 9 has been pre- sold. The Wing Tai Properties-led consortium has % also sold 364 units at OMA by the Sea in Tuen Mun, fetching 9 Jun-20 -Aug-20: 6.1% ASP of HK$13,400psf. This represented 70% of a total of 517 May-20 -Jul-20: 6.1% units. The Campton in Cheung Sha Wan, developed by China 8 Apr-20-Jun20: 6.2% Vanke, also sold well with >60% of total 467 units being 7 snapped up within a short period of time. The attractive selling 6 prices for the initial batch of units helped draw strong market attention. 5 4 SHKP’s Wetland Seasons Park in Tin Shui Wai was the best- selling residential project YTD. The company launched Ph 1 & 2 3 of this mass market project in Jan-20 and May-20 respectively. 2 Market response has been equally encouraging. Meanwhile, these two phases are virtually sold out.

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Jan/18 Jan/19 Jan/20 Moving into June and July, developers started to adopt more Source: Census and Statistics Department aggressive pricing strategies when launching their new mass market developments. Cheung Kong Asset Holdings’ Sea to

Sky in Tseung Kwan O and Wheelock’s KOKO Hills in Lam Tin Yet, residential sales take-up remained satisfactory. Despite the are cases in point. Cheung Kong Asset Holdings has pre-sold severe economic downturn, take-up rates of residential 795 units at Sea to Sky since its initial launch in Jun-20. This projects, however, have been better than expected, reflecting represented 56% of a total of 1422 units. ASP reached solid pent-up demand among end-users. This was partly HK$16,300psf, higher than other developments in the attributable to the relaxation of mortgage financing for neighbourhood. Of note, the sell-through rate for two- completed residential units valued at HK$10m or below in Oct- bedroom units with a price tag of

Housing price to income ratio X In Aug-20, Seacoast Royale (Ph 1 of The Royale) in Tuen Mun 20.00 was launched for pre-sale. The market response for this project has been favourable, with 578 units snapped up at an ASP of 18.00 HK$14,500psf within a short period of time. This represented 16.00 94% of a total of 611 units. The site on which Seacoast Royale 14.00 is being built was purchased in Aug-16 by a consortium equally 12.00 owned by Hong Kong Ferry (50 HK) and unlisted Empire Group 10.00 for HK$2.7bn or HK$4,085psf. The Royale provides a total of 1,782 units in six residential towers with scheduled completion 8.00 in 2022. Adding construction and financing costs, we estimate 6.00 total development cost at HK$10,000psf on a saleable area 4.00 basis, offering decent pre-tax margins of c.30%. In the same 2.00 area, Regency Bay Ph 1, built by Sun Hung Kai Properties, has also attracted strong market interest. About 78% of a total of 0.00 263 units were pre-sold.

Sep-95 Sep-98 Sep-01 Sep-04 Sep-07 Sep-10 Sep-13 Sep-16 Sep-19

Mar-97 Mar-00 Mar-03 Mar-06 Mar-09 Mar-12 Mar-15 Mar-18 Mar-94 Luxury home market, albeit recovering slightly, was not as active as the mass market. CSI Properties has sold eight units at Source: Centaline Property Agency, CEIC Dukes Place at Jardine’s Lookout for HK$1.55bn or HK$67,800psf on average since Jan-20. This upmarket project Favourable response to mass-market project launches. contains 16 luxury units with total saleable area of 57,800sf. Wheelock launched Ocean Marini (Lohas Park Package 9C) in Mar-20 and has since pre-sold 473 units or 94% of the total.

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Industry Focus

Hong Kong Property Sector (Residential)

Sino Land sold two units at St. George’s Mansions, which was Primary market transaction volume redeveloped from China Light Power’s head office in Ho Man Tin, for c.HK$200m. Average selling price reached No of units Aug-20 8M20 HK$50,000psf. The project’s superb location should help draw 4,000 -36.4% m-o-m -41.8% y-o-y the interest of affluent homebuyers. 3,500 -14% y-o-y 3,000 St. George’s Mansions 2,500 2,000 1,500 1,000 500

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Source: Centaline Property Agency

Yearly primary market transaction volume

No. of units 35,000 2018: 15,458 30,000 2019: 20,685 8M20: 8,900 Source: DBS HK 25,000 20,000

Elsewhere, Kerry Properties sold 10 units YTD at Mont Rouge 15,000 at Beacon Hill, aided by a flexible pricing strategy. Total 10,000 consideration reached HK$1.7bn translating into ASP of HK$59,300psf. The selling price was lower than comparable 5,000 units sold in 2019. Since the project was released onto the 0

market in Apr-19, Kerry Properties has sold 13 units

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2017 2018 representing 29% of the total. 2019 8M20 Source: Centaline Property Agency Due to the COVID-19 pandemic, the overall transaction volume in the primary market fell 42% to 8,900 units in 8M20, with Primary market transaction value total transaction value 38% lower at HK$102.5bn. HK$m Aug-20 8M20 45,000 -46.7% m-o-m -38% y-o-y 40,000 -6.9% y-o-y 35,000 30,000 25,000 20,000 15,000 10,000 5,000

0

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Source: Centaline Property Agency

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Industry Focus

Hong Kong Property Sector (Residential)

Expected project launches in the coming nine months

Project/ Lot no Location Location Stak e (%) T otal no. Remark of units Cheung Kong Asset Holdings IL 8949 Ph 1 HK Mid-levels 100 115 IL 8949 Ph 2 HK Mid-levels 100 66 STTL614 NT Kau To 100 266 Presale consent pending approval Sun Hung Kai Properties IL 8963 Ph 1 HK Mid-levels East 100 53 IL 8963 Ph 2 HK Mid-levels East 100 19 Presale consent obtained in Sep-19 IL 9027 Ph 2B-2 HK North Point 100 123 Pre-sale consent obtained in May-20 IL 9027 Ph 2B-3 HK North Point 100 228 Pre-sale consent obtained in May-20 STTL 609 Ph 1 NT Shatin 100 196 Presale consent pending approval KIL 2341sE Kln Ho Man Tin 100 101 Presale consent pending approval Wetland Season Park Ph 3 NT Tin Shui Wai 100 318 On sale Regency Bay Ph 2 NT Tuen Mun 100 419 Pre-sale consent obtained in Feb-20 YLTL 510 PhB NT Yuen Long 100 1,030 Presale consent pending approval New World Development Tai Wai Station Ph 1 NT Tai Wai 100 783 Pre-sale consent pending approval Tai Wai Station Ph 2 NT Tai Wai 100 1,415 Pre-sale consent pending approval Henderson Land Two Artlane HK Sai Ying Pun 100 264 On sale 65-71 Main Street HK Aberdeen 100 138 Old lease 2 Tak Shing Street Kln Jordan 100 172 Old lease NKIL 6565 Ph 1 Kln Kai Tak 100 479 Presale consent pending approval NKIL 6585 Kln Sham Shui Po 100 337 Presale consent pending approval Lot 1752 in DD 122 NT Yuen Long 100 16 Presale consent obtained in Oct-18 Sino Land STTL 611 NT Ma On Shan 100 160 Pre-sale consent pending approval Grand Victoria Ph 1 Kln Cheung Sha Wan 22.5 524 Pre-sale consent pending approval Grand Victoria Ph 2 Kln Cheung Sha Wan 22.5 525 Pre-sale consent pending approval Grand Victoria Ph 3 Kln Cheung Sha Wan 22.5 388 Pre-sale consent pending approval Wong Chuk Hang Station Package 2 HK Wong Chuk Hang 50 600 JV with Kerry Properties Wheelock & Co KOKO Hills Ph 2 Kln Lam Tin 100 82 Presale consent pending approval NKIL 6563 Ph 1 Kln Kai Tak 100 461 Presale consent pending approval NKIL 6563 Ph 2 Kln Kai Tak 100 552 Presale consent pending approval NKIL 6564 Ph 1 Kln Kai Tak 100 399 Presale consent pending approval NKIL 6564 Ph 2 Kln Kai Tak 100 247 Presale consent pending approval Kerry Properties NKIL 6533 Kln Kowloon Tong 100 64 Presale consent pending approval K. Wah International 2 Grampian Road Kln Kolwoon Tong 100 6 T ai Cheung Pulsa HK Repulse Bay 100 8 China Overseas Land NKIL 6575 Kln Kai Tak 100 1,059 Presale consent pending approval Chinachem Lot 1068 SD3 Kln Kwun Tong 100 334 Presale consent pending approval

Source: DBS HK

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Industry Focus

Hong Kong Property Sector (Residential)

Expected project launches in 2H20

Project/ Lot no Location Location Stak e (%) T otal no. Remark of units Poly Property TMTL542 NT Tuen Mun 100 41 Presale consent pending approval ITC Properties Hyde Park Kln Sham Shui Po 100 76 On sale Nan Fung Group Lohas Park Package 10 NT Tseung Kwan O 100 893 Presale consent pending approval Yau Lee L. Living 23 Kln Tai Kok Tsui 142 Presale consent obtained in Aug-19 Centralcon Properties STTL576 RP NT Fo Tan 1335 Presale consent pending approval Chevalier International Sablier Kln Tai Kok Tsui 144 Presale consent pending aprroval Emperor International RBL 1198 HK Shouson Peak 15 Pre-sale consent obtained in Apr-20 Seaside Castle Kln Tuen Mun 8 Pre-sale consent obtained in May-20 Hong Kong Ferry The Royal Ph 2 NT Tuen Mun 614 JV with Empire Group Logan Property APIL136 HK Ap Lei Chau 295 JV with KWG Minmetal Land YTIL 44RP Kln Yau Tong 688 Presale consent pending approval Road King Wong Chuk Hang Station Package 1 HK Wong Chuk Hang 800 JV with Ping An Real Estate

Source: DBS HK

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Industry Focus

Hong Kong Property Sector (Residential)

Market focus will be on Tai Wai Station development. With the relatively stable financial market. The Hang Seng Index had at third wave of the COVID-19 infection showing signs of one point tumbled to 21,139 points in Mar-20 but then stabilisation, we expect property developers to roll out more regained momentum supported by liquidity injection. YTD, the new projects during the rest of the year. New World Hang Seng Index has fallen by just 12%. This, coupled with Development’s Tai Wai Station Ph 1 will steal the market lower interest rates, has provided support to homeowners’ limelight in the coming months. Situated adjacent to Tai Wai holding power. MTR Station, this sizeable residential project is being developed in three phases with a total of c.3,000 units. New World Centa-City Leading Index Development is in the process of applying for pre-sale consent for Ph 1 and Ph 2 which provides 783 units and 1,415 units 225 Home price growth respectively. The project is strategically located with excellent 8M20: 0% 205 2014: +11% transportation connectivity. It also stands above a 0.6msf retail 2019: +2.1% 2013: +3% mall to be operated by MTRC when completed in 2023. Hence, 185 2018: +5% 2012: +21% we expect Ph 1 to attract strong market interest when it goes 2017: +14% 2011: +8% 165 2016 :+7% 2010: +19% on pre-sale. 2015: +3% 145 Tai Wai Station project 125 105 85

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Source: Centaline Property Agency

Centa-City Leading Index – small-to-medium sized units

205 Home price growth 8M20: 0% 2014: +12% 185 2019: +3% 2013: +3% 2018: +6% 2012: +23% 165 2017: +14% 2011: +8% 2016 :+7% 2010: +19% 145 2015: +3%

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Jan 18 Jan Jan 19 Jan On the heels of enthusiastic sales response to Wetland Seasons 20 Jan Park Ph 1 & 2, SHKP is now offering Ph 3 for sale. Regency Bay Ph 2 is also expected to go on sale in 2H20. Elsewhere, the Source: Centaline Property Agency consortium of Hong Kong Ferry and Empire Group should release Ph 2 of The Royale in Tuen Mun onto the market once it obtains pre-sale consent.

Stable home prices. Unlike the previous economic downturn, home prices have remained broadly stable. According to Centa-City Leading Index, residential prices have remained stable YTD. Home prices for small-to-medium units exhibited a similar trend. In contrast to previous residential downcycles such as the Global Financial Crisis, we have not seen any major forced selling among the existing homeowners partly due to

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Industry Focus

Hong Kong Property Sector (Residential)

In the secondary market, 26,561 units changed hands in Secondary market transaction value 8M20, up 2.8% y-o-y. Total transaction value fell 3.6% to HK$223.5bn in the same period mainly due to year-on-year HK$m Aug-20 8M20 decline in average residential prices. 50,000 -25.2% m-o-m -3.6% y-o-y 45,000 15% y-o-y Secondary market transaction volume 40,000 35,000 30,000 No of units Aug-20 8M20 25,000 14,000 -26.2% m-o-m 2.8% y-o-y 20,000 15,000 12,000 14% y-o-y 10,000 10,000 5,000 8,000 0

6,000

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2,000 Source: Centaline Property Agency 0

Benign interest rate environment eases burden on

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Jan-19 Jan-20 homebuyers. Due to the pandemic-led quantitative easing, HIBOR has edged down to 0.39% from >2% at the beginning Source: Centaline Property Agency of the year. This resulted in effective mortgage rates dropping to 1.8%. This would help relieve the financial burden of Yearly secondary market transaction volume homebuyers as evidenced by improving housing affordability. This should in turn cement their holding power.

No. of units One-month-HIBOR 160,000 2018: 38,782 2019: 35,893 140,000 8M20: 26,561 % 120,000 3.5

100,000 3 80,000 2.5 60,000 40,000 2

20,000 1.5 0

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Source: Bloomberg Finance L.P.

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Industry Focus

Hong Kong Property Sector (Residential)

Housing affordability – private households Potential migration wave. A growing number of locals are contemplating to migrate to other cities. This is illustrated by 120% Prime base HIBOR base the increase in issuances of certificate of non-criminal Aug-20 64.5% 60.1% 100% convictions which are required when migrating to other Jul-20 65.7% 61.6% countries. This evolving trend could be accompanied with 80% increased availability of secondary homes although no noticeable changes have been identified yet. 60%

40% Number of ‘certificate of non-criminal convictions’ issued

20% 4,000

0%

3,500

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Source: Centaline Property Agency 2,000

Number applications of Favourable supply outlook. We project that new completions in 1,500 the primary market will reach 18,300 units in 2020, up 34% y- 1,000

o-y. Over 75% of these units have been sold already. About

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17,000 new units are scheduled for completion in 2021, with Jul-20

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Apr-18 Apr-19 Apr-20 half of these units pre-sold. Moving into 2022, new completions should fall further to c.16,000 units. With the Source: HK Police Force government allocating more land for public housing developments instead of private residential use in recent years, Volatile financial markets a drag. The intensifying US-China the medium-term residential supply outlook should remain tensions should increase the volatility in financial markets in the favourable, thus lending support to home prices. months ahead which could create an overhang on the residential market, luxury home residential market in particular. Private residential supply Historically, home prices are positively correlated with the stock market performance in Hong Kong. Poor financial market No of units performance could trigger home selling among those suffering 40,000 Average completion (96-19) 17,783 units huge financial losses. 35,000 Average units sold (96-19) 30,000 18,272 units Home prices vs Hang Seng Index 25,000 20,000 250 35,000 15,000 10,000 30,000 5,000 200 0 25,000

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2021E 2022E 100 15,000 Completion No of primary units sold Average 10,000 50 5,000 Source: Centaline Property Agency, DBS HK 0 -

Falling rents to lower residential yield. Since the onset of social

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Industry Focus

Hong Kong Property Sector (Residential)

We forecast the Hong Kong economy to recover 4% in 2021. Any prolonged economic downturn or derailment in post COVID economic recovery trend could possibly cap the upside on home prices.

GDP growth vs home prices

% 10.0 250 8.0 6.0 200 4.0 2.0 150 0.0 (2.0) 100 (4.0) (6.0) (8.0) 50 (10.0)

(12.0) 0

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Source: Census and Statistics Department, Centaline Property Agency

All factors considered, we forecast that home prices will stay broadly stable in the coming nine months.

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Industry Focus

Hong Kong Property Sector (Residential)

Land market

Land sales YTD

Government Tender Date Project/Lot No Location Location Usage GF A Land Land Dev elopers Est. no of Premium Premium units (sf) (HK$m) (HK$psf) Jan-20 TMTL518 Tuen Mun NT R 582,887 3,500 6,005 Kaisa (1638) 1,200 Apr-20 KIL11238 Mongkok Kln R/C 24,461 86 3,512 Eagle Asia (936) 30 Apr-20 KIL11240 Mongkok Kln R/C 60,595 467 7,710 Private Developer 150 May-20 Lot 1069 SD3 Kwun Tong Kln R 1,089,145 4,951 4,546 Cheung Kong Asset Holdings 1,700 May-20 APIL 137 Ap Lei Chau HK R 88,281 1,333 15,097 Tai Cheung 70 Jul-20 TPTL243 Tai Po NT R 781,890 3,705 4,739 China Vanke consortium 1,000 Aug-20 Lot 1003 in DD 214 Sai Kung NT R 57,523 532 9,246 Chinachem Group 50

Railway Project Tender Feb-20 Lohas Park Package 12 Tseung Kwan O NT R 961,109 2,725 2,835 Wheelock & Co 2,000

URA T ender Apr-20 Tonkin Street/Fuk Wing StreetCheung Redevelopment Sha Wan Kln R/C 104,088 913 8,770 Chinachem Group 175

Source: Lands Department, MTR Corp, Urban Renewal Authority

In 1H20, the government sold seven residential or reflecting Tai Cheung’s positive view on the luxury market residential/commercial sites through tender for HK$14.6bn. outlook in the future. This also marked the company’s first land Upon completion, these projects are expected to provide 4,200 acquisition since May-12 when it purchased the luxury site units mainly in Kwun Tong and Tuen Mun. where The Pulsa is built.

Cheung Kong Asset Holdings back to the land market. In Jun- Chinachem turned more aggressive in land banking this year. 20, the company outbid eight other developers to secure the This private developer secured the redevelopment right of Anderson Road site in Kwun Tong for HK$4.95bn or Urban Renewal Authority (URA)’s Tongkin Street/Fuk Wing HK$4,546psf which lies at low end of market consensus. This Street project in Cheung Sha Wan in Apr-20. Land premium marked the company’s first land acquisition through public was HK$913m. This translated into accommodation value of tender since Aug-18. Adding construction and financing costs, HK$8770psf, about 20% lower than that of another URA we estimate all-in development costs to be 15%. In 2H20, MTRC will offer the Lohas lot in Ap Lei Chau for HK$1.33bn in May-20. The winning bid Park Package 13 for tender. This marks the final phase of the of HK$15,097psf is close to the high end of market consensus entire Lohas Park development. Located next to Sea to Sky on

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Industry Focus

Hong Kong Property Sector (Residential)

the waterfront, this package will provide about 2550 units with 1.51msf GFA.

Overall, we estimate c.6400 units to be built on the sites sold via tenders by the government, MTRC and URA YTD.

Elsewhere, Hang Lung Properties acquired the US Consulate staff quarters in Shouson Hill for HK$2.566bn or HK$54,138psf via public tender. This marked the first residential site acquisition made by Hang Lung Properties in two decades. Covering an area of 94,796sf, the site will be redeveloped into luxury houses featuring Deep Water Bay views with GFA of c.47,397sf. Total development cost is estimated at HK$4bn. Project is targeted for completion in 2024.

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Industry Focus

Hong Kong Property Sector (Residential)

Share price performance Sino Land has a strong and diversified project launch pipeline Share price performance in the year ahead. The company is now selling St George’s Mansions in Ho Man Tin. Silversands in Ma On Shan, Grand Name 1M 3M 6M YTD 2019 Victoria in Cheung Sha Wan waterfront and two URA Dev elopers T ick er (%) (%) (%) (%) (%) redevelopments in Mongkok & Central should go on pre-sale CK Asset Holdings 1113 HK (3.5) (9.7) 0.9 (26.2) (1.8) in the years ahead. With expected windfall profit from Grand CSI Properties 497 HK 1.7 3.9 5.3 (15.0) (9.7) Central, Sino Land is likely to reward its shareholders by raising Henderson Land 12 HK (2.8) 0.2 (12.8) (23.5) 7.9 the dividend in FY21. Sitting on net cash of >HK$38bn, Sino HKR International 480HK (5.3) (4.1) 1.7 (6.5) (12.2) K Wah Int'l 173 HK 13.1 13.5 13.5 (14.7) 16.9 Land is well positioned to pursue accretive land acquisitions to Kerry Props 683 HK 7.5 1.7 4.9 (15.8) (7.5) bolster its long-term growth. The stock is trading at 60% Lai Sun Dev 488 HK (6.0) (7.0) (12.3) (26.1) (19.1) discount to our appraised current NAV. BUY with HK$12.68 MTR Corp 66 HK (1.7) 0.3 1.8 (13.9) 11.8 TP. New World Dev 17 HK (2.5) 8.2 14.0 (8.2) 3.1 Sino Land 83 HK 0.6 1.5 10.2 (15.1) (15.7) New World Development continues to dispose non-core assets. SHKP 16 HK 1.2 2.9 (0.4) (15.8) 6.9 The company sold Eight Kwai Fong in Happy Valley and a 45% Tai Cheung 88 HK (1.2) (1.0) (8.0) (23.7) (16.6) stake in commercial units at Shun Tak Centre for HK$3.6bn in Wharf 4 HK 1.4 (2.8) 7.9 (25.7) (2.8) Jun-20. Its listed subsidiary, NWS Holdings, sold its franchised Wing Tai Props 369 HK 5.3 2.3 (8.1) (22.2) (4.8) business operations for HK$3.2bn. Divestment of non-core Market cap wt. (0.8) 0.2 0.7 (17.8) 3.7 assets not only augments the bottom-line earnings but also Hang Seng Index (1.8) 4.0 7.2 (12.3) 9.1 frees up capital for new investments with better returns. The planned launch of Tai Wai Station development should draw Hang Seng Prop. Index (1.2) 0.8 0.2 (19.2) 8.2 strong market interest and act as a share catalyst. The stock is Closing Price at Sep 15 th, 2020 trading at 50% discount to our assessed current NAV. BUY with HK$43.35TP. Source: Bloomberg Finance L.P.

Cheung Kong Asset Holdings disposed of its Chengdu Le Parc In the past six months, shares of property developers under our project, which brought in c.HK$3.7bn disposal gains and also coverage was largely stable, underperforming the Hang Seng further strengthened its balance sheet for accretive Index by 6ppts. Within this sector, New World Development acquisitions. The recent launch of Sea to Sky in Tseung Kwan O and K.Wah International are among the best performers with met with satisfactory market response. With a net order book their share prices up 13-14% during the period. of HK$27.9bn, development income risk for Cheung Kong Asset Holdings should be low in the years ahead. The Li family Property developers we cover are now trading at discounts of has continued to increase its stake in the company, which is a 11-82% to our current NAV estimates. This translates into a vote of confidence for the company. The stock is trading 62% discount of 49% on a weighted average basis, which below our assessed current NAV. BUY with HK$53.65 TP represents >1SD below the long-term average of 37%. In our view, the sector valuation is by no means expensive. Within the Henderson Land’s net order book stood high at HK$25bn in sector, we continue to like Sun Hung Kai Properties for its Jun-20, including proceeds from the disposal of Wo Shang Wai attractive valuation, strong execution and robust project launch agricultural land. The deal was completed in Jul-20 with pipeline. Sino Land should be a safe haven if the market turns disposal gains of c.HK$3.7bn to be booked in 2H20. All these shaky with its net cash holding making up of over 55% of point to strong earnings visibility in the years ahead. Given the market capitalisation. prevailing weak market sentiment, it has become difficult to crystallise the value of its non-core assets in Hong Kong. Close on the heels of strong market response to the launch of Henderson Land has been adding new investment properties Wetland Seasons Park Ph 1 & 2, Sun Hung Kai Properties is such as Lumina Guangzhou and Lumina Shanghai to its now offering Ph 3 for pre-sale to tap on strong end-user portfolio which should augment its recurrent earnings base. demand. Other mass market projects up for pre-sale include The stock is trading at 59% discount to our assessed current Regency Bay Ph 2 in Tuen Mun and Yuen Long Station NAV. BUY with HK$34.75 TP Development Ph 1, which should be equally popular among end-users. The company has further diversified the investment The ongoing pandemic continues to weigh on MTRC’s core risks of the office portion of its sizeable West Kowloon businesses such as transportation, station operations, commercial project by divesting a 25% stake to Ping An Life. commercial and property investment. The launch of residential The stock is trading at 57% discount to our assessed current projects at Lohas Park received good response. While Ocean NAV. BUY with HK$126.5 TP. Marini has been substantially sold, the launch of Sea to Sky

Page 13

Industry Focus

Hong Kong Property Sector (Residential)

met with favourable response. In the coming six months, Since the beginning of 2020, CSI Properties has sold eight MTRC plans to offer the 2550-unit Lohas Park Package 13 for luxury units at Dukes Place at Jardine’s Lookout for HK$1.55bn tender followed by Wong Chuk Hang Station Packages 5 & 6. or HK$67,800psf on average. The company has a 60% stake in The counter is trading at 11% discount to our appraised this upmarket development which, if fully sold, should current NAV. HOLD with HK$38 TP. generate attributable pre-tax earnings of >HK$900m. Renovation works at 8-12 Peak Road in Hong Kong and Since the COVID-19 outbreak showed signs of stabilisation in Knightsbridge in Beijing are near completion, and should be China, Wharf Holdings’ mall operations in China are well on a available for sale in FY21. The sale progress of its luxury recovery trajectory underpinned by surging luxury goods sales. portfolio would dictate its near-term share price performance. Chengdu IFS and Changsha IFS recorded double-digit growth The counter is trading at 82% discount to our appraised in retail sales in May/June. Despite the pandemic-led current NAV. BUY with HK$0.30 TP. disruption, Wharf’s contracted sales in China increased by 24% to Rmb8.1bn, of which about two-thirds of sales proceeds HKR has sold 109 units or 56% of total units at Poggibonsi in stemmed from projects in Hangzhou and Suzhou. This Discovery Bay at an ASP of HK$16,500psf since its initial launch represented 54% of its full-year sales target of Rmb15bn. The in Mar-19. Profit is expected to be booked in FY21. Elsewhere, stock is trading at 71% discount to our current NAV estimate. the company sold one luxury house at IL PICCO in Discovery BUY with HK$16.2 TP. Bay. In FY21, Creek One and Mansion One, both in Jiaxing, are in the project launch pipeline. Despite the temporary disruption In 7M20, Kerry Properties achieved contracted sales HK$6.2bn, brought on by the COVID-19 outbreak, HKRI Taikoo Hui in representing 78% of its full-year sales target. This included Shanghai, equally owned with Swire Properties, should be its HK$3.9bn from Hong Kong and HK$2.3bn from China. In an long-term growth catalyst as operations ramp up. The stock is attempt to expedite the sales of Mont Rouge, the company has trading at 82% discount to our appraised current NAV. BUY become more flexible in pricing. YTD, Kerry Properties has sold with HK$4.05 TP. 10 units for HK$1.7bn. The company had a net order book of HK$7.9bn as of Jun-20, of which >50% will be recognised in Lai Sun Development’s Ocean Park Marriot Hotel has been hit 2H20. The stock is trading at 73% discount to our appraised by dwindling inbound tourism led by the COVID-19 outbreak current NAV. There is no near-term catalyst to narrow its steep but fared better than its peers as it targets more locals by discount to NAV. HOLD with HK$22.6 TP. providing staycation packages. Restaurant business is inevitably impacted by social distancing measures. The company has K.Wah International continued to sell Solaria in Tai Po and been handing over the sold units at Monti in Shau Kei Wan K.Summit in Kai Tak. Solaria is now substantially sold. This and continues inventory sales at Alto Residences in Tseung lucrative project provides the mainstay of development Kwan O. The company’s second largest shareholder, Yu earnings in FY20. In 2H20, the company intends to offer the family, has increased its stake to >23% in Jun-20. The stock is Grampian Road luxury house project and Grand Victoria Ph 1 trading at 80% discount to our appraised current NAV. in Cheung Sha Wan for sale. In China, K.Wah plans to release Maintain BUY with HK$10.70 TP. Avanti in Suzhou, Cosmo in Huadu and Bayview in Dongguan onto the market in 2H20. Net order book stood at HK$7.8bn, Tai Cheung returned to acquisition mode. The company which will be recognised before the end of FY21. This suggests acquired a luxury residential site in Ap Lei Chau through high visibility of development earnings. The stock is trading at government tender for HK$1.33bn, near the high-end of 73% discount to our assessed current NAV. BUY with HK$4.33 market expectations. This marked the first site that the TP company has purchased since 2012. The site will provide GFA of 88,281sf upon completion. Following this land acquisition, Wing Tai Properties’ launch of OMA by the Sea in Tuen Mun Tai Cheung should still sit on net cash holding of HK$2.06bn. received good response. About 70% of a total of 517 units Given the prevailing market sentiment, it would take longer to have been pre-sold since it was released onto the market in realise the value of its completed luxury houses. The stock is May-20. A complete sale should yield attributable pre-tax trading at 78% discount to our assessed current NAV. earnings of HK$550m. Thanks to encouraging pre-sale of The Excluding net cash (after the acquisition), the remaining stub is OMA OMA and OMA by the Sea, the company has locked the trading at a discount of 92%. HOLD with HK$5.14 TP. bulk of our projected development earnings in FY21-22. This points to high earnings visibility. Despite the COVID-19 outbreak, Landmark East and London portfolio should deliver stable rental performance. The stock is trading 78% below our appraised current NAV. BUY with HK$5.15 TP.

Page 14 Industry Focus

Hong Kong Property Sector (Residential)

Valuation – Property developers

Mk t Last 12-m PE PE J un-21 J un-21 Yield Yield Company Code FYE Cap Price target Recom F Y20 F Y21 NAV NAV F Y20 F Y21 HK$bn HK$ HK$ x x HK$ % % % CK Asset Holdings1113 HKDec 153 41.50 53.65 BUY 8.76.5 107.3(61) 3.53.9 CSI Property 497 HK Mar2 0.238 0.30 BUY 2.04.01.2 (80) 2.13.0 Henderson Land 12 HKDec 142 29.25 34.75 BUY 9.212.1 69.5(58) 6.26.2 HKR Int'l 480 HK Mar4 3.03 4.05 BUY 3.95.9 16.4(81) 4.04.0 K Wah Int'l 173 HKDec 12 3.71 4.33 BUY 3.65.2 14.4(74) 5.75.7 Kerry Props 683 HKDec 30 20.85 22.60 HOLD 9.08.1 75.4(72) 6.56.5 Lai Sun Dev 488 HKJul5 7.63 10.70 BUY n.a.n.a. 35.6(79) 0.00.0 MTR Corp 66 HKDec 244 39.65 38.00 HOLD 43.323.3 47.2(16) 3.13.1 New World Dev 17 HKJun 100 39.20 43.35 BUY 13.613.8 78.8(50) 5.25.2 Sino Land 83 HKJun 68 9.61 12.68 BUY 14.67.5 23.1(58) 5.77.1 SHKP 16 HKJun 291 100.40 126.50 BUY 9.99.8 230.0(56) 4.94.9 Tai Cheung 88 HK Mar3 4.86 5.14 HOLD 24.19.5 20.6(76) 4.94.9 Wharf 4 HKDec 45 14.72 16.20 BUY 28.58.1 54.0(73) 3.13.1 Wing Tai Properties369 HKDec5 4.00 5.15 BUY 12.76.4 17.2(77) 6.86.8

Source: Bloomberg Finance L.P., DBS HK Closing prices at September 15, 2020

Page 15 Industry Focus

Hong Kong Property Sector (Residential)

Cheung Kong Asset Holdings – Discount to NAV CSI Properties – Discount to NAV

% % (25) +2SD: -29% (65) (30) +1SD: -37% +2SD: -71% (35) (70) (40) +1SD: -75% Average: -46% (45) (75) Average: -79% (50) -1SD: -54% (55) (80) (60) -2SD: -62% (85) -1SD: -83% (65) -2SD: -87% (70) (90) Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Jun-18 Jun-19 Jun-20 Sep-18 Sep-19 Sep-20 Dec-18 Dec-19 Mar-19 Mar-20

Henderson Land – Discount to NAV K. Wah Intl’ – Discount to NAV

% % 0 (45) (50) (10) +2SD: -56% (55) (20) +2SD: -23% +1SD: -61% (60) (30) +1SD: -33% (65) (40) Average: -43% (70) Avg: -66% (50) -1SD: -53% (75) -1SD: -72% (60) -2SD: -62% (80) -2SD: -77% (70) (85) Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20

Kerry Properties – Discount to NAV Lai Sun Development – Discount to NAV

% %

(5) (50) +2SD: -56% (15) (55) (60) (25) +1SD: -64% +2SD: -34% (65) (35) Average: -72% +1SD: -46% (70) (45) (75) (55) Average: -58% (80) -1SD: -81% (65) -1SD: -70% (85) -2SD: -89% (75) -2SD: -82% (90) (85) Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Source: Thomson Reuters, DBS HK

Page 16 Industry Focus

Hong Kong Property Sector (Residential)

MTR – Discount to NAV New World Development – Discount to NAV

% % 10 (10) 5 (20) 0 +2SD: 1% (5) (30) (10) +1SD: -6% (40) +2SD: -43% +1SD: -49% (15) (50) Average: -13% Average: -55% (20) (60) (25) -1SD: -20% -1SD: -61% (30) -2SD: -27% (70) -2SD: -66% (35) (80) Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20

Sino Land – Discount to NAV Sun Hung Kai Properties – Discount to NAV

% % 0 30 20 (10) 10 (20) +2SD: -25% 0 (30) +1SD: -35% (10) +2SD: -17% (20) Average: -44% +1SD: -29% (40) (30) Average: -41% (50) (40) -1SD: -53% (50) -1SD: -53% (60) -2SD: -65% -2SD: -63% (60) (70) (70) Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Tai Cheung – Discount to NAV Wharf – Discount to NAV

% % (45) (30) (35) +2SD: -36% (50) +2SD: -53% (40) +1SD: -46% (55) (45) +1SD: -59% (50) (60) (55) Average: -57% Average: -64% (65) (60) -1SD: -70% (65) -1SD: -67% (70) (70) (75) -2SD: -76% (75) -2SD: -78% (80) (80) Nov-17 Nov-18 Nov-19 May-18 May-19 May-20 Jul-17 Jan-17 Jan-18 Jun-15 Jun-16 Oct-11 Oct-12 Feb-19 Sep-10 Apr-12 Sep-20 Dec-14 Dec-15 Nov-13 Mar-11 Mar-20 Aug-18 Aug-19 May-13 May-14 Source: Thomson Reuters, DBS HK

Page 17 Industry Focus

Hong Kong Property Sector (Residential)

Wing Tai Properties – Discount to NAV Property developer sector – Discount to NAV

% % (50) 0

(55) +2SD: -56% (10) +2SD: -19% (60) +1SD: -62% (20) +1SD: -28% (65) Average: -67% (30) Average: -37% (70) -1SD: -73% (40) (75) -2SD: -79% (50) -1SD: -46% (80) (60) -2SD: -55% Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 May-12 May-13 May-14 May-15 May-16 May-17 May-18 May-19 May-20 Sep/10 Sep/11 Sep/12 Sep/13 Sep/14 Sep/15 Sep/16 Sep/17 Sep/18 Sep/19 Sep/20 Mar/11 Mar/12 Mar/13 Mar/14 Mar/15 Mar/16 Mar/17 Mar/18 Mar/19 Mar/20 Source: Thomson Reuters, DBS HK

Page 18 Industry Focus

Hong Kong Property Sector (Residential)

Property Developers – Asset Breakdown

GAV Breakdown (%) Cheung CSI Props Henderson HKR Int'l K. Wah Kerry Props Lai Sun Kong Land Development A ssets Holdings HK 58 75 61 44 41 41 67 Residential 15 23 14 13 38 29 6 Office 14 34 17 17 0 5 29 Retail 9 5 15 9 3 4 19 Hotel 15 12 2 2 0 0 11 Industrial 4 2 1 2 0 2 0 Others 1 0 9 0 0 0 3 Farmland 0 0 3 0 0 0 0 China 9 17 15 45 44 48 6 Overseas 7 0 0 9 0 3 23 Listed subsidiaries. associates & investments 4 7 24 2 15 6 3 Other assets 22 1 0 1 0 2 0 T otal 100 100 100 100 100 100 100

GAV Breakdown (%) New World Wing T ai MTRC Sino Land SHKP T ai Cheung Wharf Holdings Dev Props

HK 63 59 89 79 93 22 83 Residential 31 14 25 25 62 21 18 Office 7 16 25 22 0 0 54 Retail 22 18 31 23 6 0 0 Hotel 0 8 2 5 24 0 8 Industrial 0 0 4 1 0 1 2 Others 3 1 2 2 0 1 0 Farmland 0 1 0 1 0 0 0 China 0 36 4 16 0 54 2 Overseas 0 0 5 1 7 0 10 Listed subsidiaries. associates 0 5 1 2 4 & investments 0 21 Other assets 37 0 2 2 0 2 0 T otal 100 100 100 100 100 100 100

Source: DBS HK

Page 19 Industry Focus

Hong Kong Property Sector (Residential)

Property Developers – NAV Sensitivity

% increase in NAV Cheung Kong CSI Props Henderson HKR Int'l K.Wah Kerry Props Lai Sun if the following prices Asset Holdings Land Dev . rise by 10% Office -HK 1.5% 6.6% 2.2% 2.3% 0.1% 0.7% 4.4% Retail - HK 0.9% 1.5% 1.8% 1.3% 0.4% 0.6% 2.8% Residential - HK 1.5% 3.5% 2.2% 2.0% 3.8% 3.3% 0.6% Hotels - HK 1.6% 2.7% 0.1% 0.3% 0.0% 0.0% 0.1%

% increase in NAV MTRC New World Sino Land SHKP T ai Cheung Wharf Wing T ai if the following prices Dev Holdings Props rise by 10% Office -HK 0.8% 2.6% 1.9% 2.6% 0.0% 0.0% 7.7% Retail - HK 3.0% 5.0% 2.5% 2.7% 0.5% 0.0% 0.0% Residential - HK 2.8% 1.9% 2.0% 2.6% 5.0% 2.2% 1.1% Hotels - HK 0.0% 1.2% 0.2% 0.5% 2.1% 0.0% 1.2%

Source: DBS HK

Page 20 Industry Focus

Hong Kong Property Sector (Residential)

Company share buybacks YTD

Date No. of shares Avg price (HK$) Amount (HK$) CSI (497 HK)

3-Aug-20 1,000,000 0.238 238,000 30-Jul-20 2,000,000 0.238 476,000 29-Jul-20 2,000,000 0.238 476,000 28-Jul-20 2,500,000 0.238 594,970 27-Jul-20 4,000,000 0.238 951,000 23-Jul-20 5,020,000 0.242 1,212,560 21-Jul-20 10,970,000 0.245 2,688,180 20-Jul-20 11,000,000 0.247 2,717,920 17-Jul-20 10,000,000 0.247 2,470,000 16-Jul-20 4,000,000 0.248 991,900 15-Jul-20 12,000,000 0.248 2,978,000 14-Jul-20 10,000,000 0.246 2,455,450 13-Jul-20 15,000,000 0.249 3,733,650 10-Jul-20 7,000,000 0.250 1,748,980 9-Jul-20 15,000,000 0.248 3,713,000 8-Jul-20 7,000,000 0.247 1,728,980 7-Jul-20 12,000,000 0.250 2,994,970 6-Jul-20 14,000,000 0.247 3,458,820 3-Jul-20 13,000,000 0.245 3,180,670 2-Jul-20 12,000,000 0.243 2,919,980 30-Jun-20 14,000,000 0.243 3,398,870 28-Apr-20 9,860,000 0.267 2,635,400 27-Apr-20 80,000 0.265 21,200

NEW WORLD DEV (17 HK) Date No. of shares Avg price (HK$) Amount (HK$)

28-Apr-20 2,285,000 9.03 20,630,390 8-Apr-20 3,000,000 8.79 26,383,000 7-Apr-20 1,992,000 8.77 17,473,640 6-Apr-20 3,000,000 8.70 26,113,320 3-Apr-20 3,605,000 8.42 30,367,450 2-Apr-20 4,440,000 8.36 37,098,440 1-Apr-20 7,000,000 8.37 58,586,590 30-Mar-20 5,000,000 8.08 40,407,410 27-Mar-20 3,000,000 8.26 24,780,730 26-Mar-20 3,000,000 8.22 24,649,600 25-Mar-20 900,000 8.27 7,443,950 24-Mar-20 1,867,000 7.96 14,854,880 23-Mar-20 5,000,000 7.66 38,302,270 20-Mar-20 6,000,000 8.05 48,274,870 19-Mar-20 8,000,000 7.74 61,924,750 10-Mar-20 5,000,000 9.45 47,233,270 9-Mar-20 5,000,000 9.40 47,021,760

Source: HK Exchange

Page 21 Industry Focus

Hong Kong Property Sector (Residential)

Major shareholder stake increase

CK ASSET HOLDING (1113 HK) Name of substantial No. of shares Average price per No. of shares % of issued Date of relevant shareholder inv olv ed Buy /Sell share (HK$) interested share capital ev ent

Li Tzar Kuoi, Victor 200,000 B 40.88 1,315,934,260 35.62 17-Sep-20 Li Tzar Kuoi, Victor 200,000 B 41.32 1,315,734,260 35.62 16-Sep-20 Li Tzar Kuoi, Victor 200,000 B 41.05 1,315,534,260 35.61 14-Sep-20 Li Tzar Kuoi, Victor 200,000 B 40.98 1,315,334,260 35.61 11-Sep-20 Li Tzar Kuoi, Victor 100,000 B 40.85 1,315,134,260 35.6 9-Sep-20 Li Tzar Kuoi, Victor 160,000 B 41.17 1,315,034,260 35.6 8-Sep-20 Li Tzar Kuoi, Victor 450,000 B 41.20 1,314,874,260 35.6 4-Sep-20 Li Tzar Kuoi, Victor 176,500 B 41.60 1,314,424,260 35.58 3-Sep-20 Li Tzar Kuoi, Victor 330,000 B 41.62 1,314,247,760 35.58 2-Sep-20 Li Tzar Kuoi, Victor 400,000 B 41.78 1,313,917,760 35.57 1-Sep-20 Li Tzar Kuoi, Victor 385,500 B 41.92 1,313,517,760 35.56 28-Aug-20 Li Tzar Kuoi, Victor 1,512,000 B 41.85 1,313,132,260 35.55 27-Aug-20 Li Tzar Kuoi, Victor 550,000 B 42.36 1,311,620,260 35.51 26-Aug-20 Li Tzar Kuoi, Victor 883,500 B 42.49 1,311,070,260 35.49 25-Aug-20 Li Tzar Kuoi, Victor 500,000 B 42.15 1,310,186,760 35.47 21-Aug-20 Li Tzar Kuoi, Victor 1,000,000 B 41.98 1,309,686,760 35.46 20-Aug-20 Li Tzar Kuoi, Victor 200,000 B 42.84 1,308,686,760 35.43 19-Aug-20 Li Tzar Kuoi, Victor 200,000 B 42.74 1,308,486,760 35.42 18-Aug-20 Li Tzar Kuoi, Victor 350,000 B 42.64 1,308,286,760 35.42 17-Aug-20 Li Tzar Kuoi, Victor 200,000 B 42.67 1,307,936,760 35.41 13-Aug-20 Li Tzar Kuoi, Victor 220,000 B 41.55 1,307,736,760 35.40 11-Aug-20 Li Tzar Kuoi, Victor 180,000 B 41.18 1,307,516,760 35.40 10-Aug-20 Li Tzar Kuoi, Victor 800,000 B 41.37 1,307,336,760 35.39 7-Aug-20 Li Tzar Kuoi, Victor 1,125,500 B 47.04 1,306,536,760 35.37 2-Jul-20 Li Tzar Kuoi, Victor 1,400,000 B 46.18 1,305,411,260 35.34 30-Jun-20 Li Tzar Kuoi, Victor 450,000 B 46.69 1,304,011,260 35.3 29-Jun-20 Li Tzar Kuoi, Victor 474,500 B 47.35 1,303,561,260 35.29 26-Jun-20 Li Tzar Kuoi, Victor 280,000 B 47.55 1,303,086,760 35.28 24-Jun-20 Li Tzar Kuoi, Victor 150,000 B 46.93 1,302,806,760 35.27 23-Jun-20 Li Tzar Kuoi, Victor 313,000 B 47.28 1,302,656,760 35.26 22-Jun-20 Li Tzar Kuoi, Victor 451,000 B 47.14 1,302,343,760 35.26 19-Jun-20 Li Tzar Kuoi, Victor 415,500 B 47.25 1,301,892,760 35.24 18-Jun-20 Li Tzar Kuoi, Victor 337,000 B 45.95 1,301,477,260 35.23 15-Jun-20 Li Tzar Kuoi, Victor 337,000 B 45.95 1,301,477,260 35.23 15-Jun-20 Li Tzar Kuoi, Victor 354,500 B 45.28 1,301,140,260 35.22 12-Jun-20 Li Tzar Kuoi, Victor 965,000 B 46.47 1,300,785,760 35.21 11-Jun-20 Li Tzar Kuoi, Victor 562,000 B 43.57 1,299,820,760 35.19 4-Jun-20 Li Tzar Kuoi, Victor 600,000 B 43.60 1,299,258,760 35.17 3-Jun-20 Li Tzar Kuoi, Victor 466,500 B 43.19 1,298,658,760 35.16 2-Jun-20 Li Tzar Kuoi, Victor 470,000 B 43.28 1,298,192,260 35.14 1-Jun-20 Li Tzar Kuoi, Victor 513,000 B 41.94 1,297,722,260 35.13 29-May-20 Li Tzar Kuoi, Victor 369,500 B 42.21 1,297,209,260 35.12 27-May-20 Li Tzar Kuoi, Victor 450,000 B 42.54 1,296,839,760 35.11 26-May-20 Li Tzar Kuoi, Victor 396,000 B 41.41 1,296,389,760 35.1 25-May-20 Li Tzar Kuoi, Victor 2,500,000 B 43.19 1,295,993,760 35.08 22-May-20 Li Tzar Kuoi, Victor 1,114,000 B 46.81 1,293,493,760 35.02 21-May-20 Li Tzar Kuoi, Victor 2,418,500 B 47.10 1,292,379,760 34.99 20-May-20 Li Tzar Kuoi, Victor 4,089,000 B 47.49 1,289,961,260 34.92 19-May-20 Li Tzar Kuoi, Victor 683,500 B 47.85 1,285,872,260 34.81 18-May-20 Li Tzar Kuoi, Victor 898,000 B 46.93 1,285,188,760 34.79 15-May-20 Li Tzar Kuoi, Victor 883,500 B 48.57 1,284,290,760 34.77 8-May-20 Li Tzar Kuoi, Victor 2,500,000 B 48.12 1,283,407,260 34.74 7-May-20 Li Tzar Kuoi, Victor 900,000 B 48.37 1,280,907,260 34.68 6-May-20 Li Tzar Kuoi, Victor 671,000 B 48.05 1,280,007,260 34.65 5-May-20 Li Tzar Kuoi, Victor 2,500,000 B 47.91 1,279,336,260 34.63 4-May-20 Li Tzar Kuoi, Victor 505,000 B 45.78 1,276,836,260 34.57 8-Apr-20 Li Tzar Kuoi, Victor 26,000 B 43.45 1,276,331,260 34.55 6-Apr-20 Li Tzar Kuoi, Victor 1,135,000 B 42.99 1,276,305,260 34.55 3-Apr-20 Li Tzar Kuoi, Victor 400,000 B 42.79 1,275,170,260 34.52 2-Apr-20 Li Tzar Kuoi, Victor 398,000 B 42.39 1,274,770,260 34.51 1-Apr-20 Li Tzar Kuoi, Victor 619,000 B 40.15 1,274,372,260 34.5 30-Mar-20 Li Tzar Kuoi, Victor 1,269,000 B 39.06 1,273,753,260 34.48 26-Mar-20 Li Tzar Kuoi, Victor 1,620,500 B 38.40 1,272,484,260 34.45 25-Mar-20 Li Tzar Kuoi, Victor 4,691,500 B 36.65 1,270,863,760 34.4 24-Mar-20 Li Tzar Kuoi, Victor 4,200,000 B 36.07 1,266,172,260 34.28 23-Mar-20 Li Tzar Kuoi, Victor 6,089,500 B 38.45 1,261,972,260 34.16 20-Mar-20 Source: HK Exchange

Page 22 Industry Focus

Hong Kong Property Sector (Residential)

Major shareholder stake increase (continued)

TAI CHEUNG HLDGS (88 HK) Name of substantial No. of shares Average price per No. of shares % of issued Date of relevant shareholder inv olv ed Buy /Sell share (HK$) interested share capital ev ent

Chan Pun, David 2000 B 4.87 180,381,045 29.21 16-Sep-20 Chan Pun, David 1000 B 4.9 180,379,045 29.21 11-Sep-20 Chan Pun, David 3000 B 4.8433 180,378,045 29.21 7-Sep-20 Chan Pun, David 2000 B 4.885 180,375,045 29.21 31-Aug-20 Chan Pun, David 1000 B 4.9 180,373,045 29.21 27-Aug-20 Chan Pun, David 1000 B 4.95 180,372,045 29.21 17-Aug-20 Chan Pun, David 4000 B 4.9 180,371,045 29.21 11-Aug-20 Chan Pun, David 1000 B 4.9 180,367,045 29.21 31-Jul-20 Chan Pun, David 2000 B 4.89 180,366,045 29.21 28-Jul-20 Chan Pun, David 1000 B 4.92 180,364,045 29.21 20-Jul-20 Chan Pun, David 1000 B 4.92 180,363,045 29.21 16-Jul-20 Chan Pun, David 2000 B 4.97 180,362,045 29.21 9-Jul-20 Chan Pun, David 13000 B 5.0023 180,360,045 29.21 6-Jul-20 Chan Pun, David 2000 B 4.97 180,347,045 29.20 30-Jun-20 Chan Pun, David 1,000 B 5.20 180,345,045 29.20 23-Apr-20 Chan Pun, David 1,000 B 5.34 180,344,045 29.20 20-Apr-20 Chan Pun, David 1,000 B 5.45 180,343,045 29.20 9-Apr-20 Chan Pun, David 4,000 B 5.21 180,342,045 29.20 6-Apr-20 Chan Pun, David 4,000 B 5.11 180,338,045 29.20 2-Apr-20 Chan Pun, David 2,000 B 5.15 180,334,045 29.20 30-Mar-20 Chan Pun, David 7,000 B 5.05 180,332,045 29.20 18-Mar-20 Chan Pun, David 3,000 B 5.43 180,325,045 29.20 13-Mar-20 Chan Pun, David 4,000 B 5.71 180,322,045 29.20 9-Mar-20 Chan Pun, David 2,000 B 5.90 180,318,045 29.20 4-Mar-20 Chan Pun, David 5,000 B 6.01 180,316,045 29.20 28-Feb-20 Chan Pun, David 7,000 B 6.17 180,311,045 29.20 4-Feb-20 Chan Pun, David 1,000 B 6.17 180,304,045 29.20 31-Jan-20 Chan Pun, David 1,000 B 6.26 180,303,045 29.20 21-Jan-20 Chan Pun, David 3,000 B 6.31 180,302,045 29.20 15-Jan-20 Chan Pun, David 1,000 B 6.28 180,299,045 29.20 8-Jan-20

LAI SUN DEV (488 HK) Name of substantial No. of shares Average price per No. of shares % of issued Date of relevant shareholder inv olv ed Buy /Sell share (HK$) interested share capital ev ent

Yu Cheuk Yi 252,300 B 8.65 140,488,110 23.02 10-Jun-20 Yu Cheuk Yi 355,800 B 8.75 139,003,410 22.78 19-May-20 Yu Cheuk Yi 956,700 B 8.24 134,611,110 22.06 26-Mar-20 Yu Cheuk Yi 1,260,000 B 9.82 128,660,610 21.08 5-Mar-20

SHK PPT (16 HK) Name of substantial No. of shares Average price per No. of shares % of issued Date of relevant shareholder inv olv ed Buy /Sell share (HK$) interested share capital ev ent

Kwong Siu Hing 850,000 B 97.60 773,462,261 26.69 10-Jul-20 Kwong Siu Hing 220,000 B 89.02 772,612,261 26.66 29-May-20 Kwong Siu Hing 792,000 B 88.45 772,392,261 26.65 25-May-20 Kwong Siu Hing 1,000,000 B 90.87 771,600,261 26.63 22-May-20 Kwong Siu Hing 500,000 B 96.45 770,600,261 26.59 14-May-20

Source: HK Exchange

Page 23 HK Property Sector (Residential) CK Asset Holdings

Bloomberg: 1113 HK | Reuters: 1113.HK Refer to important disclosures at the end of this report

A vote of confidence BUY Last Traded Price (15 Sep 2020): HK$41.50 (HSI : 24,733) • Strong net order book lowers development income risk Price Target 12-mth: HK$53.65 (29.3% upside) • Robust war chest for acquisitions Analyst • BUY with HK$53.65 TP Jeff YAU CFA, +852 36684180, [email protected] Strong net order book lowers development income risk. Up to late July, Cheung Kong Asset Holdings (CKAH) achieved contracted Price Relative sales of HK$12.5bn in Hong Kong, mainly from selling Seaside HK$ Relative Index Sonata in Sham Shui Po and Sea to Sky in Tseung Kwan O. 81.0 220 200 Meanwhile, CKAH has pre-sold c.71% and c.56% of total units at 71.0 180 160 61.0 Seaside Sonata and Sea to Sky respectively. CKAH is now applying 140 51.0 120 for pre-sale consent for its Kau To project (266 units). Newly built 100 41.0 80 Borrett Road luxury development could be released onto the market 31.0 60 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 once the sentiment improves. In China, contracted sales exceeded

CK Asset Holdings (LHS) Relative HSI (RHS) HK$7bn in the same period. As of Jun-20, property sales contracted Forecasts and Valuation but not yet recognized amounted to HK$27.9bn, of which FY Dec (HK$ m) 2018A 2019A 2020F 2021F HK$8.8bn is expected to be booked in 2H20. Turnover 50,368 82,382 50,998 67,597 EBITDA 25,587 38,196 23,504 33,746 Robust war chest for acquisitions. Net debt stood at HK$17.8bn Pre-tax Profit 49,175 37,510 24,551 30,572 in Jun-20, translating into a gearing of 5%. Even allowing for off- Underlying Profit 24,134 28,729 17,521 23,472 balance sheet debt, CKAH’s gearing would remain comfortable at Net Profit 40,117 29,134 17,521 23,472 12-13%. Balance sheet strength should improve further on back of EPS (HK$) 6.53 7.78 4.74 6.36 proceeds from disposal of Chengdu Le Parc project. In Jul-20, CKAH EPS Gth (%) 19.9 19.1 (39.0) 34.0 disposed its interest in this sizeable project to a consortium equally PE (X) 6.4 5.3 8.7 6.5 owned by Yuzhou and Chengdu Ruizhou Real Estate for P/Cash Flow (X) 8.9 3.6 9.2 13.9 EV/EBITDA (X) 6.9 4.6 7.5 5.2 c.HK$8.9bn with disposal gains of HK$3.7bn to be recognised in DPS (HK$) 1.90 2.10 1.44 1.63 2H20. With a healthy balance sheet, CKAH is well positioned to Div Yield (%) 4.6 5.1 3.5 3.9 pursue acquisitions when opportunities knock. Net Gearing (%) 4 6 4 3 ROE (%) 13.0 8.7 5.0 6.5 BUY with HK$53.65 TP. After the share sell-off following Est. NAV (HK$) 109.9 107.3 disappointment on cut in interim dividend, the stock, trading at Disc. to NAV (%) (62) (61) 62% discount to our appraised current NAV, is attractive from a historical viewpoint. This should limit further downside risk on its Earnings Rev (%): Nil Nil share price. After the result announcement, the Li family purchased Consensus EPS (HK$): 5.22 5.95 9m shares from the market, seen as a vote of confidence over the Other Broker Recs: B:10 S:2 H:3 company’s prospects. Even allowing for pandemic-led impact on Source of all data on this page: Company, DBS Bank (Hong Kong) Limited aircraft leasing, pub business and hotel operations, we remain (“DBS HK”), Thomson Reuters positive on its share price performance. BUY with HK$53.65, based on 50% discount to our Jun-2021 NAV estimate.

At A Glance Issued Capital (m shrs) 3,693 Mkt Cap (HK$m/US$m) 153,276 / 19,771 Major Shareholders (%) Li (Ka Shing) 29.1 Free Float (%) 70.9 3m Avg. Daily Val. (US$m) 46.78 GICS Industry: Real Estate / Real Estate Management & Development

Page 24

ed-JS/ sa- CS /AH HK Property Sector (Residential)

CK Asset Holdings

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F Turnover 50,368 82,382 50,998 67,597 Fixed Assets 161,138 217,351 209,650 207,018 EBITDA 25,587 38,196 23,504 33,746 Other LT Assets 93,882 100,191 108,691 108,190 Depr / Amort (1,771) (2,192) (3,507) (3,788) Cash & ST Invts 56,725 60,304 66,093 70,722 EBIT 23,816 36,004 19,997 29,958 Other Current Assets 164,200 130,211 128,846 144,908 Associates Inc 2,913 2,569 2,543 2,564 Total Assets 475,945 508,057 513,279 530,838 Interest (Exp)/Inc (1,079) (1,291) (1,800) (1,950) ST Debt 1,829 6,841 6,841 6,841 Exceptionals 23,525 228 3,811 0 Creditors 15,622 21,970 19,970 17,970 Pre-tax Profit 49,175 37,510 24,551 30,572 Other Current Liab 36,996 20,947 20,947 20,947 Tax (7,541) (7,464) (5,502) (6,162) LT Debt 67,663 73,241 73,241 73,241 Minority Interest (1,517) (912) (1,528) (938) Other LT Liabilities 12,807 23,826 23,826 23,826 Net Profit 40,117 29,134 17,521 23,472 Minority Interests 17,508 16,979 17,966 18,363 Underlying Profit 24,134 28,729 17,521 23,472 Shareholder’s Equity 323,520 344,253 350,488 369,650 Total Cap. & Liab. 475,945 508,057 513,279 530,838 Sales Gth (%) (12) 64 (38) 33 Share Capital (m) 3,696 3,693 3,693 3,693 Net Profit Gth (%) 33 (27) (40) 34 Net Cash/(Debt) (12,767) (19,778) (13,989) (9,360) EBITDA Margins (%) 51 46 46 50 Working Capital 166,478 140,757 147,181 169,872 EBIT Margin (%) 47 44 39 44 Net Gearing (%) 4 6 4 3 Tax Rate (%) 15 20 22 20

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F EBIT 23,816 36,004 19,997 29,958 Revenues (HK$ m) Tax Paid (7,364) (4,520) (5,502) (6,162) Property sales 34,763 64,099 27,156 38,158 Depr/Amort 1,771 2,192 3,507 3,788 Property rental 7,479 7,302 6,896 6,725 Chg in Wkg.Cap (8,775) 3,179 (5,224) (17,212) Hotels and serviced suites 5,136 4,168 2,146 3,368 Other Non-Cash 4,519 5,060 4,854 1,065 Property and project 826 827 911 957 Operating CF 13,967 41,915 17,632 11,436 management Net Capex (10,536) (16) 0 0 Aircraft leasing 2,164 2,375 1,890 1,890 Pub operations 0 3,611 12,000 16,500 Assoc, MI, Invsmt 9,731 (14,826) (1,711) 2,000 Total 50,368 82,382 50,998 67,597 Investing CF (805) (14,842) (1,711) 2,000 Net Chg in Debt (1,765) (11,953) 0 0 Key Assumptions (%) 2020F 2021F New Capital 0 0 0 0 Residential price - HK 0 0 Dividend (6,825) (7,992) (7,091) (5,466) Office rental - HK (20) (5) Other Financing CF (3,167) (2,802) (3,041) (3,341) Retail rental (Shopping centre) - HK (25) (5) Financing CF (11,757) (22,747) (10,132) (8,807) Chg in Cash 1,405 4,326 5,789 4,629

Source: Company, DBS HK

Page 25 HK Property Sector (Residential) CSI Properties

Bloomberg: 497 HK | Reuters: 0497.HK Refer to important disclosures at the end of this report

Strong embedded value BUY Last Traded Price (15 Sep 2020): HK$0.238 (HSI : 24,733) • Good response to launch of Dukes Place Price Target 12-mth: HK$0.30 (26.1% upside) • More luxury home sales in the pipeline Analyst Jeff YAU CFA, +852 36684180, [email protected] • BUY with HK$0.30 TP Good response to launch of Dukes Place. Despite the challenging market led by the COVID-19 outbreak, CSI Price Relative

HK$ Relative Index Properties has sold eight units at Dukes Place at Jardine’s 0.6 Lookout for a total of HK$1.55bn or c.HK$67,800psf on 0.6 207 0.5 187 average. We estimate pre-tax margins of c.40%. CSI Properties 0.5 167 0.4 147 has a 60% stake in this luxury development which contains 16 0.4 127 0.3 107 units. Dukes Place should be a key profit contributor in FY21. A 0.3 87 complete sale should yield total attributable pre-tax profit of 0.2 67 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 >HK$900m to CSI Properties. CSI Properties (LHS) Relative HSI (RHS) Forecasts and Valuation More luxury home sales in the pipeline. The renovation works FY Mar (HK$ m) 2019A 2020A 2021F 2022F at 8-12 Peak Road are almost completed. This luxury Turnover 3,439 3,710 2,850 4,212 development would also be available for sale in FY21. In Beijing, EBITDA 959 1,111 1,226 1,505 the renovation works at Knightsbridge, previously known as Pre-tax Profit 738 1,309 1,021 1,280 Beijing Legendale, is close to completion and sales should Net Profit 530 1,156 582 757 commence soon. Elsewhere, CSI Properties is also carrying out EPS (HK cts) 5.28 11.77 5.94 7.72 the interior finishing at its luxury houses on the Peak and in EPS Gth (%) (47.6) 123.0 (49.6) 30.0 PE (X) 4.5 2.0 4.0 3.1 Sheung Shui. P/Cash Flow (X) 1.6 2.5 4.6 1.2 BUY with HK$0.30 TP. The stock is trading at 82% discount to EV/EBITDA (X) 11.3 9.8 8.9 7.2 DPS (HK cts) 0.72 0.50 0.71 0.93 our appraised current NAV. The sales progress of its luxury Div Yield (%) 3.0 2.1 3.0 3.9 property portfolio would dictate its share price performance. Net Gearing (%) 66 59 58 48 Following the final result announcement in June, the company ROE (%) 3.9 8.3 4.0 4.9 has repurchased 183.5m shares for HK$45.1m or HK$0.246/sh Est. NAV (HK$) 1.3 1.2 on average. This not only signals its strong embedded value but Disc. to NAV (%) (82) (80) also lends support to its share price. BUY with HK$0.30 TP. This is premised on 75% discount to our Jun-2021 NAV estimate. Earnings Rev (%): Nil Nil Source of all data on this page: Company, DBS Bank (Hong Kong) Limited (“DBS HK”), Thomson Reuters At A Glance Issued Capital (m shrs) 9,808 Mkt Cap (HK$m/US$m) 2,334 / 301 Major Shareholders (%) Chung (Cho Yee Mico) 52.7 Dalton Investments LLC 5.1 Free Float (%) 42.3 3m Avg. Daily Val. (US$m) 0.20 GICS Industry: Real Estate / Real Estate Management & Development

Page 26

ed-JS/ sa- CS /AH HK Property Sector (Residential)

CSI Properties

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Mar 2019A 2020A 2021F 2022F FY Mar 2019A 2020A 2021F 2022F Turnover 3,439 3,710 2,850 4,212 Fixed Assets 252 297 264 230 EBITDA 959 1,111 1,226 1,505 Other LT Assets 10,093 10,132 10,311 10,491 Depr / Amort (24) (34) (34) (34) Cash & ST Invts 1,410 2,675 2,539 2,739 EBIT 935 1,077 1,192 1,471 Other Current Assets 14,574 14,008 14,782 14,453 Associates Inc 20 402 179 179 Total Assets 26,329 27,113 27,896 27,912 Interest (Exp)/Inc (218) (171) (350) (370) ST Debt 2,123 1,812 1,501 1,502 Exceptionals 0 0 0 0 Creditors 325 346 386 426 Pre-tax Profit 738 1,309 1,021 1,280 Other Current Liab 2,000 989 989 989 Tax (70) (65) (139) (145) LT Debt 8,255 9,440 9,751 8,750 Minority Interest (49) 2 (211) (290) Other LT Liabilities 12 65 65 65 Holders of perpetual Minority Interests 38 36 247 537 securities (90) (90) (90) (90) Net Profit 530 1,156 582 757 Shareholder’s Equity 13,577 14,424 14,956 15,643 Total Cap. & Liab. 26,329 27,113 27,896 27,912 Sales Gth (%) (13) 8 (23) 48 Share Capital (m) 10,037 9,815 9,798 9,798 Net Profit Gth (%) (48) 118 (50) 30 Net Cash/(Debt) (8,968) (8,577) (8,713) (7,513) EBITDA Margins (%) 28 30 43 36 Working Capital 11,536 13,536 14,445 14,275 EBIT Margin (%) 27 29 42 35 Net Gearing (%) 66 59 58 48 Tax Rate (%) 9 5 14 11

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Mar 2019A 2020A 2021F 2022F FY Mar 2019A 2020A 2021F 2022F EBIT 935 1,077 1,192 1,471 Revenues (HK$ m) Tax Paid (34) (14) (139) (145) Property rental income 302 212 196 247 Depr/Amort 24 34 34 34 Property sales income 3,137 3,498 2,654 3,966 Chg in Wkg.Cap. 458 372 (734) 369 Total 3,439 3,710 2,850 4,212 Other Non-Cash 65 (564) 14 13 Operational CF 1,448 905 368 1,745 Net Capex (64) (523) 0 0 Assoc, MI, Invsmt (1,864) 553 (90) (90) Investment CF (1,929) 30 (90) (90) Net Chg in Debt 133 948 0 (1,000) Key Assumptions (%) 2020F 2021F New issues/Unit Buyback 0 (97) 0 0 Residential price - HK 0 0 Distribution Paid (180) (71) (49) (70) Office rental - HK (20) (5) Other Financing CF (644) (453) (365) (385) Retail rental (Shopping centre) - HK (25) (5) Financing CF (690) 327 (414) (1,455) Chg in Cash (1,170) 1,262 (136) 200

Source: Company, DBS HK

Page 27 HK Property Sector (Residential) Henderson Land

Bloomberg: 12 HK | Reuters: 12.HK Refer to important disclosures at the end of this report

Well grounded BUY Last Traded Price (15 Sep 2020): HK$29.25 (HSI : 24,733) • Sale of Wo Shang Wai lots completed with Price Target 12-mth: HK$34.75 (18.8% upside) handsome profit generated Analyst • Expanding rental income base Jeff YAU CFA, +852 36684180, [email protected] • BUY with HK$34.75 TP Sale of Wo Shang Wai lots completed with handsome profit Price Relative generated. With the COVID-19 outbreak disrupting sales HK$ Relative Index

49.3 210 activities, Henderson Land’s contracted sales tumbled 59% to

190 44.3 HK$5bn in 1H20, with HK$2.83bn from Hong Kong and 170 39.3 150 HK$2.18bn from China. As of Jun-20, net order book stood high

34.3 130 110 at HK$25bn, made up of HK$14.9bn from Hong Kong and 29.3 90 HK$10bn from China. This includes proceeds from the disposal 24.3 70 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 of Wo Shang Wai agricultural land. The transaction was Henderson Land (LHS) Relative HSI (RHS) completed in Jul-20 with disposal gains of c.HK$3.7bn to be Forecasts and Valuation booked in 2H20. All these point to strong earnings visibility in the FY Dec (HK$ m) 2018A 2019A 2020F 2021F years ahead. Nonetheless, given the prevailing weak market Turnover 21,982 24,184 21,226 20,943 sentiment, it is becoming difficult to crystallise the value of non- EBITDA 9,358 10,482 9,545 9,256 core property assets in Hong Kong. Pre-tax Profit 22,171 16,694 17,085 13,617 Underlying Profit 19,765 14,640 15,349 11,698 Expanding rental income base. In Hong Kong, Henderson Land EPS (HK$) 4.08 3.02 3.17 2.42 is scheduled to complete an office development (65,000sf) in EPS Gth (%) 1.3 (25.9) 4.8 (23.8) Wan Chai in early 2021 followed by the Murray Road project PE (X) 7.2 9.7 9.2 12.1 (465,000sf) in Central in late 2023/early 2024. In China, Lumina P/Cash Flow (X) 26.6 18.4 16.6 16.1 Shanghai Ph 1 & 2, retail mall and remaining phases of Lumina EV/EBITDA (X) 25.1 22.4 24.6 25.4 Guangzhou and Hengxu Hui in Shanghai will be added to its DPS (HK$) 1.64 1.80 1.80 1.80 investment property portfolio over the next couple of years. New Div Yield (%) 5.6 6.2 6.2 6.2 contributions from these commercial developments should add Net Gearing (%) 22 25 24 25 ROE (%) 6.5 4.6 4.8 3.6 momentum to the company’s future rental income expansion. Est. NAV (HK$) 70.7 69.5 BUY with HK$34.75 TP. YTD, share price of Henderson Land has Disc. to NAV (%) (59) (58) fallen 24%, underperforming the broad market by 12%. Meanwhile, the stock is trading 59% below our appraised Earnings Rev (%): Nil Nil Consensus EPS (HK$): 3.04 2.83 current NAV, which is >1.5SD below its 10-year mean. Estimated Other Broker Recs: B:12 S:3 H:2 dividend yield is high at 6.2%. Valuation is by no means demanding. Strong earnings visibility and improving earnings Source of all data on this page: Company, DBS Bank (Hong Kong) Limited (“DBS HK”), Thomson Reuters quality should justify a higher valuation. BUY with HK$34.75 TP, based on a 50% discount to our Jun-2021 NAV estimate.

At A Glance Issued Capital (m shrs) 4,841 Mkt Cap (HK$m/US$m) 141,599 / 18,265 Major Shareholders (%) Lee (Shau Kee) 72.8 Free Float (%) 27.2 3m Avg. Daily Val. (US$m) 14.27 GICS Industry: Real Estate / Real Estate Management & Development

Page 28

ed-JS/ sa- CS /AH HK Property Sector (Residential)

Henderson Land

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F Turnover 21,982 24,184 21,226 20,943 Fixed Assets 177,087 183,803 178,130 179,712 EBITDA 9,358 10,482 9,545 9,256 Other LT Assets 129,840 142,692 144,417 146,235 Depr / Amort (68) (377) (385) (392) Cash & ST Invts 18,665 12,110 12,310 8,122 EBIT 9,290 10,105 9,160 8,864 Other Current Assets 115,514 116,640 118,813 121,839 Associates Inc 5,649 4,860 4,610 4,903 Total Assets 441,106 455,245 453,669 455,907 Interest (Exp)/Inc (150) 34 (350) (150) ST Debt 27,834 27,768 27,768 27,768 Exceptionals 7,382 1,695 3,665 0 Creditors 27,113 27,298 27,198 27,098 Pre-tax Profit 22,171 16,694 17,085 13,617 Other Current Liab 7,367 4,099 4,099 4,099 Tax (1,923) (1,997) (1,586) (1,568) LT Debt 53,609 63,137 60,638 58,140 Minority Interest (483) (57) (150) (350) Other LT Liabilities 7,191 7,550 7,550 7,550 Underlying Profit 19,765 14,640 15,349 11,698 Minority Interests 4,839 4,542 3,870 4,126 Shareholder’s Equity 313,153 320,851 322,546 327,126 Total Cap. & Liab. 441,106 455,245 453,669 455,907 Sales Gth (%) (21) 10 (12) (1) Share Capital (m) 4,841 4,841 4,841 4,841 Net Profit Gth (%) 1 (26) 5 (24) Net Cash/(Debt) (70,123) (81,655) (78,956) (80,646) EBITDA Margins (%) 43 43 45 44 Working Capital 71,865 69,585 72,057 70,995 EBIT Margin (%) 42 42 43 42 Net Gearing (%) 22 25 24 25 Tax Rate (%) 9 12 9 12

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F EBIT 9,290 10,105 9,160 8,864 Revenues (HK$ m) Tax Paid (1,810) (1,275) (1,586) (1,568) Sales of property 13,335 15,079 12,329 10,911 Depr/Amort 68 377 385 392 Rental Income 6,020 6,169 5,898 6,669 Chg in Wkg.Cap (4,120) (2,053) (1,413) (926) Department store operation 1,496 1,707 1,758 2,110 Other Non-Cash 396 (410) 400 450 Others 1,131 1,229 1,241 1,254 Operating CF 3,824 6,744 6,946 7,212 Total 21,982 24,184 21,226 20,943 Net Capex 31 (2,932) (200) (200) Assoc, MI, Invsmt (7,370) (891) 7,590 3,085 Investing CF (7,339) (3,823) 7,390 2,885 Net Chg in Debt 6,240 5,458 (2,499) (2,498) Key Assumptions (%) 2020F 2021F New Capital 0 0 0 0 Residential Price - HK 0 0 Dividend (7,831) (8,219) (8,987) (8,986) Office rental - HK (20) (5) Other Financing CF (2,141) (3,108) (2,650) (2,800) Retail Rental (Shopping Center) - HK (25) (5) Financing CF (3,732) (5,869) (14,136) (14,284) Chg in Cash (7,247) (2,948) 200 (4,188)

Source: Company, DBS HK

Page 29 HK Property Sector (Residential) HKR International Ltd

Bloomberg: 480 HK | Reuters: 0480.HK Refer to important disclosures at the end of this report

Overlooked gem with visible earnings BUY Last Traded Price (15 Sep 2020): HK$3.03 (HSI : 24,733) • Near-term development earnings secured Price Target 12-mth: HK$4.05 (33.7% upside) (Prev HK$4.09) • HKRI Taikoo Hui in Shanghai is a long-term growth engine Analyst • BUY with HK$4.05 TP Jeff YAU CFA, +852 36684180, [email protected] Near term development earning secured. HKR has commenced to hand over units at Poggibonsi in Discovery Bay. This upmarket project Price Relative has 196 units in three residential towers with a total GFA of HK$ Relative Index 187,000sf. Since its launch in Mar-19, HKR has sold 109 units, c.56% 3.7 209 of total, at an ASP of HK$16,500psf on average. We estimate the 3.5 189 3.3 169 project should yield pre-tax attributable profit of c.HK$510m if fully 3.1 149 sold. Aided by project pre-sale of Poggibonsi, we estimate HKR has 2.9 129

2.7 109 locked in >85% of its development earnings for FY21, pointing to

2.5 89 Dec-19 Mar-20 Jun-20 Sep-20 high earnings visibility. Elsewhere, HKR sold one house at IL PICCO in

HKR International Ltd (LHS) Relative HSI (RHS) Discovery Bay in Feb-20. IL PICCO offers 21 luxury houses with Forecasts and Valuation extensive private gardens. The low-rise residential development in Tai FY Mar (HK$ m) 2019A 2020A 2021F 2022F Po, a 40/60 JV with Hysan Development, should go on sale in 2021. Turnover 3,844 4,696 3,741 3,906 In China, Creekside One and Mansion One in Jaixing are also in the EBITDA 1,003 1,975 1,372 1,240 sales pipeline. Profit contributions from these projects should kick in Pre-tax Profit 2,731 2,522 1,330 1,197 from FY22 onwards. Underlying Profit 776 1,142 759 773 Net Profit 2,207 1,625 759 773 HKRI Taikoo Hui in Shanghai is a long-term growth engine. With EPS (HK$) 0.52 0.77 0.51 0.52 total GFA of 3.5msf, HKRI Taikoo in Shanghai, 50/50 JV with Swire EPS Gth (%) (66.3) 47.2 (33.5) 1.8 Properties, has ramped up nicely since its completion in 2016-17. PE (X) 5.8 3.9 5.9 5.8 HKR intends to further optimise the retail trade mix by recruiting P/Cash Flow (X) 10.5 87.0 7.0 5.2 more higher yielding luxury brands over time. This should allow the EV/EBITDA (X) 11.9 6.1 8.7 9.6 DPS (HK$) 0.10 0.12 0.12 0.12 mall to tap on growing domestic consumption of luxury goods. Div Yield (%) 3.3 4.0 4.0 4.0 Despite the temporary business disruption led by the COVID-19 Net Gearing (%) 19 22 22 22 outbreak, this property complex has been on a recovery path since ROE (%) 10.8 7.5 3.4 3.4 2Q20, and is set to be HKR’s major growth catalyst in the medium Est. NAV (HK$) 16.6 16.4 term. Disc. to NAV (%) (82) (81) BUY with HK$4.05 TP. The stock, trading at 82% discount to our Earnings Rev (%): (5) 2 assessed current NAV, is attractively valued. Continued sales at Source of all data on this page: Company, DBS Bank (Hong Kong) Limited Poggibonsi and IL PICCO in Discovery Bay should serve as share price (“DBS HK”), Thomson Reuters catalysts in the near term. HKRI Taikoo Hui has been recovering well and should be a long-term growth engine. BUY with HK$4.05 TP, based on a 75% discount to our Jun-2021 NAV estimate.

At A Glance Issued Capital (m shrs) 1,485 Mkt Cap (HK$m/US$m) 4,500 / 581 Major Shareholders (%) CCM Trust (Cayman) Ltd. 43.2 LBJ Regents Limited 6.8 Free Float (%) 50.0 3m Avg. Daily Val. (US$m) 0.13 GICS Industry: Real Estate / Real Estate Management & Development

Page 30

ed-JS/ sa- CS /AH HK Property Sector (Residential)

HKR International Ltd

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Mar 2019A 2020A 2021F 2022F FY Mar 2019A 2020A 2021F 2022F Turnover 3,844 4,696 3,741 3,906 Fixed Assets 14,797 17,491 17,386 17,262 EBITDA 1,003 1,975 1,372 1,240 Other LT Assets 9,443 9,996 10,451 10,871 Depr / Amort (165) (191) (210) (231) Cash & ST Invts 2,639 2,541 2,348 1,932 EBIT 838 1,784 1,162 1,009 Other Current Assets 8,579 7,212 7,263 7,204 Associates Inc 947 507 335 320 Total Assets 35,457 37,241 37,447 37,270 Interest (Exp)/Inc (171) (214) (167) (131) ST Debt 906 4,109 500 800 Exceptionals 1,117 445 0 0 Creditors 1,201 1,289 1,309 1,329 Pre-tax Profit 2,731 2,522 1,330 1,197 Other Current Liab 1,894 2,016 1,916 1,916 Tax (326) (838) (298) (223) LT Debt 5,780 3,212 6,821 6,021 Minority Interest (198) (60) (272) (201) Other LT Liabilities 1,753 1,869 1,869 1,869 Net Profit 2,207 1,625 759 773 Minority Interests 2,622 2,679 2,679 2,679 Underlying Profit 776 1,142 759 773 Shareholder’s Equity 21,300 22,067 22,353 22,656 Sales Gth (%) 73 22 (20) 4 Total Cap. & Liab. 35,457 37,241 37,447 37,269 Net Profit Gth (%) (4) (26) (53) 2 Share Capital (m) 1,485 1,485 1,485 1,485 EBITDA Margins (%) 26 42 37 32 Net Cash/(Debt) (4,048) (4,780) (4,974) (4,889) EBIT Margin (%) 22 38 31 26 Working Capital 7,216 2,340 5,885 5,092 Tax Rate (%) 12 33 22 19 Net Gearing (%) 19 22 22 22

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Mar 2019A 2020A 2021F 2022F FY Mar 2019A 2020A 2021F 2022F EBIT 838 1,784 1,162 1,009 Revenues (HK$ m) Tax Paid (227) (653) (298) (223) Property development 2,297 3,223 2,446 2,499 Depr/Amort 165 191 210 231 Property leasing 460 528 545 549 Chg in Wkg.Cap (124) (694) (130) 78 Hotel management 329 264 197 277 Other Non-Cash 0 76 0 0 Others 758 681 553 581 Operating CF 653 705 943 1,095 Total 3,844 4,696 3,741 3,906 Net Capex (438) (685) (400) (400) Assoc, MI, Invsmt 666 (497) (120) (100) Investing CF 228 (1,182) (520) (500) Net Chg in Debt (817) 618 0 (500) Key Assumptions (%) 2020F 2021F New Capital 0 0 0 0 Residential price - HK 0 0 Dividend (171) (166) (450) (379) Office rental - HK (20) (5) Other Financing CF (123) (22) (167) (131) Retail rental (Shopping centre) - HK (25) (5) Financing CF (1,112) 430 (618) (1,010) Chg in Cash (230) (48) (194) (415)

Source: Company, DBS HK

Page 31 HK Property Sector (Residential) K.Wah International

Bloomberg: 173 HK | Reuters: 0173.HK Refer to important disclosures at the end of this report

Strong earnings visibility BUY Last Traded Price ( 15 Sep 2020): HK$3.71 (HSI : 24,733) • Near term development income is well assured Price Target 12-mth: HK$4.33 (16.7% upside) • Strong project launch pipeline ahead Analyst Jeff YAU CFA, +852 36684180, [email protected] • BUY with HK$4.33TP Near term development income is well assured. In 2020, K.Wah International continued to sell Solaria in Tai Po and Price Relative

HK$ Relative Index K.Summit in Kai Tak. About 85% of a total of 1122 units at 221 6.1 Solaria have been sold out at an ASP of >HK$18,000psf with 201 5.6 181 the corresponding profit mostly recognized in 1H20. Up to Jul- 5.1 161 4.6 141 20, the company has sold >410 units at K.Summit, representing 4.1 121 3.6 101 41% of the total. Since the COVID-19 outbreak has stabilised in 3.1 81 China, sales of The Palace III and Windermere in Shanghai have 2.6 61 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 improved noticeably. Overall, K.Wah achieved contracted sales K.Wah International (LHS) Relative HSI (RHS) of HK$5.1bn including HK$3.1bn from Hong Kong and HK$2bn Forecasts and Valuation from China in 7M20. As of Jul-20, net order book stood at FY Dec (HK$ m) 2018A 2019A 2020F 2021F HK$7.8bn comprising HK$5bn from Hong Kong and HK$2.8bn Turnover 10,760 10,652 11,407 16,550 from China. Contracted sales from these projects should be EBITDA 4,010 4,935 4,546 2,992 recognised before end-2021, pointing to high visibility of its Pre-tax Profit 5,539 5,299 4,573 2,991 Underlying Profit 3,005 3,149 3,201 2,224 development earnings in the near term. EPS (HK$) 0.96 1.01 1.02 0.71 Strong project launch pipeline ahead. After launching Jiajun EPS Gth (%) 16.4 4.8 1.6 (30.5) PE (X) 3.9 3.7 3.6 5.2 Garden and J City in Jiangmen for pre-sale in Jan-20 and Mar- P/Cash Flow (X) 11.0 3.7 (33.2) 2.6 20, K.Wah intends to put Avanti in Suzhou, Cosmo in Huadu EV/EBITDA (X) 5.6 5.1 5.8 7.4 and Bayview in Dongguan onto the market in 2H20. These DPS (HK$) 0.20 0.20 0.21 0.21 three projects will altogether provide a total of c.3200 units. In Div Yield (%) 5.4 5.4 5.7 5.7 Hong Kong, K.Wah plans to launch the Grampian Road luxury Net Gearing (%) 31 39 38 27 project and Grand Victoria Ph 1 on the Cheung Sha Wan ROE (%) 11.5 8.5 7.9 5.1 Waterfront towards the end of 2020. Est. NAV (HK$) 13.5 14.4 Disc. to NAV (%) (73) (74) BUY with HK$4.33 TP. The stock is trading at 73% discount to our appraised current NAV. Valuation is by no means expensive Earnings Rev (%): Nil Nil Consensus EPS (HK$): n.a. n.a. from a historical viewpoint. With smooth project pre-sales in Other Broker Recs: B:2 S:0 H:0 Hong Kong/China, the company’s development earnings should be well assured. By assigning a 70% discount to our Source of all data on this page: Company, DBS Bank (Hong Kong) Limited (“DBS HK”), Thomson Reuters Jun-2021 NAV estimate, we set our TP at HK$4.33, which suggests 17% upside from the current level. Maintain BUY.

At A Glance Issued Capital (m shrs) 3,125 Mkt Cap (HK$m/US$m) 11,597 / 1,496 Major Shareholders (%) Lui (Che Woo) 55.6 Polymate Company Limited 8.5 Free Float (%) 35.9 3m Avg. Daily Val. (US$m) 1.30 GICS Industry: Real Estate / Real Estate Management & Development

Page 32

ed-JS/ sa- CS /AH HK Property Sector (Residential)

K.Wah International

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F Turnover 10,760 10,652 11,407 16,550 Fixed Assets 14,640 15,541 16,267 17,031 EBITDA 4,010 4,935 4,546 2,992 Other LT Assets 16,302 22,841 22,859 22,859 Depr / Amort (29) (30) (30) (32) Cash & ST Invts 7,987 6,756 5,850 7,765 EBIT 3,981 4,905 4,515 2,961 Other Current Assets 30,964 29,422 33,059 30,919 Associates Inc 87 262 18 0 Total Assets 69,894 74,559 78,036 78,573 Interest (Exp)/Inc 54 94 40 30 ST Debt 1,101 4,269 2,002 2,003 Exceptionals 1,417 38 0 0 Creditors 7,931 7,357 7,437 7,517 Pre-tax Profit 5,539 5,299 4,573 2,991 Other Current Liab 3,801 4,109 4,109 4,109 Tax (1,362) (2,063) (1,277) (671) LT Debt 17,610 16,172 18,439 16,438 Minority Interest (130) (86) (95) (96) Other LT Liabilities 2,449 2,534 2,345 2,146 Net Profit 4,046 3,149 3,201 2,224 Minority Interests 1,361 1,232 1,611 2,004 Underlying Profit 3,005 3,149 3,201 2,224 Shareholder’s Equity 35,640 38,886 42,093 44,356 Total Cap. & Liab. 69,894 74,559 78,036 78,573 Sales Gth (%) (5) (1) 7 45 Share Capital (m) 3,124 3,126 3,126 3,126 Net Profit Gth (%) 4 (22) 2 (31) Net Cash/(Debt) (11,222) (14,998) (15,904) (11,989) EBITDA Margins (%) 37 46 40 18 Working Capital 26,119 20,442 25,361 25,055 EBIT Margin (%) 37 46 40 18 Net Gearing (%) 31 39 38 27 Tax Rate (%) 25 39 28 22

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F EBIT 3,981 4,905 4,515 2,961 Revenues (HK$ m) Tax Paid (2,329) (1,261) (1,277) (671) Sale of properties 10,109 9,957 10,761 15,819 Depr/Amort 29 30 30 32 Rental income 539 582 580 629 Chg in Wkg.Cap (124) 449 (2,858) 3,020 Hotel operation 112 112 67 101 Other Non-Cash (497) (703) (760) (850) Total 10,760 10,652 11,407 16,550 Operating CF 1,059 3,420 (349) 4,491 Net Capex (4) (296) 0 0 Assoc, MI, Invsmt 1,771 (6,001) 100 80 Investing CF 1,768 (6,298) 100 80 Net Chg in Debt 236 1,700 0 (2,000) Key Assumptions (%) 2020F 2021F New Capital 13 1 0 0 Residential price - HK 0 0 Dividend (357) (665) (656) (656) Office rental - HK (20) (5) Other Financing CF (674) (148) 0 0 Retail rental (Shopping centre) - HK (25) (5) Financing CF (781) 888 (656) (2,656) ` Chg in Cash 2,045 (1,990) (906) 1,915

Source: Company, DBS HK

Page 33 HK Property Sector (Residential) Kerry Properties

Bloomberg: 683 HK | Reuters: 683.HK Refer to important disclosures at the end of this report

In search of a re-rating catalyst HOLD Last Traded Price (15 Sep 2020): HK$20.85 (HSI : 24,733) • Expediting the sales of Mont Rouge Price Target 12-mth: HK$22.60 (8.4% upside) • Near-term development income secured through Analyst pre-sales Jeff YAU CFA, +852 36684180, [email protected] • HOLD with HK$22.6 TP

Price Relative HK$ Relative Index Expediting the sales of Mont Rouge. In Hong Kong, Kerry 222 45.8 202 Properties achieved HK$3.9bn in contracted sales in 7M20, 40.8 182 35.8 162 including some HK$600m from non-core asset disposals. This 142 30.8 122 has exceeded its full-year target of HK$3.2bn. The Bloomsway 25.8 102 and Mantin Heights are virtually sold out. Recently, Kerry 20.8 82 15.8 62 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Properties has expedited the sales of Mont Rouge using a

Kerry Properties (LHS) Relative HSI (RHS) flexible pricing strategy. YTD, the company has sold ten units at this luxury development for HK$1.7bn. In China, Kerry Forecasts and Valuation FY Dec (HK$ m) 2018A 2019A 2020F 2021F Properties achieved HK$2.3bn of contracted sales in 7M20, or Turnover 21,433 18,026 11,712 13,889 48% of the full-year target of HK$4.8bn. The pre-sale of a EBITDA 6,908 7,986 5,476 6,370 second apartment tower at Qianhai Kerry Centre was launched Pre-tax Profit 6,523 8,331 5,799 6,372 in Jul-20. Overall, Kerry Properties achieved contracted sales of Underlying Profit 3,345 5,396 3,361 3,752 HK$6.2bn in 7M20, representing 78% of its full-year FY20 EPS (HK$) 2.30 3.71 2.31 2.58 target of HK$8bn. EPS Gth (%) (50.0) 60.9 (37.7) 11.6 PE (X) 9.1 5.6 9.0 8.1 Near-term development income secured through pre-sales. P/Cash Flow (X) 1.6 4.5 31.1 11.1 Kerry Properties had a net order book of c.HK$7.9bn as at Jun- EV/EBITDA (X) 10.9 9.4 13.7 11.8 20. Approximately HK$4.8bn is from Hong Kong, of which DPS (HK$) 1.35 1.35 1.35 1.35 around c.33% is expected to be booked in 2H20. The Div Yield (%) 6.5 6.5 6.5 6.5 remaining c.HK$3.1bn is from China, of which c.85% is Net Gearing (%) 19 27 30 32 ROE (%) 3.5 5.4 3.3 3.6 expected to be booked in 2H20. Est. NAV (HK$) 77.8 75.4 HOLD with HK$22.6 TP. The stock is trading at 73% discount Disc. to NAV (%) (73) (72) to our appraised current NAV which compares favourably with Earnings Rev (%): Nil Nil the 10-year average discount of 58%. Estimated dividend yield Consensus EPS (HK$): 2.76 3.01 for FY20 reached 6.5%. While the current valuations are low Other Broker Recs: B:4 S:0 H:7 from a historical perspective, there are no imminent catalysts to Source of all data on this page: Company, DBS Bank (Hong Kong) Limited re-rate the stock. Therefore, we maintain HOLD at this stage (“DBS HK”), Thomson Reuters with HK$22.6 TP. This is derived by assigning a 70% discount to our Jun-2021 NAV estimates.

At A Glance Issued Capital (m shrs) 1,457 Mkt Cap (HK$m/US$m) 30,368 / 3,917 Major Shareholders (%) Kerry Group Ltd. 58.7 Free Float (%) 41.3 3m Avg. Daily Val. (US$m) 5.14 GICS Industry: Real Estate / Real Estate Management & Development

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ed-JS/ sa- CS /AH HK Property Sector (Residential)

Kerry Properties

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F Turnover 21,433 18,026 11,712 13,889 Fixed Assets 104,588 113,139 113,816 114,042 EBITDA 6,908 7,986 5,476 6,370 Other LT Assets 30,925 34,203 35,851 37,230 Depr / Amort (509) (478) (525) (578) Cash & ST Invts 13,868 11,751 10,541 10,926 EBIT 6,398 7,508 4,951 5,793 Other Current Assets 20,804 18,792 23,661 27,821 Associates Inc 1,208 1,065 1,148 979 Total Assets 170,185 177,884 183,868 190,018 Interest (Exp)/Inc 92 (242) (300) (400) ST Debt 8,142 8,494 7,921 11,577 Exceptionals (1,175) 0 0 0 Creditors 13,407 8,839 8,859 8,879 Pre-tax Profit 6,523 8,331 5,799 6,372 Other Current Liab 2,255 2,502 2,452 2,452 Tax (2,325) (2,213) (1,621) (1,880) LT Debt 24,970 31,047 34,620 34,164 Minority Interest (853) (722) (817) (739) Other LT Liabilities 10,470 11,618 11,819 11,920 Underlying Profit 3,345 5,396 3,361 3,752 Minority Interests 13,401 13,679 14,496 15,235 Shareholder’s Equity 97,541 101,705 103,701 105,791 Total Cap. & Liab. 170,185 177,884 183,868 190,018 Sales Gth (%) (40) (16) (35) 19 Share Capital (m) 1,455 1,456 1,457 1,457 Net Profit Gth (%) (50) 61 (38) 12 Net Cash/(Debt) (18,728) (27,286) (31,496) (34,311) EBITDA Margins (%) 32 44 47 46 Working Capital 10,868 10,707 14,970 15,838 EBIT Margin (%) 30 42 42 42 Net Gearing (%) 19 27 30 32 Tax Rate (%) 36 27 28 30

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F EBIT 6,398 7,508 4,951 5,793 Revenues (HK$ m) Tax Paid (1,986) (1,765) (1,621) (1,880) Property rental 4,851 4,910 4,700 5,101 Depr/Amort 509 478 525 578 Property sales 14,475 11,161 5,841 7,051 Chg in Wkg.Cap 11,911 2,685 (4,449) (3,590) Hotel opeation 2,108 1,954 1,170 1,738 Other Non-Cash (811) (5,086) (1,300) (1,553) Total 21,433 18,026 11,712 13,889 Operating CF 16,022 3,820 (1,894) (652) Net Capex (1,521) (2,155) (400) (399) Assoc, MI, Invsmt (6,349) (8,213) 100 203 Investing CF (7,871) (10,368) (300) (197) Net Chg in Debt (4,556) 7,456 3,000 3,200 Key Assumptions (%) 2020F 2021F New Capital 272 33 0 0 Residential price - HK 0 0 Dividend (2,106) (2,455) (1,966) (1,966) Office rental - HK (20) (5) Other Financing CF (438) 25 0 0 Retail rental (Shopping centre) - HK (25) (5) Financing CF (6,828) 5,059 1,034 1,234 Chg in Cash 1,323 (1,489) (1,160) 385

Source: Company, DBS HK

Page 35 HK Property Sector (Residential) Lai Sun Development

Bloomberg: 488 HK | Reuters: 0488.HK Refer to important disclosures at the end of this report

Navigating through various challenges BUY Last Traded Price (15 Sep 2020): HK$7.63 (HSI : 24,733) • Hotel and restaurant operations hard hit by COVID-19 Price Target 12-mth: HK$10.70 (40.2% upside) (Prev HK$11.80) • Monti is substantially sold Analyst Jeff YAU CFA, +852 36684180, [email protected] • BUY with HK$10.70 TP Hotel and restaurant operations hard hit by COVID-19. Ocean Park Marriott Hotel has been hit by dwindling inbound Price Relative tourism led by the COVID-19 pandemic. However, this hotel is HK$ Relative Index 222 16.5 faring slightly better than its peers as it targets more local Hong 202 14.5 182 Kong residents by offering staycation packages. Nonetheless, 12.5 162 we do not see any meaningful recovery in the short term until 142 10.5 122 the borders reopen. Caravelle Hotel in Ho Chi Minh City has re- 8.5 102 opened for business. Elsewhere, restaurant operations should 6.5 82 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 see wider losses due to social distancing measures.

Lai Sun Development (LHS) Relative HSI (RHS) Monti is substantially sold. Lai Sun Development has sold 112 Forecasts and Valuation FY Jul (HK$ m) 2018A 2019A 2020F 2021F units at newly completed Monti in Shau Kei Wan, a joint Turnover 1,693 6,494 5,114 4,872 venture with URA, at an ASP of HK$20,700psf. This represented EBITDA 485 4,387 544 761 78% of the total number of units. Handover of the sold Pre-tax Profit 4,421 4,892 (865) (382) residential units has commenced with the corresponding profit Underlying Profit 189 453 (547) (187) to be booked in FY20 and FY21. Elsewhere, the company has Net Profit 4,335 4,843 (547) (187) sold 13 residential units or houses at its 50%-owned Alto EPS (HK$) 0.31 0.75 (0.90) (0.31) EPS Gth (%) (25.0) 139.9 N/A 65.8 Residences in Tseung Kwan O YTD. This brings the cumulative PE (X) 24.5 10.2 n.a. n.a. number of units sold to 597, or 99% of total. P/Cash Flow (X) 6.3 (2.7) 9.0 30.6 EV/EBITDA (X) 66.5 7.3 59.3 42.4 BUY with HK$10.70 TP. The stock is trading at 80% discount DPS (HK$) 0.11 0.11 0.00 0.00 to our appraised current NAV. The company has acquired a Div Yield (%) 1.4 1.4 0.0 0.0 51% stake in Lai Fung Holdings via a general cash offer. Its Net Gearing (%) 25 39 42 42 second largest shareholder, Yu family, has raised its stake in the ROE (%) 15.0 14.5 (1.6) (0.6) company to >23% in Jun-20. Any further stake increase should Est. NAV (HK$) 38.1 35.6 play a key role in dictating the share price performance. A Disc. to NAV (%) (80) (79) longer-term catalyst would be its Leadenhall Street office redevelopment in London. Maintain BUY with HK$10.70 TP, Earnings Rev (%): nm nm based on 70% discount to our Jun-2021 NAV estimate. Source of all data on this page: Company, DBS Bank (Hong Kong) Limited (“DBS HK”), Thomson Reuters At A Glance Issued Capital (m shrs) 606 Mkt Cap (HK$m/US$m) 4,656 / 601 Major Shareholders (%) Lai Sun Garment International Ltd 56.1 Yu (Cheuk Yi) 23.0 Free Float (%) 20.9 3m Avg. Daily Val. (US$m) 0.14 GICS Industry: Real Estate / Real Estate Management & Development

Page 36

ed-JS/ sa- CS /TW HK Property Sector (Residential)

Lai Sun Development

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Jul 2018A 2019A 2020F 2021F FY Jul 2018A 2019A 2020F 2021F Turnover 1,693 6,494 5,114 4,872 Fixed Assets 23,653 50,769 47,937 46,304 EBITDA 485 4,387 544 761 Other LT Assets 15,436 14,336 13,847 14,147 Depr / Amort (85) (440) (880) (880) Cash & ST Invts 4,257 5,174 6,693 7,899 EBIT 400 3,947 (336) (119) Other Current Assets 3,358 8,347 7,657 7,657 Associates Inc 1,800 676 153 217 Total Assets 46,703 78,626 76,133 76,006 Interest (Exp)/Inc (190) (381) (682) (480) ST Debt 1,186 4,324 4,324 4,324 Exceptionals 2,411 650 0 0 Creditors 2,146 4,862 4,862 4,862 Pre-tax Profit 4,421 4,892 (865) (382) Other Current Liab 124 298 298 298 Tax (50) (159) 138 55 LT Debt 10,817 14,988 15,988 16,988 Minority Interest (36) 110 180 140 Other LT Liabilities 810 5,799 5,799 5,799 Net Profit 4,335 4,843 (547) (187) Minority Interests 460 12,526 12,346 12,206 Underlying Profit 189 453 (547) (187) Shareholder’s Equity 31,159 35,828 32,515 31,528 Total Cap. & Liab. 46,703 78,626 76,133 76,006 Sales Gth (%) (1) 284 (21) (5) Share Capital (m) 606 606 606 606 Net Profit Gth (%) 107 12 N/A 66 Net Cash/(Debt) (7,663) (14,057) (13,538) (13,332) EBITDA Margins (%) 29 68 11 16 Working Capital 4,157 4,036 4,865 6,071 EBIT Margin (%) 24 61 (7) (2) Net Gearing (%) 25 39 42 42 Tax Rate (%) 1 3 N/A N/A

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Jul 2018A 2019A 2020F 2021F FY Jul 2018A 2019A 2020F 2021F EBIT 400 3,947 (336) (119) Revenues (HK$ m) Tax Paid (69) (255) 138 55 Property Dev & Sales 0 2,280 1,070 526 Depr/Amort 85 353 880 880 Property Investment 705 1,357 1,352 1,394 Chg in Wkg.Cap 633 (1,507) (173) (145) Hotel & Rest. operations 938 1,201 1,035 1,296 Other Non-Cash (320) (4,256) 7 (520) Others 50 1,656 1,656 1,656 Operating CF 729 (1,717) 516 151 Total 1,693 6,494 5,114 4,872 Net Capex (1,238) (3,317) (48) (47) Assoc, MI, Invsmt (339) 4,760 156 102 Investing CF (1,576) 1,443 108 55 Net Chg in Debt 1,921 524 1,000 1,000 Key Assumptions (%) 2020F 2021F New Capital 0 0 0 0 Residential price - HK 0 0 Dividend (48) (93) (65) 0 Office rental - HK (20) (5) Other Financing CF 269 (356) 0 0 Retail rental (Shopping centre) - HK (25) (5) Financing CF 2,142 75 935 1,000 Chg in Cash 1,295 (199) 1,558 1,206

Source: Company, DBS HK

Page 37 HK Property Sector (Residential) MTR Corporation

Bloomberg: 66 HK | Reuters: 0066.HK Refer to important disclosures at the end of this report

Uncertain outlook HOLD Last Traded Price (15 Sep 2020): HK$39.65 (HSI : 24,733) • Pandemic undermines earnings visibility Price Target 12-mth: HK$38.00 (4.2% downside) • Good project sales, more project tenders ahead Analyst Jeff YAU CFA, +852 36684180, [email protected] • HOLD with HK$38 TP Pandemic undermines earnings visibility. In view of the ongoing COVID-19 outbreak, MTRC continues to grant rental Price Relative

HK$ Relative Index relief to retail tenants. Retail reversionary growth turned

58.2 206 negative at 17.6% in 1H20. All of these are a drag on the 186 53.2 company’s rental income. The pandemic has also heavily 166 48.2 146 weighed on the station shop and advertising business. In 7M20, 43.2 126 106 patronage for domestic service operations declined 33.4%. 38.2 86 Airport Express and cross boundary services registered steep 33.2 66 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 falls of 78.6% and 88.9% in ridership respectively due to the MTR Corporation (LHS) Relative HSI (RHS) travel restrictions. Fare revenue should remain under pressure, Forecasts and Valuation FY Dec (HK$ m) 2018A 2019A 2020F 2021F Good project sales, more project tenders ahead. In Mar-20, Turnover 53,930 54,505 41,870 46,643 Ocean Marini (Lohas Park Package 9C), a joint venture with EBITDA 18,867 15,327 6,899 12,380 Wheelock & Co, was launched with encouraging response. Over Pre-tax Profit 13,736 12,643 6,662 12,713 94% of a total 503 units have been snapped up. The launch of Underlying Profit 11,263 10,561 5,638 10,491 Sea to Sky (Lohas Park Package 8), a joint venture with Cheung EPS (HK$) 1.86 1.72 0.92 1.70 Kong Asset Holdings, also met with good initial response. Over EPS Gth (%) 5.2 (7.5) (46.8) 86.1 790 units have been sold at an ASP of >HK$16,000psf. This PE (X) 21.3 23.1 43.3 23.3 represented 54% of total. Smooth project sales should underpin P/Cash Flow (X) 18.3 13.8 34.6 19.5 EV/EBITDA (X) 14.2 17.5 38.9 21.7 MTRC’s property development profit over the next couple of DPS (HK$) 1.20 1.23 1.23 1.23 years. After awarding the development rights of Lohas Park Div Yield (%) 3.0 3.1 3.1 3.1 Package 12 to Wheelock & Co in 1H20, MTRC plans to offer Net Gearing (%) 18 15 21 23 the 2550-unit Lohas Park Package 13 for tender in 2H20. Wong ROE (%) 6.5 5.8 3.1 5.7 Chuk Hang Station Packages 5 & 6 are expected to be up for Est. NAV (HK$) 44.7 47.2 tender before Mar-21. These two packages will offer c1.800 Disc. to NAV (%) (11) (16) units in total. Earnings Rev (%): Nil Nil HOLD with HK$38 TP. The stock is trading 11% below our Consensus EPS (HK$): 1.04 1.67 appraised current NAV. The COVID-19 outbreak continues to Other Broker Recs: B:7 S:2 H:2 overshadow the company’s core business performance with no Source of all data on this page: Company, DBS Bank (Hong Kong) Limited clear recovery on the horizon. We therefore maintain our HOLD (“DBS HK”), Thomson Reuters rating at this stage with HK$38 TP. This is based on respective target discounts of 20% and 25% to our estimated Jun-2021 valuation of development and investment properties.

At A Glance Issued Capital (m shrs) 6,158 Mkt Cap (HK$m/US$m) 244,230 / 31,503 Major Shareholders (%) Financial Secretary Inc. 75.0 Free Float (%) 25.0 3m Avg. Daily Val. (US$m) 24.35 GICS Industry: Real Estate / Equity Real Estate Investment

Page 38

ed-JS/ sa- CS /TW HK Property Sector (Residential)

MTR Corporation

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F Turnover 53,930 54,505 41,870 46,643 Fixed Assets 215,925 225,605 222,423 219,299 EBITDA 18,867 15,327 6,899 12,380 Other LT Assets 25,679 24,540 33,888 44,678 Depr / Amort (4,985) (5,237) (5,325) (5,425) Cash & ST Invts 18,316 21,572 12,633 7,919 EBIT 13,882 10,090 1,573 6,955 Other Current Assets 14,767 17,497 17,397 17,297 Profit on property 2,574 5,707 6,274 7,646 Total Assets 274,687 289,214 286,341 289,193 developments Variable cost paid to KCRC (2,305) (2,583) (847) (1,490) ST Debt 4,424 3,371 1,000 1,200 Associates Inc 658 288 631 703 Creditors 25,947 33,315 34,212 35,752 Interest (Exp)/Inc (1,074) (859) (970) (1,100) Other Current Liab 4,382 5,422 5,422 5,422 Pre-tax Profit 13,736 12,643 6,662 12,713 LT Debt 35,781 36,085 38,456 38,256 Tax (2,325) (1,922) (995) (1,982) Other LT Liabilities 23,534 24,223 24,180 24,132 Minority Interest (148) (160) (28) (240) Minority Interests 172 192 220 460 Underlying Profit 11,263 10,561 5,638 10,491 Shareholder’s Equity 180,447 186,606 182,851 183,971 Total Cap. & Liab. 274,687 289,214 286,341 289,193 Sales Gth (%) (3) 1 (23) 11 Share Capital (m) 6,139 6,142 6,160 6,160 Net Profit Gth (%) 7 (6) (47) 86 Net Cash/(Debt) (32,738) (28,764) (37,660) (42,327) EBITDA Margins (%) 35 28 16 27 Working Capital (1,670) (3,039) (10,604) (17,158) EBIT Margin (%) 26 19 4 15 Net Gearing (%) 18 15 21 23 Tax Rate (%) 17 15 15 16

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F EBIT 13,882 10,090 1,573 6,955 Revenues (HK$ m) Tax Paid (2,162) (631) (995) (1,982) HK transportation operations 19,490 19,939 13,434 16,862 Depr/Amort 4,985 5,237 5,325 5,425 HK station commercial business 6,458 6,799 3,662 4,369 Chg in Wkg.Cap (6,016) (67) 150 150 HK Property rental and management 5,055 5,137 4,913 4,702 Other Non-Cash 260 2,414 0 0 business Operating CF 10,949 17,043 6,053 10,548 Mainland China and International 20,936 21,085 18,760 19,532 Net Capex (6,962) (9,331) (5,970) (6,088) subsidiaries Assoc, MI, Invsmt (4,703) 1,019 0 0 Other business 1,990 1,545 1,100 1,177 Investing CF (11,665) (8,312) (5,970) (6,088) Total 53,930 54,505 41,870 46,643 Net Chg in Debt (1,548) (1,513) 0 0 New Capital 162 96 0 0 Key Assumptions (%) 2020F 2021F Dividend (1,357) (6,774) (7,559) (7,576) Residential price - HK 0 0 Other Financing CF (1,081) (937) (713) (847) Office rental - HK (20) (5) Financing CF (3,824) (9,128) (8,272) (8,424) Retail rental (Shopping centre) - HK (25) (5) Chg in Cash (4,540) (397) (8,189) (3,964)

Source: Company, DBS HK

Page 39 HK Property Sector (Residential) New World Development

Bloomberg: 17 HK | Reuters: 0017.HK Refer to important disclosures at the end of this report

Fitter and stronger BUY Last Traded Price (15 Sep 2020): HK$39.20 (HSI : 24,733) Price Target 12-mth: HK$43.35 (10.6% upside) (Prev HK$44.8) • Optimising asset mix for future growth

Analyst • Planned launch of Tai Wai Station project should steal Jeff YAU CFA, +852 36684180, [email protected] market limelight • BUY with HK$43.35 TP

Price Relative Optimising asset mix for future growth. Following the sales HK$ Relative Index of its stakes in Telford Plaza II and PopCorn II to MTRC and

57.4 210 190 commercial units at Grand Millennium Plaza in Sheung Wan, 52.4 170 47.4 New World Development has sold Eight Kwai Fong in Happy 150 42.4 130 Valley and a 45% stake in commercial units at Shun Tak Centre 37.4 110

32.4 90 in Sheung Wan for HK$3.6bn in Jun-20. Divestment of these

27.4 70 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 non-core assets not only augments the bottom-line earnings

New World Development (LHS) Relative HSI (RHS) but also frees up capital for new investments which offer better growth prospects. Elsewhere, its listed subsidiary NWS Holdings Forecasts and Valuation FY Jun (HK$ m) 2019A 2020F 2021F 2022F has recently agreed to sell its franchised bus operations, New Turnover 76,764 87,760 88,301 101,901 World First Bus and Citybus, for HK$3.2bn. EBITDA 17,012 15,304 16,592 18,702 Planned launch of Tai Wai Station project should steal the Pre-tax Profit 29,129 14,415 13,413 14,619 Underlying Profit 8,814 7,350 7,234 7,795 market limelight. New World Development is currently EPS (HK$) 3.45 2.87 2.84 3.06 applying for pre-sale consent of Tai Wai Station Ph 1 & 2 which EPS Gth (%) 7.9 (16.7) (1.2) 7.8 has c.2,200 units in total. The entire project is developed in PE (X) 11.4 13.6 13.8 12.8 three phases with a total of c.3,000 residential units. Located P/Cash Flow (X) 8.2 (19.3) 9.4 9.6 adjacent to Tai Wai MTR Station, this sizeable project offers EV/EBITDA (X) 16.3 18.1 16.7 14.9 easy transportation accessibility. It also contains a 0.6msf retail DPS (HK$) 2.04 2.04 2.04 2.04 mall which will be operated by MTRC upon completion in Div Yield (%) 5.2 5.2 5.2 5.2 Net Gearing (%) 32 40 43 45 2023. This development should draw strong market interest ROE (%) 7.7 3.0 3.0 3.2 when launched for sale and would be the mainstay of the Est. NAV (HK$) 78.2 78.8 company’s development income in the years ahead. Disc. to NAV (%) (50) (50) BUY with HK$43.35 TP. The stock is trading 50% below our Earnings Rev (%): (0) (2) New appraised current NAV. The upcoming launch of Tai Wai Consensus EPS (HK$): 3.12 3.53 4.27 Station project should help narrow the discount to NAV, Other Broker Recs: B:18 S:1 H:0 providing share price upside. A string of non-core asset Source of all data on this page: Company, DBS Bank (Hong Kong) Limited disposals should rejuvenate its asset portfolio and strengthen its (“DBS HK”), Thomson Reuters balance sheet for future acquisitions, which would be another catalyst. BUY with HK$43.35 TP, premised on 45% discount to our Jun-2021 NAV estimate.

At A Glance Issued Capital (m shrs) 2,556 Mkt Cap (HK$m/US$m) 100,219 / 12,927 Major Shareholders (%) Chow Tai Fook Enterprises, Ltd. 44.5 Free Float (%) 55.5 3m Avg. Daily Val. (US$m) 18.58 GICS Industry: Real Estate / Real Estate Management & Development

Page 40

ed-JS/ sa- CS /TW HK Property Sector (Residential)

New World Development

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Jun 2019A 2020F 2021F 2022F FY Jun 2019A 2020F 2021F 2022F Turnover 76,764 87,760 88,301 101,901 Fixed Assets 205,565 201,448 197,188 197,761 EBITDA 17,012 15,304 16,592 18,702 Other LT Assets 149,360 149,879 151,156 152,328 Depr / Amort (2,454) (2,650) (2,862) (3,091) Cash & ST Invts 63,732 51,273 54,391 55,445 EBIT 14,558 12,654 13,730 15,611 Other Current Assets 84,628 111,461 121,699 135,010 Associates Inc 4,683 2,398 3,103 3,172 Total Assets 503,285 514,061 524,434 540,544 Interest (Exp)/Inc (756) (3,426) (3,420) (4,164) ST Debt 41,776 32,313 32,313 32,313 Exceptionals 10,645 2,789 0 0 Creditors 38,200 38,150 38,100 38,050 Pre-tax Profit 29,129 14,415 13,413 14,619 Other Current Liab 21,281 21,281 21,281 21,281 Tax (7,490) (3,414) (2,887) (3,434) LT Debt 114,559 134,022 144,022 154,022 Minority Interest (3,479) (3,651) (3,292) (3,390) Other LT Liabilities 12,105 12,105 12,105 12,105 Net Profit 18,160 7,350 7,234 7,795 Minority Interests 29,995 32,148 33,943 35,836 Underlying Profit 8,814 7,350 7,234 7,795 Shareholder’s Equity 245,370 244,043 242,670 246,938 Total Cap. & Liab. 503,285 514,061 524,434 540,544 Sales Gth (%) 26 14 1 15 Share Capital (m) 2,554 2,557 2,545 2,545 Net Profit Gth (%) (22) (60) (2) 8 Net Cash/(Debt) (88,288) (110,747) (117,629) (126,575) EBITDA Margins (%) 22 17 19 18 Working Capital 47,103 70,990 84,396 98,812 EBIT Margin (%) 19 14 16 15 Net Gearing (%) 32 40 43 45 Tax Rate (%) 26 24 22 23

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Jun 2019A 2020F 2021F 2022F FY Jun 2019A 2020F 2021F 2022F EBIT 14,558 12,654 13,730 15,611 Revenues (HK$ m) Tax Paid (5,182) (3,414) (2,887) (3,434) Property Investment 3,669 4,236 4,558 4,766 Depr/Amort 2,454 2,650 2,862 3,091 Property Development 38,512 32,232 27,503 37,996 Chg in Wkg.Cap (4,765) (23,283) (5,988) (8,361) Services 26,598 26,997 27,402 27,813 Other Non-Cash (54) 2,789 0 0 Infrastrcture 2,699 2,725 2,753 2,780 Operating CF 7,011 (8,604) 7,718 6,907 Hotels 1,491 1,569 1,846 2,061 Net Capex (10,145) (2,000) (2,000) (2,000) Department Stores & Others 3,795 20,000 24,240 26,485 Assoc, MI, Invsmt (9,011) 4,453 4,606 4,836 Total 76,764 87,760 88,301 101,901 Investing CF (19,156) 2,453 2,606 2,836 Net Chg in Debt 24,933 10,000 10,000 10,000 Key Assumptions (%) 2020F 2021F New Capital 349 0 0 0 Residential price - HK 0 0 Dividend (6,207) (6,708) (6,706) (6,689) Office rental - HK (20) (5) Other Financing CF (6,382) (9,600) (10,500) (12,000) Retail rental (Shopping centre) - HK (25) (5) Financing CF 12,694 (6,308) (7,207) (8,690) Chg in Cash 549 (12,459) 3,118 1,054

Source: Company, DBS HK

Page 41 HK Property Sector (Residential) Sino Land

Bloomberg: 83 HK | Reuters: 83.HK Refer to important disclosures at the end of this report

Impeccable financial strength, strong BUY earnings visibility Last Traded Price (15 Sep 2020): HK$9.61 (HSI : 24,733) Price Target 12-mth: HK$12.68 (31.9% upside) • Strong and diversified project launch pipeline Analyst • Near-term development earnings well secured Jeff YAU CFA, +852 36684180, [email protected] • BUY with HK$12.68 TP Strong and diversified project launch pipeline. Sino Land Price Relative

HK$ Relative Index offered St. George’s Mansions in Ho Man Tin for sale via tender

16.4 214 recently. Given its superb location, initial market response has 15.4 194 14.4 174 been positive with two apartments sold for c.HK$200m or 13.4 154 12.4 134 HK$50,000psf on average. Sino Land has a strong project 11.4 114 10.4 launch pipeline in the year ahead. The company is applying for 9.4 94 8.4 74 7.4 54 pre-sale consent for Grand Victoria on the Cheung Sha Wan Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 waterfront, Silversands in Ma On Shan and Wong Chuk Hang Sino Land (LHS) Relative HSI (RHS) Station Package 2. Other projects available for sale in the Forecasts and Valuation coming year include two URA redevelopment projects in FY Jun (HK$ m) 2019A 2020A 2021F 2022F Central and Mongkok. These new projects have a diversified Turnover 8,010 5,887 27,724 15,057 EBITDA 3,700 2,975 10,186 5,968 product mix, allowing the company to tap varying demand Pre-tax Profit 5,334 5,062 11,313 7,089 from different types of home buyers. Underlying Profit 4,671 4,557 9,012 5,852 Near-term development earnings well secured. As of Jun-20, EPS (HK$) 0.70 0.66 1.28 0.83 Sino Land’s net order book exceeded HK$24bn, of which EPS Gth (%) (60.2) (5.4) 94.1 (35.1) >80% came from Grand Central in Kwun Tong. Since its initial PE (X) 13.8 14.6 7.5 11.6 launch in Dec-18, Sino Land has sold 82% of units at Grand P/Cash Flow (X) 4.0 10.2 6.5 9.8 EV/EBITDA (X) 8.1 10.1 3.0 5.0 Central. This lucrative development is scheduled for handover DPS (HK$) 0.55 0.55 0.68 0.68 to buyers in 2Q21. Elsewhere, Madison Park in Sham Shui Po is Div Yield (%) 5.7 5.7 7.1 7.1 substantially sold. With successful pre-sale of these two Net Gearing (%) CASH CASH CASH CASH developments, we estimate Sino Land has locked in >95% of ROE (%) 3.3 3.1 6.1 3.9 our projected development earnings for FY21. Hence, near Est. NAV (HK$) 24.1 23.1 term earnings should be well assured. Disc. to NAV (%) (60) (58) BUY with HK$12.68 TP. The stock is trading at 60% discount Earnings Rev (%): Nil Nil to our assessed current NAV. Excluding its net cash holdings, Consensus EPS (HK$): 1.37 1.21 the remaining stub is trading at an attractive 78% discount. Its Other Broker Recs: B:8 S:0 H:6 key investment appeal lies in its robust balance sheet. With Source of all data on this page: Company, DBS Bank (Hong Kong) Limited strong net cash holdings of HK$38.4bn as of Jun-20, the (“DBS HK”), Thomson Reuters company is well positioned to pursue value-accretive acquisitions. Given windfall profits from Grand Central, the company could possibly reward shareholders with a higher dividend, providing upside on stock. BUY with HK$12.68 TP, based on 45% discount to our Jun-2021 NAV estimate. At A Glance Issued Capital (m shrs) 7,045 Mkt Cap (HK$m/US$m) 67,704 / 8,733 Major Shareholders (%) Tsim Sha Tsui Properties Ltd 54.1 Free Float (%) 45.9 3m Avg. Daily Val. (US$m) 10.04 GICS Industry: Real Estate / Real Estate Management & Development

Page 42

ed-JS/ sa- CS /TW HK Property Sector (Residential)

Sino Land

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Jun 2019A 2020A 2021F 2022F FY Jun 2019A 2020A 2021F 2022F Turnover 8,010 5,887 27,724 15,057 Fixed Assets 67,147 64,564 62,999 64,333 EBITDA 3,700 2,975 10,186 5,968 Other LT Assets 39,057 41,769 45,783 49,797 Depr / Amort (122) (186) (193) (201) Cash & ST Invts 39,086 43,673 48,841 50,836 EBIT 3,578 2,789 9,993 5,767 Other Current Assets 35,459 36,719 36,587 35,791 Associates Inc 1,003 943 461 482 Total Assets 180,748 186,724 194,210 200,757 Interest (Exp)/Inc 581 993 860 840 ST Debt 0 832 832 832 Exceptionals 172 336 0 0 Creditors 4,967 4,974 5,024 5,074 Pre-tax Profit 5,334 5,062 11,313 7,089 Other Current Liab 20,418 26,513 26,513 26,513 Tax (632) (487) (1,791) (1,090) LT Debt 5,027 4,418 8,418 12,418 Minority Interest (31) (17) (511) (147) Other LT Liabilities 4,174 4,227 4,227 4,227 Underlying Profit 4,671 4,557 9,012 5,852 Minority Interests 868 843 843 843 Shareholder’s Equity 145,294 144,916 148,352 150,849 Total Cap. & Liab. 180,748 186,724 194,210 200,757 Sales Gth (%) (25) (27) 371 (46) Share Capital (m) 6,959 6,959 6,959 6,959 Net Profit Gth (%) (58) (2) 98 (35) Net Cash/(Debt) 34,047 38,414 39,583 37,577 EBITDA Margins (%) 46 51 37 40 Working Capital 49,159 48,072 53,059 54,207 EBIT Margin (%) 45 47 36 38 Net Gearing (%) CASH CASH CASH CASH Tax Rate (%) 12 10 16 15

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Jun 2019A 2020A 2021F 2022F FY Jun 2019A 2020A 2021F 2022F EBIT 3,578 2,789 9,993 5,767 Revenues (HK$ m) Tax Paid (1,803) (597) (1,791) (1,090) Property sales 2,542 864 22,852 10,089 Depr/Amort 122 186 193 201 Property rental 3,327 3,162 2,994 2,940 Chg in Wkg.Cap 12,484 3,685 292 966 Hotel operations 934 611 594 708 Other Non-Cash (137) (170) 0 0 Property management and 1,098 1,147 1,181 1,217 Operating CF 14,244 5,893 8,687 5,844 other services Net Capex (25) (1) (100) (100) Investments in securities 48 33 33 33 Assoc, MI, Invsmt (7,544) 3,158 (2,653) (2,632) Financing 61 70 70 70 Investing CF (7,569) 3,157 (2,753) (2,732) Total 8,010 5,887 27,724 15,057 Net Chg in Debt 2,647 221 4,000 4,000 New Capital 0 0 0 0 Key Assumptions (%) 2020F 2021F Dividend (905) (1,299) (4,615) (4,937) Residential price - HK 0 0 Other Financing CF 269 (1,252) (150) (180) Office rental - HK (20) (5) Financing CF 2,011 (2,330) (765) (1,117) Retail rental (Shopping Centre) - HK (25) (5) Chg in Cash 8,686 6,721 5,169 1,994

Source: Company, DBS HK

Page 43 HK Property Sector (Residential) Sun Hung Kai Properties

Bloomberg: 16 HK | Reuters: 16.HK Refer to important disclosures at the end of this report

Strong execution, deep value BUY Last Traded Price (15 Sep 2020): HK$100.40 (HSI : 24,733) • Strong and diversified project launch pipeline Price Target 12-mth: HK$126.5 (26.0% upside) • Portfolio expansion to boost rental Analyst Jeff YAU CFA, +852 36684180, [email protected] • BUY with HK$126.5 TP Strong and diversified project launch pipeline to cater to the demand from different homebuyers. Close on the heels of Price Relative

HK$ Relative Index strong market response to the launch of Wetland Seasons Park

150.1 206 Ph 1 & 2, SHKP is now offering Ph 3 for pre-sale to tap on 140.1 186 strong end-user demand. Other mass market projects up for 130.1 166 120.1 146 pre-sale include Regency Bay Ph 2 in Tuen Mun and Yuen Long 110.1 126 100.1 106 Station Development Ph 1. Upmarket projects in Mid-levels, 90.1 86 Shatin and North Point will be released onto the market once 80.1 66 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 luxury home market sentiment improves. The company will Sun Hung Kai Properties (LHS) Relative HSI (RHS) commence marketing Central Peak in 4Q20. Elsewhere, an Forecasts and Valuation industrial project in Tsuen Wan is also available for sale. In FY Jun (HK$ m) 2019A 2020A 2021F 2022F China, SHKP plans to launch three residential projects in Turnover 85,302 82,653 82,375 84,096 Dongguan, Foshan and Shanghai with attributable GFA of EBITDA 40,770 40,036 40,545 40,342 Pre-tax Profit 40,065 36,819 37,079 36,908 2.1msf in FY21. Overall, SHKP targets to sell HK$35bn worth of Underlying Profit 32,398 29,368 29,641 29,080 properties in Hong Kong and HK$5bn in China in FY21. EPS (HK$) 11.18 10.13 10.23 10.04 Significant portfolio expansion to boost rental. In the next EPS Gth (%) 6.6 (9.4) 0.9 (1.9) four financial years, SHKP is expected to complete c.12msf of PE (X) 9.0 9.9 9.8 10.0 P/Cash Flow (X) 11.5 (940.4) 26.7 25.3 investment properties in China, almost doubling its existing EV/EBITDA (X) 9.6 9.8 9.6 9.7 investment property portfolio. These include Shanghai ITC and DPS (HK$) 4.95 4.95 4.95 4.95 Nanjing IFC. In Hong Kong, the How Ming Street commercial Div Yield (%) 4.9 4.9 4.9 4.9 development in Kwun Tong is slated for completion in 1H23. Net Gearing (%) 13 14 15 17 With increased rental footage in Hong Kong and China, SHKP’s ROE (%) 5.8 5.1 5.1 4.9 rental income is set to resume growth momentum once the Est. NAV (HK$) 235.0 230.0 pandemic recedes. Disc. to NAV (%) (57) (56) BUY with HK$126.5 TP. The stock, trading at 57% discount to Earnings Rev (%): Nil Nil our appraised current NAV, is attractively valued. In view of the Consensus EPS (HK$): 10.90 11.31 company’s strong execution capability and robust project Other Broker Recs: B:15 S:1 H:1 launch pipeline, we see room for further share price Source of all data on this page: Company, DBS Bank (Hong Kong) Limited appreciation. Maintain BUY with HK$126.5 TP. This is derived (“DBS HK”), Thomson Reuters by applying a 45% discount to our Jun-2021 NAV estimate.

At A Glance Issued Capital (m shrs) 2,898 Mkt Cap (HK$m/US$m) 290,937 / 37,528 Major Shareholders (%) HSBC Trustee (C.I.) Ltd. 26.7 Thriving Talent Ltd. 6.7 Rosy Result Ltd. 6.5 Asporto Ltd. 6.5 Free Float (%) 53.6 3m Avg. Daily Val. (US$m) 55.93 GICS Industry: Real Estate / Real Estate Management & Development

Page 44

ed-JS/ sa- CS /TW HK Property Sector (Residential)

Sun Hung Kai Properties

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Jun 2019A 2020A 2021F 2022F FY Jun 2019A 2020A 2021F 2022F Turnover 85,302 82,653 82,375 84,096 Fixed Assets 422,474 421,542 415,166 416,226 EBITDA 40,770 40,036 40,545 40,342 Other LT Assets 86,273 92,627 97,471 100,572 Depr / Amort (2,912) (4,581) (4,718) (4,860) Cash & ST Invts 23,141 32,529 40,098 35,928 EBIT 37,858 35,455 35,827 35,482 Other Current Assets 219,274 251,133 281,975 312,114 Associates Inc 3,911 3,147 3,102 3,326 Total Assets 751,162 797,831 834,711 864,839 Interest (Exp)/Inc (2,051) (2,120) (1,850) (1,900) ST Debt 9,168 26,375 15,001 15,002 Exceptionals 347 337 0 0 Creditors 28,699 36,851 37,051 37,251 Pre-tax Profit 40,065 36,819 37,079 36,908 Other Current Liab 28,035 34,116 34,116 34,116 Tax (6,618) (6,674) (6,456) (6,213) LT Debt 85,838 86,231 112,605 122,604 Minority Interest (1,049) (777) (983) (1,616) Other LT Liabilities 23,603 23,843 23,843 23,843 Underlying Profit 32,398 29,368 29,641 29,080 Minority Interests 5,601 14,789 24,979 26,403 Shareholder’s Equity 570,218 575,626 587,116 605,620 Total Cap. & Liab. 751,162 797,831 834,711 864,839 Sales Gth (%) 0 (3) 0 2 Share Capital (m) 2,897 2,898 2,898 2,898 Net Profit Gth (%) 7 (9) 1 (2) Net Cash/(Debt) (72,968) (80,901) (88,332) (102,502) EBITDA Margins (%) 48 48 49 48 Working Capital 176,513 186,320 235,905 261,673 EBIT Margin (%) 44 43 43 42 Net Gearing (%) 13 14 15 17 Tax Rate (%) 17 18 17 17

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Jun 2019A 2020A 2021F 2022F FY Jun 2019A 2020A 2021F 2022F EBIT 37,858 35,455 35,827 35,482 Revenues (HK$ m) Tax Paid (5,539) (6,674) (6,456) (6,213) Property sales 38,573 39,765 38,424 38,504 Depr/Amort 2,912 4,581 4,718 4,860 Rental income 20,590 19,909 19,697 19,621 Chg in Wkg.Cap (17,020) (40,345) (29,642) (28,839) Hotel operation 4,786 2,595 3,049 3,987 Other Non-Cash 1,544 0 0 0 Telecommunications 8,415 6,986 7,200 7,443 Operating CF 19,755 (6,983) 4,447 5,291 Data centre operations 1,561 1,714 1,970 2,146 Net Capex (12,644) 6,250 7,250 (2,150) Others 11,377 11,684 12,035 12,396 Assoc, MI, Invsmt (192) (2,063) (1,742) 225 Total 85,302 82,653 82,375 84,096 Investing CF (12,836) 4,187 5,508 (1,925) Net Chg in Debt 4,055 30,000 15,000 10,000 Key Assumptions (%) 2020F 2021F New Capital 64 0 0 0 Residential price - HK 0 0 Dividend (14,282) (14,536) (14,537) (14,536) Office rental - HK (20) (5) Other Financing CF 2,090 (3,001) (2,850) (3,000) Retail rental (Shopping centre) - HK (25) (5) Financing CF (8,073) 12,463 (2,387) (7,536) Chg in Cash (1,154) 9,667 7,569 (4,170)

Source: Company, DBS HK

Page 45 HK Property Sector (Residential) Tai Cheung

Bloomberg: 88 HK | Reuters: 88.HK Refer to important disclosures at the end of this report

Back to acquisition mode HOLD Last Traded Price (15 Sep 2020): HK$4.86 (HSI : 24,733) • Acquired a luxury residential lot in Ap Lei Chau Price Target 12-mth: HK$5.14 (5.8% upside) • Remains in net cash position after land purchase Analyst Jeff YAU CFA, +852 36684180, [email protected] • HOLD with HK$5.14 TP Acquired a luxury residential lot in Ap Lei Chau. In May-20, Tai Cheung acquired a luxury residential lot in Ap Lei Chau Price Relative

HK$ Relative Index through a government tender for HK$1.33bn or HK$15,097psf.

10.3 205 The winning bid is close to the high end of market consensus 9.3 185 reflecting the company’s positive view on prospects in the 165 8.3 145 luxury market. This marks the company’s first land acquisition 7.3 125 6.3 105 since May 2012 when it purchased the site where The Pulsa is 5.3 85 built. Located near Larvotto, the site will provide GFA of 4.3 65 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 88,282sf upon completion. Adding construction and financing Tai Cheung (LHS) Relative HSI (RHS) costs, we estimate total development costs at HK$24,000psf on Forecasts and Valuation saleable area basis. FY Mar (HK$ m) 2019A 2020A 2021F 2022F Turnover 368 43 641 656 Remains in net cash position after land purchase. As of EBITDA 14 (47) 244 223 Mar-20, Tai Cheung’s net cash stood at HK$3.39bn (or Pre-tax Profit 235 125 359 361 HK$5.49/sh). After factoring in acquisition cost for the recent Net Profit 232 125 315 321 residential site in Ap Lei Chau, we expect the company’s net EPS (HK$) 0.38 0.20 0.51 0.52 cash to fall to HK$2.06bn (or HK$3.34/sh). EPS Gth (%) (34.7) (46.2) 153.0 1.7 PE (X) 13.0 24.1 9.5 9.4 HOLD with HK$5.14 TP. The stock is trading at 78% discount P/Cash Flow (X) 5.0 (25.2) (3.8) 5.7 to appraised current NAV. Excluding net cash holdings after EV/EBITDA (X) (27.9) 8.4 (1.6) (1.8) DPS (HK$) 0.35 0.24 0.24 0.24 land acquisitions, the remaining stub is trading at 92% Div Yield (%) 7.2 4.9 4.9 4.9 discount. Given the prevailing market sentiment, we sense that Net Gearing (%) CASH CASH CASH CASH it would take longer for the company to crystallise the value of ROE (%) 3.3 1.8 4.5 4.4 its luxury house projects in Repulse Bay and on the Peak. By Est. NAV (HK$) 21.9 20.6 applying 75% discount to our Jun-2021 NAV estimate, we Disc. to NAV (%) (78) (76) derive our TP at HK$5.14. This implies just 6% upside potential. HOLD. Earnings Rev (%): Nil Nil Source of all data on this page: Company, DBS Bank (Hong Kong) Limited At A Glance (“DBS HK”), Thomson Reuters Issued Capital (m shrs) 618 Mkt Cap (HK$m/US$m) 3,001 / 387 Major Shareholders (%) Chan (Pun David) 29.2 Chan (Poon Wai Kuen) 15.6 Free Float (%) 55.2 3m Avg. Daily Val. (US$m) 0.07 GICS Industry: Real Estate / Real Estate Management & Development

Page 46

ed-JS/ sa- CS /TW HK Property Sector (Residential)

Tai Cheung

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Mar 2019A 2020A 2021F 2022F FY Mar 2019A 2020A 2021F 2022F Turnover 368 43 641 656 Fixed Assets 11 2 2 2 EBITDA 14 (47) 244 223 Other LT Assets 203 268 259 251 Depr / Amort (1) (9) (8) (8) Cash & ST Invts 3,818 3,611 2,735 3,194 EBIT 13 (55) 236 214 Other Current Assets 3,595 3,587 4,637 4,355 Associates Inc 158 120 95 118 Total Assets 7,627 7,469 7,633 7,802 Interest (Exp)/Inc 64 61 28 28 ST Debt 290 0 0 0 Exceptionals 0 0 0 0 Creditors 243 180 177 174 Pre-tax Profit 235 125 359 361 Other Current Liab 4 11 11 11 Tax (3) (1) (44) (40) LT Debt 0 219 219 219 Minority Interest 0 0 0 0 Other LT Liabilities 4 62 62 62 Net Profit 232 125 315 321 Minority Interests 0 0 0 0 Shareholder’s Equity 7,087 6,996 7,163 7,336 Sales Gth (%) (67) (88) 1,391 2 Total Cap. & Liab. 7,627 7,469 7,633 7,802 Net Profit Gth (%) (35) (46) 153 2 Share Capital (m) 618 618 618 618 EBITDA Margins (%) 4 (109) 38 34 Net Cash/(Debt) 3,528 3,393 2,516 2,975 EBIT Margin (%) 4 (128) 37 33 Working Capital 6,876 7,007 7,183 7,364 Tax Rate (%) 1 0 12 11 Net Gearing (%) CASH CASH CASH CASH

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Mar 2019A 2020A 2021F 2022F FY Mar 2019A 2020A 2021F 2022F EBIT 13 (55) 236 214 Revenues (HK$ m) Tax Paid (92) (11) (44) (40) Property development and 357 32 629 644 Depr/Amort 1 9 8 8 leasing Chg in Wkg.Cap 608 (48) (1,052) 279 Property management 11 11 12 12 Other Non-Cash (24) (24) 28 28 Total 368 43 641 656 Operating CF 506 (130) (823) 490 Net Capex 0 0 0 0 Assoc, MI, Invsmt 207 210 95 118 Investing CF 207 210 95 118 Net Chg in Debt 60 (74) 0 0 Key Assumptions (%) 2021F 2022F New Capital 0 0 0 0 Residential price - HK 0 0 Dividend (216) (216) (148) (148) Office rental - HK (20) (5) Other Financing CF 0 0 0 0 Retail rental (Shopping centre) - HK (25) (5) Financing CF (156) (290) (148) (148) Chg in Cash 557 (210) (877) 460

Source: Company, DBS HK

Page 47 HK Property Sector (Residential) Wharf

Bloomberg: 4 HK | Reuters: 4.HK Refer to important disclosures at the end of this report

On a recovery path BUY Last Traded Price (15 Sep 2020): HK$14.72 (HSI : 24,733) Price Target 12-mth: HK$16.20 (10.1% upside) • Retail mall operations well on a recovery trajectory

Analyst • Higher contracted sales in China despite disruption from Jeff YAU CFA, +852 36684180, [email protected] pandemic • BUY with HK$16.2 TP

Price Relative

HK$ Relative Index

212 Retail mall operations well on a recovery trajectory. 31.4 192 Chengdu IFS Mall recorded 11% decline in retail sales in 1H20 172 26.4 152 due to the COVID-19 pandemic. Yet, rental reversion stayed 132 21.4 112 positive with double-digit growth. Occupancy cost ratio 16.4 92 72 remained healthy at 14% (1H19: 13%). Changsha IFS Mall 11.4 52 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 fared better with a modest 6% increase in tenants’ sales. Wharf (LHS) Relative HSI (RHS) Occupancy cost ratio was low at 11% which bodes well for Forecasts and Valuation future reversionary growth. Since the COVID-19 outbreak FY Dec (HK$ m) 2018A 2019A 2020F 2021F showed signs of stabilisation in China, Wharf’s malls have Turnover 21,055 16,873 16,864 32,149 staged a good recovery led by surging luxury goods sales. EBITDA 8,945 8,131 8,171 9,198 Chengdu IFS and Changsha IFS recorded double-digit growth in Pre-tax Profit 10,837 6,470 4,915 8,853 retail sales in May/June. Underlying Core Profit 6,511 2,710 1,575 5,511 EPS (HK$) 2.14 0.89 0.52 1.81 Higher contracted sales in China despite disruption from EPS Gth (%) (58.7) (58.4) (41.9) 249.8 pandemic. In 1H20, Wharf’s contracted sales in China PE (X) 6.9 16.5 28.5 8.1 increased by 24% to Rmb8.1bn. This was despite sales P/Cash Flow (X) (6.7) 4.2 7.7 5.3 EV/EBITDA (X) 8.0 8.8 8.7 7.8 disruption caused by COVID-19. This represented 54% of its DPS (HK$) 0.65 0.33 0.45 0.45 full-year sales target of Rmb15bn. About two-thirds of sales Div Yield (%) 4.4 2.2 3.1 3.1 proceeds stemmed from projects in Hangzhou and Suzhou, Net Gearing (%) 19 13 15 13 with the balance mainly from Beijing, Foshan/Guangzhou, ROE (%) 4.8 2.4 1.1 3.8 Shanghai and Chongqing. As of Jun-20, the company’s net Est. NAV (HK$) 51.0 54.0 order book stood at Rmb31.4bn (covering 1m sm in GFA) Disc. to NAV (%) (71) (73) BUY with HK$16.2 TP. YTD, the share price of Wharf Earnings Rev (%): Nil Nil Holdings has fallen 26%, underperforming the broad market Consensus EPS (HK$): 1.10 1.85 by 13ppts. Following the share price correction, the counter is Other Broker Recs: B:7 S:0 H:6 now trading at a 71% discount to our appraised current NAV. Source of all data on this page: Company, DBS Bank (Hong Kong) Limited Such a low valuation is unjustified as the retail portfolio in (“DBS HK”), Thomson Reuters China is well on a recovery path. We recommend BUY with HK$16.2 TP, premised on target discount of 70% to our Jun- 2021 NAV estimate.

At A Glance Issued Capital (m shrs) 3,049 Mkt Cap (HK$m/US$m) 44,881 / 5,789 Major Shareholders (%) Wheelock and Co Ltd 50.9 Free Float (%) 49.1 3m Avg. Daily Val. (US$m) 10.54 GICS Industry: Real Estate / Real Estate Management & Development

Page 48

ed-JS/ sa- CS /TW HK Property Sector (Residential)

Wharf

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F Turnover 21,055 16,873 16,864 32,149 Fixed Assets 88,408 87,867 86,020 86,013 EBITDA 8,945 8,131 8,171 9,198 Other LT Assets 73,658 80,927 84,867 85,073 Depr / Amort (643) (712) (726) (755) Cash & ST Invts 17,448 27,292 34,764 37,866 EBIT 8,302 7,419 7,445 8,443 Other Current Assets 47,835 46,132 46,380 48,058 Associates Inc 2,382 834 1,063 1,110 Total Assets 227,349 242,218 252,031 257,009 Interest (Exp)/Inc (62) (662) (720) (700) ST Debt 11,239 10,647 9,200 9,200 Exceptionals 215 (1,121) (2,872) 0 Creditors 29,690 33,790 33,790 33,790 Pre-tax Profit 10,837 6,470 4,915 8,853 Other Current Liab 3,736 2,795 2,795 2,795 Tax (4,126) (3,000) (2,344) (2,453) LT Debt 31,847 35,689 47,136 47,136 Minority Interest (88) (84) (996) (889) Other LT Liabilities 12,077 12,954 12,954 12,954 Net Profit 6,623 3,386 1,575 5,511 Minority Interests 3,336 3,469 3,665 3,755 Underlying Core Profit 6,511 2,710 1,575 5,511 Shareholder’s Equity 135,424 142,874 142,490 147,379 Total Cap. & Liab. 227,349 242,218 252,031 257,009 Sales Gth (%) (51) (20) 0 91 Share Capital (m) 3,047 3,049 3,049 3,049 Net Profit Gth (%) (58) (49) (53) 250 Net Cash/(Debt) (25,638) (19,044) (21,572) (18,470) EBITDA Margins (%) 42 48 48 29 Working Capital 20,618 26,192 35,359 40,138 EBIT Margin (%) 39 44 44 26 Net Gearing (%) 19 13 15 13 Tax Rate (%) 38 46 48 28

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F EBIT 8,302 7,419 7,445 8,443 Revenues (HK$ m) Tax Paid (1,938) (2,763) (2,344) (2,453) Investment Property 3,586 4,090 4,473 5,000 Depr/Amort 643 712 726 755 Hotels 463 530 303 547 Chg in Wkg.Cap (15,121) 4,076 (2,590) (1,078) Logistics 2,616 2,597 2,416 2,478 Other Non-Cash 23 (124) (1,250) (1,300) Development Property 12,914 7,054 7,459 21,845 Operating CF (8,091) 9,320 1,988 4,368 Investment and others 1,476 2,603 2,213 2,279 Net Capex (2,504) (837) 0 0 Total 21,055 16,873 16,864 32,149 Assoc, MI, Invsmt (20,060) (1,970) (2,878) 904 Investing CF (22,564) (2,807) (2,878) 904 Net Chg in Debt 7,266 3,162 10,000 0 Key Assumptions (%) 2020F 2021F New Capital 0 0 0 0 Residential price - HK 0 0 Dividend (3,768) (2,065) (1,638) (2,171) Office rental - HK (20) (5) Other Financing CF 239 315 0 0 Retail rental (Shopping centre) - HK (25) (5) Financing CF 3,737 1,412 8,362 (2,171) Chg in Cash (26,918) 7,925 7,472 3,102

Source: Company, DBS HK

Page 49 HK Property Sector (Residential) Wing Tai Properties

Bloomberg: 369 HK | Reuters: 0369.HK Refer to important disclosures at the end of this report

Unlocking value via project sales BUY Last Traded Price (15 Sep 2020): HK$4.00 (HSI : 24,733) • Strong visibility of near-term development earnings Price Target 12-mth: HK$5.15 (28.8% upside) • Steady property leasing performance Analyst Jeff YAU CFA, +852 36684180, [email protected] • BUY with HK$5.15 TP Strong visibility of near-term development earnings. In May- 20, Wing Tai Properties launched 70%-owned OMA by the Sea in Price Relative

HK$ Relative Index Tuen Mun for pre-sale. So far, market response has been

7.4 205 encouraging with 364 units (or 70% of total) sold. Scheduled for 6.9 185 6.4 completion in 2022, OMA by the Sea contains 517 units with 165 5.9 145 5.4 0.29msf GFA. Fully sold, this development should yield 4.9 125 4.4 105 attributable pre-tax earnings of c.HK$550m. The company has 3.9 85 handed over most of sold units at The Carmel in Tuen Mun in 3.4 65 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 1H20. This project is virtually sold out and provides the mainstay Wing Tai Properties (LHS) Relative HSI (RHS) of development income in FY20. Wing Tai Properties has sold 384 Forecasts and Valuation units at OMA OMA since its launch in Jun-19. This represents FY Dec (HK$ m) 2018A 2019A 2020F 2021F c.73% of total 528 units. Overall, the company’s near-term Turnover 885 829 2,498 3,810 development earnings visibility is strong given smooth project pre- EBITDA 386 281 522 940 Pre-tax Profit 1,432 375 562 1,054 sales. Net Profit 1,312 239 426 844 Steady property leasing performance. Occupancy of EPS (HK$) 0.98 0.18 0.31 0.62 Landmark East in Kwun Tong remains stable at 92% in Jun-20 EPS Gth (%) (33.8) (81.9) 78.3 98.2 with neutral reversionary growth in FY20. Its London portfolio PE (X) 4.1 22.7 12.7 6.4 P/Cash Flow (X) (65.6) 9.7 20.5 8.4 should deliver broadly steady leasing performance. Inventory sales EV/EBITDA (X) 25.0 34.4 18.5 10.3 at two luxury developments in Kau To – Le Cap and La Vetta – DPS (HK$) 0.27 0.27 0.27 0.27 have been slow, and therefore the company has converted a few Div Yield (%) 6.8 6.8 6.8 6.8 of the unsold units for leasing. Initial leasing response has been Net Gearing (%) 8 11 12 11 positive. Occupancy at the newly built Waterfront Suite in Shau ROE (%) 4.9 0.9 1.6 3.2 Kei Wan has gradually improved to c.60%. Est. NAV (HK$) 18.1 17.2 Disc. to NAV (%) (78) (77) BUY with HK$5.15 TP. The stock is trading at 78% discount to our assessed current NAV. Valuation sounds attractive given its Earnings Rev (%): Nil Nil strong earnings visibility and balance sheet. By assigning a 70% Consensus EPS (HK$): 0.45 0.66 discount to our Jun-2021 NAV estimate, we set our TP at Other Broker Recs: B:1 S:0 H:0 HK$5.15 which suggests 29% upside from the current level. BUY. Source of all data on this page: Company, DBS Bank (Hong Kong) Limited (“DBS HK”), Thomson Reuters At A Glance Issued Capital (m shrs) 1,353 Mkt Cap (HK$m/US$m) 5,418 / 699 Major Shareholders (%) Wing Tai Holdings Ltd 23.7 Sun Hung Kai Properties Ltd 13.6 Wing Tai Corporation Ltd. 13.5 Brave Dragon Ltd. 10.5 Farnham Group Limited 7.5 Free Float (%) 31.3 3m Avg. Daily Val. (US$m) 0.08 GICS Industry: Real Estate / Real Estate Management & Development

Page 50

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Wing Tai Properties

Income Statement (HK$ m) Balance Sheet (HK$ m) FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F Turnover 885 829 2,498 3,810 Fixed Assets 20,534 20,502 19,476 19,081 EBITDA 386 281 522 940 Other LT Assets 6,755 6,743 6,640 6,407 Depr / Amort (10) (14) (15) (16) Cash & ST Invts 2,874 1,740 1,475 1,218 EBIT 377 267 507 924 Other Current Assets 5,266 7,338 7,773 8,251 Associates Inc 121 197 88 133 Total Assets 35,428 36,323 35,364 34,956 Interest (Exp)/Inc (12) 12 (33) (3) ST Debt 1,295 147 1,000 700 Exceptionals 947 (102) 0 0 Creditors 1,155 2,467 2,467 2,467 Pre-tax Profit 1,432 375 562 1,054 Other Current Liab 25 43 43 43 Tax (53) (70) (69) (143) LT Debt 3,739 4,535 3,681 3,481 Minority Interest (67) (66) (68) (68) Other LT Liabilities 491 508 508 508 Net Profit 1,312 239 426 844 Minority Interests 1,521 1,521 1,523 1,526 Shareholder’s Equity 27,201 27,102 26,141 26,231 Sales Gth (%) (17) (6) 201 53 Total Cap. & Liab. 35,428 36,323 35,364 34,956 Net Profit Gth (%) (34) (82) 78 98 Share Capital (m) 1,350 1,355 1,355 1,355 EBITDA Margins (%) 44 34 21 25 Net Cash/(Debt) (2,161) (2,941) (3,206) (2,964) EBIT Margin (%) 43 32 20 24 Working Capital 5,664 6,422 5,738 6,258 Tax Rate (%) 4 19 12 14 Net Gearing (%) 8 11 12 11

Cash Flow Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions FY Dec 2018A 2019A 2020F 2021F FY Dec 2018A 2019A 2020F 2021F EBIT 377 267 507 924 Revenues (HK$ m) Tax Paid (82) (33) (69) (143) Property development 32 26 1,773 3,040 Depr/Amort 10 14 15 16 Property investment and 674 626 618 608 Chg in Wkg.Cap (513) 143 (315) (353) management Other Non-Cash (124) (31) (153) (128) Hospitality investment and 144 122 55 110 Operating CF (333) 360 (14) 317 management Net Capex 4,644 346 (10) (10) Assoc, MI, Invsmt (801) (1,358) 191 367 Investing 34 55 53 53 Investing CF 3,843 (1,012) 181 357 Total 885 829 2,498 3,810 Net Chg in Debt (1,100) (385) 0 (500) New Capital 0 0 0 0 Key Assumptions (%) 2020F 2021F Dividend (451) (431) (431) (431) Residential price - HK 0 0 Other Financing CF (4) (10) 0 0 Office rental - HK (20) (5) Financing CF (1,555) (826) (431) (931) Retail rental (Shopping centre) - HK (25) (5) Chg in Cash 1,954 (1,479) (265) (258)

Source: Company, DBS HK

Page 51 Industry Focus

Hong Kong Property Sector (Residential)

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: 24 Sep 2020 10:29:38 (HKT) Dissemination Date: 24 Sep 2020 18:58:01 (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 CK Asset Holdings Ltd (1113 HK), Henderson Land Development Co Ltd (12 HK), MTR Corp Ltd (66 HK), New World Development Co Ltd (17 HK), Sino Land Co Ltd (83 HK), Sun Hung Kai Properties Ltd (16 HK) and Wharf Holdings Ltd/The (4 HK) recommended in this report as of 22 Sep 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 Henderson Land Development Co Ltd (12 HK), Sun Hung Kai Properties Ltd (16 HK), China Overseas Land & Investment Ltd (688 HK), Hang Lung Properties Ltd (101 HK) and Swire Properties Ltd (1972 HK) as of 31 Aug 2020.

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 Henderson Land Development Co Ltd (12 HK), Sun Hung Kai Properties Ltd (16 HK), China Overseas Land & Investment Ltd (688 HK), Hang Lung Properties Ltd (101 HK) and Swire Properties Ltd (1972 HK) in the past 12 months, as of 31 Aug 2020.

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. DBS Bank Ltd., Hong Kong Branch is a limited liability company incorporated in Singapore.

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 e-mail: [email protected] e-mail: [email protected] Fax: 603 2604 3921 Company Regn. No. 196800306E e-mail: [email protected]

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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