China Property Sector

Transcription

1 Asia Pacific/China Equity Research Real Estate / UNDERWEIGHT Research Analysts Jinsong Du jinsong.du@credit-suisse.com Ronney Cheung ronney.cheung@credit-suisse.com Wenhan Chen wenhan.chen@credit-suisse.com China Property Sector THEME Jump out of that Tier 2 city value trap! Figure 1: Ten Tier 2 cities to avoid (marked in red) Heilongjiang Changchun Shenyang Y Urumqi Beijing Tianjin Bohai Sea Dalian Bohai Rim region Yangtze River Delta region Xi an Taiyuan Yellow River Jinan Qingdao Mid-Western region Pearl River Delta region Chongqing Chengdu Hefei Wuxi Suzhou Shanghai Wuhan Nanjing Hangzhou Ningbo Yangtze River Nanchang Changsha Fuzhou Top 1 cities to avoid Other Tier 1 and 2 cities Guiyang Kunming Xiamen Guangzhou Shenzhen Haikou Source: Credit Suisse research DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit researchdisclosures or call +1 (877) U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Sanya The conventional wisdom of favouring developers exposure to Tier 2 cities is wrong: many Tier 2 cities are value traps due to low development margins and oversupply situations there, based on Credit Suisse research. Land prices surged faster than property prices in some Tier 2 cities. Ministry of Land and Resources data showed that, in recent years, land prices in some Tier 2 cities surged much faster than property prices. Therefore, we expect margin pressure for developers that entered such Tier 2 cities in recent years. Oversupply approaching and tightening measures extended to Tier 2 cities. With tightening measures expanding to all major cities, we expect the Tier 2 cities advantage of less policy impact to be removed in 211E. On the other hand, land/housing oversupply in some of these cities is much more severe than in Tier 1 and 3 cities. Top-ten cities to avoid: ranked on margins and severity of oversupply. We rank each city on expected spot margins for property projects., as well as the severity of potential oversupply. Potential winners and losers. This analysis shows that COLI and Guangzhou R&F are among those with the most significant exposure in these value traps (bad), while Agile, KWG and Kaisa have the least exposure (good).

2 Focus charts and tables Figure 2: Housing created by the past three years land supply should be sold over how many years? (No. of y rs) Shenzhen Suzhou Shanghai Sanya Fuzhou Guangzho Chongqing Qingdao Nanjing Haikou Changsha Chengdu Kunming Hefei Xian Wuxi Beijing Hangzhou Nanchang Ningbo Guiyang Changchu Shenyang Urumqi Xiamen Jinan Dalian Tianjin Taiyuan Wuhan Note: The inventory level for each city is calculated based on: land supply over the past three years (28-1)/average demand (28-1) (in GFA) for each city, Source: Soufun; CEIC; Credit Suisse estimates Figure 4: Many Tier 2 cities land prices surged faster than property prices in 21 (%) Haikou Wuhan Tianjin Nanjing Chongqing Figure 3: What will be the developers net margin with today s property price and 21 average land cost? Est. net margin (%) Kunming Urumqi Guiyang Dalian Xiamen Ningbo Shenzhen Tianjin Hangzhou Nanchang Guangzhou Chengdu Beijing Qingdao Sanya Taiyuan Xian Wuhan Wuxi Fuzhou Suzhou Jinan Shanghai Shenyang Changchun Nanjing Haikou Changsha Chongqing Hefei NB: Net margin is calculated based on using the end-21 residential price level and average 21 land cost paid in each city Source: Soufun; CEIC; Credit Suisse estimates Figure 5: Top-ten Tier 2 cities to avoid 1 Wuhan 2 Shenyang 3 Jinan 4 Changchun 5 Taiyuan 6 Hefei 7 Changsha 8 Haikou 9 Chongqing 1 Tianjin Yoy % chg in land price YoY% chg in residential price Source: Soufun; CEIC Source: Credit Suisse estimates Figure 6: Valuation summary China developers and agents Div Net Share Target Mkt Current (Disc)/ 12-mth (Disc)/ yield gearing price price +/- cap NAV prem. NAV prem. P/E (%) P/B 21E RIC Name Rating (HK$) (HK$) (%) (US$) (HK$/shr) (%) HK$/shr (%) 21E 211E 212E 21E 21E (%) China property developers 3383.HK Agile N (53) 23. (57) SZ China Vanke - A (RMB) O (28) 13.1 (38) SZ China Vanke - B O (3) 15.2 (4) HK COLI U (5) 15.3 (16) HK CR Land N (3) 21.2 (4) HK Evergrande O (47) 7.6 (52) HK Greentown U (54) 19.9 (61) HK GZ R&F N (39) 18.7 (44) HK Kaisa O (59) 6.39 (64) HK KWG O (61) 13.4 (62) HK Sino Ocean Land N (47) 1.1 (53) HK Shimao N (45) 21.7 (51) China property agents EJ.N E-House O n.a n.a n.a n.a net cash 733.HK Hopefluent O n.a n.a n.a n.a net cash CRIC.OQ CRIC O n.a n.a n.a n.a net cash Source: Prices are as of 28 th Feb; Bloomberg; Company data, Credit Suisse estimates China Property Sector 2

3 Jump out of that Tier 2 city value trap! We believe the conventional wisdom of favouring developers exposure to Tier 2 cities is wrong: many of these cities are value traps due to low development margins and an oversupply situation there, based on Credit Suisse research. We also identify the top-ten cities to avoid, and the related top buy and sell ideas in the sector. Land prices surged faster than property prices: margin pressure in some Tier 2 cities Ministry of Land and Resources data showed that, in recent years, land prices in some Tier 2 cities surged much faster than property prices. Therefore, we expect margin pressure for developers that entered such Tier 2 cities in recent years. The ten cities with the lowest estimated property development margins are: Hefei, Chongqing, Changsha, Haikou, Nanjing, Changchun, Shenyang, Shanghai, Jinan and Suzhou. Oversupply of land, accelerated construction lead to housing oversupply in 211 As a proxy to housing supply, we add up residential land supply (in terms of GFA) in each city over the past three years (28-1). This amount, divided by the average residential sales volume (in terms of GFA) for the past three years, gives us a picture of the supplydemand dynamics in each city. Based on this analysis, the ten cities with the most severe potential housing oversupply are: Wuhan, Taiyuan, Tianjin, Dalian, Jinan, Xiamen, Urumqi, Shenyang, Changchun and Guiyang. Developers stuck in Tier 2 city value trap; our top investment ideas Based on current property prices and average land costs, we rank each city on expected spot margins for property projects. Based on the past three years land supply and average demand, we also rank each city on the severity of potential oversupply. As a result, we identify the top-ten cities to avoid: Wuhan, Shenyang, Jinan, Changchun, Taiyuan, Hefei, Changsha, Haikou, Chongqing and Tianjin. By analyzing the Chinese property developers landbank, we conclude that CC Land, Guangzhou R&F, COLI, Longfor and Shui On Land have the most significant exposure (more than 4% of their landbank) in these ten cities, while Shenzhen Investment, KWG, Franshion, Agile and Kaisa have the least exposure. On the other hand, both the Credit Suisse annual China Consumer Survey and our site visits showed that self-use demand is strong in many 3 rd tier cities, and the supply/demand dynamics there are also more favourable to developers. Country Garden, Kaisa, Evergrande, and Agile have the most significant exposure (more than 5% of landbank) in 3 rd tier cities. As a result, we maintain our OUTPERFORM ratings on Evergrande, KWG, and Kaisa, and UNDERPERFORM rating on COLI. We are concerned about the risks of worse-thanexpected contracted sales for Guangzhou R&F. We also downgrade Shimao from Outperform to a NEUTRAL. China Property Sector 3

4 Land prices surged faster than property prices: margin pressure in some Tier 2 cities Ministry of Land and Resources data showed that, in recent years, land prices in some Tier 2 cities surged much faster than property prices there. Therefore, we expect margin pressure for developers that entered such Tier 2 cities in recent years. The ten cities with the lowest estimated property development margins are: Hefei, Chongqing, Changsha, Haikou, Nanjing, Changchun, Shenyang, Shanghai, Jinan and Suzhou. Not all Tier 2 cities are equally attractive... In 21, a total GFA of 41 mn sq m of land was purchased across China for the purpose of building commodity (private) housing, implying 28% YoY growth. Figure 7: Land area purchased (mn sqm) (%) (1) (2) (3) mn sqm y oy change - RHS Source: CEIC, Credit Suisse estimates Most developers tend to buy land in Tier 2 and 3 cities with the rationale that land is generally cheaper in such cities compared to Tier 1 cities and that the potential for growth in Tier 2 cities is huge. As a result of the developers growing interest in Tier 2 cities, land prices grew considerably in them. For example, the land price in key Tier 2 cities increased by an average of 23% in 21 versus a drop of 2% in Tier 1 cities. The average premium land price over the opening price for Tier 2 cities also grew substantially from 28% in 29 to 44% in 21. China Property Sector 4

5 Figure 8: Tier 1 cities land costs and premiums decline significantly Average premium % over Average land cost Tier 1 cities opening price (Rmb/sq m) YoY % change Beijing , Shanghai , Guangzhou , Shenzhen , Average Tier 2 cities Chongqing , Tianjin , Chengdu , Nanjing , Hangzhou , Shenyang , Changchun 13 1, Average Source: Centaline; Soufun; Credit Suisse estimates Consensus opinion is that Tier 2 cities are better to invest in than Tier 1 cities because they are less affected by the central government s tightening measures and thus less subject to its scrutiny. However, we believe this will apply to only a few Tier 2 cities in China. If we take the analysis a step further estimating the potential gross and net margin that could be fetched in each of the Tier 1 and 2 cities, not all Tier 2 cities are in fact as attractive as one thinks. One of the main reasons lies in the relationship between land and residential prices: the higher residential prices grow (as happened in 29 and 21), the more homebuyers rush out to buy as there is a growing fear that if they do not buy today, prices would be even more expensive later. This drives up ASPs and renders most macro policies useless. This, in turn, eventually drives up land prices, as the market expects further tightening measures to take place as prices rise further. In fact, in China this has resulted in land prices surging much faster than residential prices in 21. For example, in 21 Haikou s land price grew by 93% YoY versus 45% YoY for residential prices while in Wuhan land price growth was 28% YoY versus residential price growth of a meagre 7% YoY. Figure 9: Land prices rose much faster than residential prices in 21 in Tier 2 cities (%) Haikou Wuhan Tianjin Nanjing Chongqing Yoy % chg in land price YoY % chg in residential price Source: CEIC; Soufun China Property Sector 5

6 Top ten cities with low development margins By analysing the 3 Tier 1 and Tier 2 cities in China, we have the following findings: when land prices surge faster than property prices, certain Tier 2 cities in China perform better than others, while some are likely to underperform. Based on the average 21 land cost paid and assuming residential prices remain stable at the end-21 level, we estimate the potential gross and net margin that can be generated from each city and in Figure 9 we give the outcome for all cities by ranking. Figure 1: Tier 1 and 2 cities ranked by estimated net margin Est. net margin (%) Kunming Urumqi Guiy ang Dalian Xiamen Ningbo Shenzhen Tianjin Hangzhou Nanchang Guangzhou Chengdu Beijing Qingdao Sanya Taiyuan Xian Wuhan Wuxi Fuzhou Suzhou Jinan Shanghai Shenyang Changchun Nanjing Haikou Changsha Chongqing Hefei Source: CEIC, Soufun, company data, Credit Suisse estimates In the above chart, the worst ten cities are highlighted in grey with Hefei, Chongqing and Changsha showing up as the top-three worst performers. Meanwhile, the best five cities are: Kunming, Urumqi, Guiyang, Dalian and Xiamen. Chongqing was the second-worst performer with an estimated gross margin of 6% and net margin of -4%. The gross margin of 6% is based on Chongqing s end-21 ASP of Rmb 5,151/sq m with a total cost of revenue of Rmb4,842/sq m including an average land cost of Rmb1,717/sq m (based on 21 average land cost from Soufun), an assumed construction cost of Rmb2,5/sq m, a finance cost of Rmb188/sq m (assuming 7.5% of construction cost) and an SG&A of Rmb412/sq m (assuming 8% of sales is assigned to SG&A expenses). Deducting the respective tax expenses (including the LAT), we derive a total loss of -4% as the net margin for Chongqing, making it the second-worst performer. While one might argue that the overall calculation may be too general, we believe by applying the same assumptions to each of the 3 Tier 1 and 2 cities in China, we should get a sense of how each city will perform on a relative basis. China Property Sector 6

7 Figure 11: Cities ranked by estimated net margin Construction Land Gross Net ASP cost cost margin margin Ranking City (Rmb/sq m)* (Rmb/sq m)** (Rmb/sq m)*** (%) (%) 1 Kunming 12,384 3,96 1, Urumqi 7,3 2, Shenzhen 18,34 4,576 2, Guiyang 9,94 2, Dalian 1,648 2,662 1, Xiamen 1,878 2,72 3, Ningbo 17,519 4,38 3, Tianjin 9,553 2,5 1, Hangzhou 21,968 4,723 6, Nanchang 8,2 2,5 1, Guangzhou 14,46 3,62 5, Chengdu 8,266 2,5 1, Beijing 18,711 4,678 7, Qingdao 8,221 2,5 2, Sanya 2,5 3,916 7, Taiyuan 5,713 2,5 1, Xian 6,725 2,5 1, Wuhan 6,572 2,5 1, Wuxi 9,187 2,5 2, Fuzhou 12,746 3,187 4, Suzhou 9,52 2,5 3, Jinan 6,823 2,5 1, Shanghai 14,888 3,722 6, Shenyang 5,363 2,5 1, Changchun 5,544 2,5 1, Nanjing 11,142 2,786 5, Haikou 6,22 2,5 2, Changsha 5,2 2,5 1, Chongqing 5,151 2,5 1, Hefei 5,32 2,5 2, * ASP based on residential price as of end 21; ** = construction cost ranging from Rmb2,5-Rmb4,7/sq m depending on ASP of each city; *** Land cost based on 21 average residential land cost level Source: CEIC, Soufun, Credit Suisse estimates China Property Sector 7

8 Oversupply of land, accelerated construction lead to housing oversupply in 211 As a proxy to housing supply, we add up residential land supply (in terms of GFA) in each city over the past three years (28-1). This amount, divided by the average residential sales volume (in terms of GFA) for the past three years, gives us a picture of the supplydemand dynamics in each city. Based on this analysis of the same 3 cities in China, the ten cities with the most severe potential housing oversupply are: Wuhan, Taiyuan, Tianjin, Dalian, Jinan, Xiamen, Urumqi, Shenyang, Changchun and Guiyang. Figure 12: Cities ranked according to supply-demand analysis Residential land supply (GFA) Residential sales volume (GFA) Sum Average No. of years Ranking City (28-1) (A) (B) (C) = (A) / (B) 1 Shenzhen Suzhou Shanghai Sanya Fuzhou Guangzhou Chongqing Qingdao Nanjing Haikou Changsha Chengdu Kunming Hefei Xian Wuxi Beijing Hangzhou Nanchang Ningbo Guiyang Changchun Shenyang Urumqi Xiamen Jinan Dalian Tianjin Taiyuan Wuhan Source: Centaline; Soufun; Credit Suisse estimates China Property Sector 8

9 Figure 13: Housing created by the past three years land supply should be sold over how many years? (No. of y rs) Shenzhen Suzhou Shanghai Sanya Fuzhou Guangzhou Chongqing Qingdao Nanjing Haikou Changsha Chengdu Kunming Hefei Xian Wuxi Beijing Hangzhou Nanchang Ningbo Guiyang Changchun Shenyang Urumqi Xiamen Jinan Dalian Tianjin Taiyuan Wuhan Source: Centaline; Soufun; Credit Suisse estimates China Property Sector 9

10 Developers stuck in the Tier 2-city value trap; our top investment ideas By combining the ranking in the previous two sections for the 3 cities in China, we identify the top-ten cities to avoid: Wuhan, Shenyang, Jinan, Changchun, Taiyuan, Hefei, Changsha, Haikou, Chongqing and Tianjin. By analysing the Chinese property developers landbank, we conclude that CC Land, Guangzhou R&F, COLI, Longfor and Shui On Land have the most significant exposure (more than 4% of their landbank) in these ten cities, while Shenzhen Investment, KWG, Franshion, Agile and Kaisa have the least exposure. On the other hand, both the Credit Suisse annual China Consumer Survey and our site visits show that self-use demand is strong in many 3 rd tier cities, and the supply/demand dynamics there are also more favourable to developers. Country Garden, Kaisa, Evergrande, and Agile have the most significant exposure (more than 5% of landbank) in 3 rd tier cities. As a result, we maintain our OUTPERFORM ratings on Evergrande, KWG and Kaisa, and UNDERPERFORM rating on COLI. We are concerned about the risks of worse-thanexpected contracted sales for Guangzhou R&F. We also downgrade Shimao from Outperform to a NEUTRAL. Figure 14: Overall ranking for the 3 Tier 1 and Tier 2 cities Total score Supply-demand Score-1 Net Score-2 Overall ranking City (A) = (B) + (C) City ratio (B) City margin (%) (C) 1 Shenzhen 8 Beijing Beijing Kunming 14 Changchun Changchun Guangzhou 17 Changsha Changsha Sanya 19 Chengdu Chengdu Qingdao 22 Chongqing Chongqing Suzhou 23 Dalian Dalian Chengdu 24 Fuzhou Fuzhou Guiyang 24 Guangzhou Guangzhou Fuzhou 25 Guiyang Guiyang Ningbo 26 Haikou Haikou Urumqi 26 Hangzhou Hangzhou Hangzhou 27 Hefei Hefei Shanghai 27 Jinan Jinan Nanchang 29 Kunming Kunming Beijing 3 Nanchang Nanchang Xiamen 3 Nanjing Nanjing Dalian 31 Ningbo Ningbo Xian 32 Qingdao Qingdao Wuxi 35 Sanya Sanya Nanjing 36 Shanghai Shanghai Tianjin 36 Shenyang Shenyang Chongqing 37 Shenzhen Shenzhen Haikou 38 Suzhou Suzhou Changsha 4 Taiyuan Taiyuan Hefei 45 Tianjin Tianjin Taiyuan 45 Urumqi Urumqi Changchun 48 Wuhan Wuhan Jinan 48 Wuxi Wuxi Shenyang 48 Xiamen Xiamen Wuhan 48 Xian Xian Source: Centaline; Soufun; Credit Suisse estimates China Property Sector 1

11 Figure 15: Developers landbank distribution by % in the worst ten cities (from highest % to lowest) % landbank in As of 1H1 or later Haikou Tianjin Chongqing Changsha Hefei Taiyuan Changchun Shenyang Jinan Wuhan worst ten cities CC Land GZ R&F COLI Longfor Shui On Land CRL Evergrande Glorious Beijing Capital Land Sino-Ocean Land China Vanke SPG Land Poly HK Shimao Country Garden Hopson Yanlord Greentown Kaisa 9 9 Agile Franshion KWG SZ Investment Our statistics show that CC Land, GZ R&F, COLI, Longfor and Shui On Land have the most landbank exposure to the worst ten cities, while SZ Investment, KWG, Franshion, Agile and Kaisa have the least landbank exposure to such cities. Figure 16: Land bank distribution in other cities by ranking (from highest to lowest) Ranking As of 1H1 or later Other cities 3 Tier 1 and Tier 2 cities 1 Country Garden Kaisa Evergrande Agile Greentown China Vanke Glorious Hopson Shimao Beijing Capital Land SZ Investment Poly HK Franshion SPG Land Shui On Land Yanlord COLI CRL Sino-Ocean Land CC Land Longfor GZ R&F KWG 3 97 Our statistics also show that Agile, Country Garden, Kaisa, Evergrande and Greentown have the most landbank exposure to Tier 3 cities, while KWG, GZ R&F, Longfor, CC Land and Sino-Ocean Land have the least landbank exposure to such cities. China Property Sector 11

12 Figure 17: Percentage likely to purchase a new property in the next two years CITY 1% HOUSEHOLD MONTHLY INCOME (RMB) % % Beijing ShanghaiGuangzhouChengdu Wuhan Jinhua Xiangfan Baoji Handan Putian % 51-75% More than 75% Don t Know Source: Credit Suisse China Consumer Survey 211 The above chart is taken from Credit Suisse s China Consumer Survey 211 to address the query on consumers intention to purchase a new property within the next two years in different cities. The survey findings show that housing demand in Tier 3 cities is generally strong: around 84% of those interviewed in Jinhua, 62% in Xiangfan, 66% in Baoji, 66% in Handan and 67% of those interviewed in Putian said the likelihood for them to buy a new property within the next two years would higher than 5%. China Property Sector 12

13 Asia Pacific / China Real Estate Management & Development Rating UNDERPERFORM* Price (28 Feb 11, HK$) Target price (HK$) 13.¹ Chg to TP (%).62 Market cap. (HK$ mn) 15,589 (US$ 13,547) Enterprise value (HK$ mn) 125,432 Number of shares (mn) 8, Free float (%) week price range *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. Share price performance Price (LHS) Research Analysts Jinsong Du jinsong.du@credit-suisse.com Rebased Rel (RHS) Mar-9 Jul-9 Nov-9 Mar-1 Jul-1 Nov-1 The price relative chart measures performance against the MSCI China Free index which closed at 64.3 on 28/2/11 On 28/2/11 the spot exchange rate was HK$7.77/US$ Performance Over 1M 3M 12M Absolute (%) Relative (%) China Overseas Land & Investment (688.HK / 688 HK) 1% MoM sales volume decline in January despite strong market January sales drop 1% MoM. COLI s January sales of HK$7.8 bn sales imply 89% YoY growth, but a 7% MoM drop. The GFA sold, at 536,6 sq m, implies 65% YoY growth, but a 1% MoM decline, implying a 3% MoM increase in ASP to HK$14,476/sq m in January. Underperforms relative to overall market volume. With the primary housing market s overall transaction volumes up 3% MoM, COLI s 1% volume drop indicates fewer project launches in January, and some large projects lack the flexibility to increase sales, especially in some of the second-tier cities where oversupply is increasingly severe. New real estate fund launched. COLI launched its second real estate fund, which will have a size of US$3-5 mn, and is not likely to buy COLI s existing projects. Instead, the fund may invest in COLI s future land acquisitions. Maintain our UNDERPERFORM. We maintain our UNDERPERFORM rating on COLI despite its 25% share price drop since October 21. We believe that potential delays in some of its new project launches should affect its near-term performance in contracted sales, and its lack of meaningful geographical expansion means the potential weakness of the property market in FY11 should affect it more than many of its smaller peers. Financial and valuation metrics Year 12/9A 12/1E 12/11E 12/12E Revenue (HK$ mn) 37, , , ,87.1 EBITDA (HK$ mn) 1, , , ,345. EBIT (HK$ mn) 1, , , ,32. Net attributable profit (HK$ mn) 7, , , ,3.2 EPS (CS adj.) (HK$) Change from previous EPS (%) n.a. Consensus EPS (HK$) n.a EPS growth (%) P/E (x) Dividend yield (%) EV/EBITDA (x) ROE Net debt/equity (%) NAV per share (HK$) Disc./prem. to NAV (%) Source: Company data, Thomson Reuters, Credit Suisse estimates China Property Sector 13

14 Figure 18: Profit and loss summary (28-12E) Year end 31 Dec (HK$ mn) 28 29E 21E 211E 212E Turnover 18,892 37,322 43,28 53,565 57,87 Cost of goods sold (1,722) (25,544) (26,97) (35,131) (38,16) Gross profit 8,171 11,778 16,32 18,434 18,981 Gain / (loss) on disposal of subsids (Loss)/gain from changes in fair value of invests held for trading (24) Other income (inc. interest income) SG&A (1,575) (1,327) (2,437) (2,658) (2,689) Operating profit 7,374 1,94 14,343 16,254 16,77 Share of profit of asso./jv (38) ,81 4,575 Financial expenses (418) (228) (783) (783) (783) Profit before tax 6,919 1,734 14,51 18,552 2,562 Income tax expense (3,263) (4,85) (6,343) (8,459) (9,84) Minority interests (24) (135) (225) (485) (45) Core profit 3,632 6,514 7,933 9,68 11,73 Other non-recurring income IP revaluation 1, Reported profit for the year 5,49 7,469 7,933 9,68 11,73 Core EPS (HK$) Figure 19: Share price to 12-month NAV discount (%) Avg. Disc. = -5% +1 SD -1 SD Oct 6 Dec 6 Feb 7 Apr 7 Jun 7 Aug 7 Oct 7 Dec 7 Feb 8 Apr 8 Jun 8 Aug 8 Oct 8 Dec 8 Feb 9 Apr 9 Jun 9 Aug 9 Oc t 9 Dec 9 Feb 1 Apr 1 Jun 1 Aug 1 Oct 1 Dec 1 Feb 11 COLI: (Disc)/prem to 12 month NAV +1 SD -1 SD Avg. discount China Property Sector 14

15 Asia Pacific / China Real Estate Management & Development China Resources Land Ltd Rating NEUTRAL* Price (28 Feb 11, HK$) Target price (HK$) 14.8¹ Chg to TP (%) 17.1 Market cap. (HK$ mn) 68,95 (US$ 8,737) Enterprise value (HK$ mn) 9,83 Number of shares (mn) 5, Free float (%) week price range *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. Share price performance Price (LHS) Research Analysts Jinsong Du jinsong.du@credit-suisse.com Rebased Rel (RHS) Mar-9 Jul-9 Nov-9 Mar-1 Jul-1 Nov The price relative chart measures performance against the MSCI China Free index which closed at 64.3 on 28/2/11 On 28/2/11 the spot exchange rate was HK$7.77/US$1 Performance Over 1M 3M 12M Absolute (%) Relative (%) (119.HK / 119 HK) Valuation no longer expensive; lending, investment properties to protect downside Valuation is no longer rich. China Resources Land s share price has dropped 24% since China s first rate hike in October 21, compared with a 9% drop for both MSCI China and the CS China property index over the same period. It is also the worst performing major China property stock YTD (down 1% plus), now trading at a 4% discount to forward NAV. Expect 11% growth in 211 contracted sales. We have had a negative outlook for CR Land s 21 contracted sales since the beginning of 21. After a 1% YoY decline in 21A contracted sales, we expect 11% growth in 211E, despite continued difficulties in high-end projects, especially since CR Land recently vowed to price new projects with flexibility. CR Group s internal lending providing flexibility. The financial condition remains our key concern on the sector, where we believe CR Land has a clear advantage, especially with the shareholders approval for lending within the CR Group. Maintain our NEUTRAL. We expect potential positive catalysts including better 2Q1 sales and intra-group loans at low interest rates, though risks remain. We maintain our NEUTRAL recommendation. Financial and valuation metrics Year 12/9A 12/1E 12/11E 12/12E Revenue (HK$ mn) 16, , , ,552.4 EBITDA (HK$ mn) 5,39.4 7, , ,844.1 EBIT (HK$ mn) 4, ,65.4 8, ,71.1 Net attributable profit (HK$ mn) 3, ,5.6 4,6.9 5,419.9 EPS (CS adj.) (HK$) Change from previous EPS (%) n.a. Consensus EPS (HK$) n.a EPS growth (%) P/E (x) Dividend yield (%) EV/EBITDA (x) ROE Net debt/equity (%) NAV per share (HK$) Disc./prem. to NAV (%) Source: Company data, Thomson Reuters, Credit Suisse estimates. China Property Sector 15

16 Figure 2: Profit and loss summary (28-212E) Year-end 31 Dec (Rmb mn) E 211E 212E Sale of developed properties 6,949 14,45 21,863 23,91 31,344 Rental income 1,131 1,292 2,378 3,156 3,214 Constr. & decoration & others 1, Turnover 9,134 16,61 25,143 28,13 35,552 YoY change (%) Other expenses Operating profit 2,51 4,882 7,559 8,317 9,659 Net interest expense (151) (154) (231) (346) (52) Share of profits of associates Investment in securities Others Profit before tax 2,612 4,859 7,374 8,19 9,19 Taxation (875) (1,274) (3,1) (3,22) (3,548) Minority interests (44) (442) (323) (217) (223) Core profit 1,693 3,143 4,51 4,61 5,42 YoY change (%) Net impact of inv't ppty reval reserves 277 1,351 1 Reported net profit 1,994 4,48 4,51 4,61 5,421 YoY change (%) EPS (HK$) Figure 21: Share price to 12-month NAV discount (%) Average discount at -34% +1 SD -1 SD Mar 7 May 7 Jul 7 Sep 7 Nov 7 Jan 8 Mar 8 May 8 Jul 8 Sep 8 Nov 8 Jan 9 Mar 9 May 9 Jul 9 Sep 9 Nov 9 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 11 Discount to 12 mth NAV Av g NAV discount +1 SD -1 SD China Property Sector 16

17 Asia Pacific / China Real Estate Management & Development China Vanke Co Ltd-A Rating OUTPERFORM* [V] Price (28 Feb 11, Rmb) 8.16 Target price (Rmb) 12.3¹ Chg to TP (%) 5.7 Market cap. (Rmb mn) 78,991 (US$ 12,13) Enterprise value (Rmb mn) 89,995 Number of shares (mn) 9,68.25 Free float (%) week price range *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. [V] = Stock considered volatile (see Disclosure Appendix). Share price performance Price (LHS) Research Analysts Jinsong Du jinsong.du@credit-suisse.com Rebased Rel (RHS) Mar-9 Jul-9 Nov-9 Mar-1 Jul-1 Nov The price relative chart measures performance against the MSCI China Free index which closed at 64.3 on 28/2/11 On 28/2/11 the spot exchange rate was Rmb6.59/US$1 Performance Over 1M 3M 12M Absolute (%) Relative (%) (2.SZ / 2 CH) Leading all the way the best of it all Another year of exceptional sales. China Vanke s January contracted sales were Rmb2.1 bn (up 141% MoM and 221% YoY), far exceeding its previous historical high of Rmb15.8 bn in October 21. This also implies an ASP of Rmb12,152/sq m, flat MoM but +2% YoY and representing ~18% of Credit Suisse's 211E contracted sales of Rmb11 bn already achieved. Its consistent strong sales demonstrated yet again its execution capability in an uncertain environment. Beneficiary of small unit development. With property-related measures likely to remain tight in 211, we believe developers, such as China Vanke, should benefit from the development of small units properties since it should provide more pricing flexibility, and therefore better sell-through rates. Aggressive land acquisition. In 211, we believe China Vanke will not only continue to maintain its dominant position in the China property market, but also grow faster than the industry average in the coming years. China Vanke has purchased a total GFA of ~21 mn sq m of landbank in 21 at a land cost of ~Rmb2,8/sq m which should provide sufficient landbank for development for the next 5-6 years. Attractive valuation. Currently, China Vanke is trading at a 38% discount to its 12-month NAV and 13.4x 21 P/E and 8.8x 211 P/E. We reiterate our OUTPERFORM rating. Financial and valuation metrics Year 12/9A 12/1E 12/11E 12/12E Revenue (Rmb mn) 48, , , ,68.5 EBITDA (Rmb mn) 8, , ,7.6 15,819.4 EBIT (Rmb mn) 8, , ,7.6 15,819.4 Net attributable profit (Rmb mn) 5, ,648. 1,11.5 1,347.5 EPS (CS adj.) (Rmb) Change from previous EPS (%) n.a. Consensus EPS (Rmb) n.a EPS growth (%) P/E (x) Dividend yield (%) EV/EBITDA (x) ROE Net debt/equity (%) NAV per share (Rmb) Disc./prem. to NAV (%) Source: Company data, Thomson Reuters, Credit Suisse estimates. China Property Sector 17

18 Figure 22: Share price to 12-month discount chart (%) SD Avg. disc of -7% -1 SD Jan 6 May 6 Sep 6 Jan 7 May 7 Sep 7 Jan 8 May 8 Sep 8 Jan 9 May 9 Sep 9 Jan 1 May 1 Sep 1 Jan 11 Discount to 12 mth NAV Avg. discount +1 SD -1 SD Figure 23: Profit and loss summary (28-12E) Year-end 31 Dec (Rmb mn) 28 29E 21E 211E 212E Turnover 4,992 48,881 49,195 73,253 77,68 Cost of sales (29,539) (38,117) (34,252) (51,621) (55,76) Gross profit 11,453 1,764 14,943 21,632 21,93 Other operating (exps)/income (1,268) 96 SG&A (3,391) (2,956) (4,974) (5,624) (6,83) Operating profit 6,793 8,714 9,969 16,8 15,819 Net interest expenses (657) (574) (6) (16) (153) Associate & JV ,25 1,54 Other items (23) (65) (72) (79) (87) Profit before taxation 6,322 8,618 1,52 16,873 16,721 Taxation (1,682) (2,187) (2,951) (4,754) (4,7) Minority interests (67) (1,1) (92) (2,17) (1,673) Core profit 4,33 5,33 6,648 1,12 1,348 YoY Change Net impact of inv't ppty reval. res. 632 Net Profit 4,33 5,33 7,28 1,12 1,348 YoY change (%) Core EPS (Rmb) YoY change (%) DPS (Rmb) YoY change (%) China Property Sector 18

19 Asia Pacific / China Real Estate Management & Development Rating OUTPERFORM* [V] Price (28 Feb 11, HK$) 3.66 Target price (HK$) 5.3¹ Chg to TP (%) 44.8 Market cap. (HK$ mn) 54,9 (US$ 7,44) Enterprise value (Rmb mn) 57,589 Number of shares (mn) 15,. Free float (%) week price range *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. [V] = Stock considered volatile (see Disclosure Appendix). Share price performance Price (LHS ) Research Analysts Jinsong Du jinsong.du@credit-suisse.com Rebased Rel (RHS) No v- 9 Mar-1 Jul-1 Nov The price relative chart measures performance against the MSCI China Free index which closed at 64.3 on 28/2/11 On 28/2/11 the spot exchange rate was HK$7.77/US$1 Performance Over 1M 3M 12M Absolute (%) Relative (%) Evergrande Real Estate Group Ltd (3333.HK / 3333 HK) Getting stronger, bigger and better Strong balance sheet position. We believe that Evergrande has a fairly comfortable balance sheet position with its recent US$1.4 bn bond issuance and strong January sales of Rmb9.8 bn. Evergrande is also confident about its cash flow. With Rmb19.5 bn in cash at end-21 and Rmb9.3 bn raised via January s bond issuance, it expects strong positive cash flow for 211E. Focus on 2 nd and 3 rd tier cities. Evergrande s plan to enter Tier 2 and 3 cities on a massive scale has been one of its key strategies over the past few years. The recent success of its new launches in some Tier 3 cities proved the strong market potential there, given the less stringent requirement on upfront land premium payment and working capital there should reduce the company s risk profile. A better than-expected delivery: We now expect Evergrande to deliver more than 8 mn sq m and more than 9 mn sq m in 21 and 211, respectively both far exceeding the current market expectation. Deep discount of 55% to 12-month NAV. We believe Evergrande s current valuation is cheap given that it is trading at a 55% discount to our 12-month NAV and only 8.2x 1P/E and 5.1x 11P/E. Maintain our OUTPERFORM rating. Financial and valuation metrics Year 12/9A 12/1E 12/11E 12/12E Revenue (Rmb mn) 5, ,7.2 6, ,793.5 EBITDA (Rmb mn) ,12. 1, ,369.4 EBIT (Rmb mn) ,33.7 1, ,286.7 Net attributable profit (Rmb mn) , , ,31.4 EPS (CS adj.) (Rmb) Change from previous EPS (%) n.a. Consensus EPS (Rmb) n.a EPS growth (%) n.a. 2, P/E (x) Dividend yield (%) EV/EBITDA (x) ROE Net debt/equity (%) net cash NAV per share (HK$) Disc./prem. to NAV (%) Source: Company data, Thomson Reuters, Credit Suisse estimates. China Property Sector 19

20 Figure 24: Share price to 12-month discount (%) SD -5 Avg. discount of 52% -6-1 SD -7-8 Jan 1 Jan 1 Feb 1 Mar 1 Apr 1 Apr 1 May 1 Jun 1 Jun 1 Jul 1 Aug 1 Sep 1 Sep 1 Oct 1 Nov 1 Dec 1 Dec 1 Jan 11 Feb 11 Discount to 12 mth NAV Av g. discount +1 SD -1SD Figure 25: Profit and loss forecasts summary (28-12E) Year-end 31 Dec (Rmb mn) E 211E 212E Turnover 3,67 5,723 43,7 6,57 69,794 COGS (2,124) (3,776) (31,742) (4,97) (47,711) Gross profit 1,482 1,946 11,958 19,959 22,82 SG&A (1,21) (1,82) (2,649) (4,683) (4,99) Operating profit ,31 15,276 17,93 Net interest (expense)/income Others Profit before taxation ,338 15,34 17,143 Taxation (315) (119) (3,857) (6,39) (7,219) Minority interests (18) (7) (194) (442) (622) Core profit ,287 8,553 9,32 YoY change (%) , Net imp. of inv't ppty reval. res Exceptional Items (66) 197 Reported net profit 525 1,46 5,287 8,553 9,32 Core EPS (Rmb) China Property Sector 2

21 Asia Pacific / China Real Estate Management & Development KWG Property Holding Limited Rating OUTPERFORM* [V] Price (28 Feb 11, HK$) 5.3 Target price (HK$) 7.4¹ Chg to TP (%) 47.1 Market cap. (HK$ mn) 14,553 (US$ 1,869) Enterprise value (Rmb mn) 17,712 Number of shares (mn) 2, Free float (%) week price range *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. [V] = Stock considered volatile (see Disclosure Appendix). Research Analysts Jinsong Du jinsong.du@credit-suisse.com (1813.HK / 1813 HK) A good entry point for an overpenalised stock Recent correction. Since the Guangzhou government announced household purchase restrictions last few weeks, KWG s share price has dropped by 13%, compared with 5% drop for both Credit Suisse China Property Index and MSCI China index. Although we expect February contracted sales to be low at Rmb7 mn down 46% MoM but flat YoY, projects outside Guangzhou and Beijing are still selling well, we expect more launches coming from other tiered cities in the coming 3-6 months such as the Tianjin Jinan project, Shanghai Putuo and Xin Jiang Wan, and Chengdu s Jinjiang project. Potential catalysts. They include: (1) better-than-expected contracted sales in the next few months and (2) a successful Shanghai project launch in 2Q11 to unlock the currently underappreciated Shanghai projects value. An opportunity to accumulate on recent weakness. We maintain OUTPERFORM on KWG and suggest accumulating on the recent weakness. We estimate that >5% of KWG s 211 earnings are already locked in. With a 211E outstanding land premium (Rmb2 bn), much smaller than most peers, and strong balance sheet (around 55% end-21e net gearing), we expect KWG to have much lower financial risks than the sector average. Share price performance Price (LHS) Rebased Rel (RHS) Mar-9 Jul-9 Nov-9 Mar-1 Jul-1 Nov The price relative chart measures performance against the MSCI China Free index which closed at 65.7 on 28/2/11 On 28/2/11 the spot exchange rate was HK$7.77/US$1 Performance Over 1M 3M 12M Absolute (%) Relative (%) Financial and valuation metrics Year 12/9A 12/1E 12/11E 12/12E Revenue (Rmb mn) 4, ,1.4 9,45.3 1,956.7 EBITDA (Rmb mn) 1, , , ,913.5 EBIT (Rmb mn) 1,25.9 2, , ,899.9 Net attributable profit (Rmb mn) , ,921. 2,222.7 EPS (CS adj.) (Rmb) Change from previous EPS (%) n.a. Consensus EPS (Rmb) n.a EPS growth (%) P/E (x) Dividend yield (%) EV/EBITDA (x) ROE Net debt/equity (%) NAV per share (HK$) Disc./prem. to NAV (%) Source: Company data, Thomson Reuters, Credit Suisse estimates. China Property Sector 21

22 Figure 26: Share price to 12-month NAV discount (%) SD -4 Avg. discount of -5% SD -1 Jan 8 Apr 8 Jul 8 Oct 8 Jan 9 Apr 9 Jul 9 Oct 9 Jan 1 Apr 1 Jul 1 Oct 1 Jan 11 Discount to 12mth NAV Av g. discount +1 SD -1 SD Figure 27: Profit and loss forecasts summary (28-12E) Year-end 31 Dec (Rmb mn) E 211E 212E Turnover 1,574 4,267 8,1 9,45 1,957 COGS (746) (2,61) (5,25) (5,69) (6,332) Gross profit 828 1,656 3,75 3,76 4,624 Other income and gains SG&A (26) (47) (821) (1,54) (1,19) Other operating expenses, net (2) (42) (15) (2) (26) Operating profit 693 1,186 2,324 2,75 3,483 Net finance (costs)/income 24 (2) (35) (48) (53) Share of profit & loss of a JV Profit before tax 727 1,249 2,333 3,238 3,847 Taxation (337) (518) (969) (1,317) (1,624) MI 2 (1) Core profit ,364 1,921 2,223 Net impact of IP revaluation reserves (24) 31 Exceptional items 4 Net profit ,364 1,921 2,223 Core EPS (Rmb) China Property Sector 22

23 Asia Pacific / China Real Estate Management & Development Shimao Property Holdings Ltd Rating (from Outperform) NEUTRAL* [V] Price (28 Feb 11, HK$) 1.64 Target price (HK$) (from 15.15) 12.¹ Chg to TP (%) 12.8 Market cap. (HK$ mn) 37,724 (US$ 4,84) Enterprise value (Rmb mn) 52,579 Number of shares (mn) 3, Free float (%) week price range *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. [V] = Stock considered volatile (see Disclosure Appendix). Share price performance Price (LHS) Research Analysts Wenhan Chen wenhan.chen@credit-suisse.com Jinsong Du jinsong.du@credit-suisse.com Rebased Rel (RHS) Mar-9 Jul-9 Nov-9 Mar-1 Jul-1 Nov The price relative chart measures performance against the MSCI China Free index which closed at 64.3 on 28/2/11 On 28/2/11 the spot exchange rate was HK$7.77/US$1 Performance Over 1M 3M 12M Absolute (%) Relative (%) (813.HK / 813 HK) Potential mega joint venture projects raise concern over cash flow Joint venture company was established to develop mega projects. According to recent news, one of Shimao s joint ventures, Strait Construction & Investment Co. Ltd. (Strait Company) has signed framework agreements with the local governments of Pingtan (Fujian province), Nanjing and Chengdu to develop large-sized integrated projects with commercial, residential, industrial components and high-tech parks. Additional cash outflow may be incurred. We expect the related land acquisition and construction development will result in more attributable cash outflow for Shimao from this year as the previous cash outflow guidance was based on its existing projects construction schedule (Rmb13 bn for 6-7 mn sq m) and land premium payment (Rmb12 bn in 211). Therefore, we estimate the potential amount might exceed the company s previous cash outflow budget at the beginning of this year. Less impressive contracted sales in 1Q 211. We estimate that Shimao s February contracted sales will drop from Rmb3.1 bn in January and might be similar to around the Rmb1 bn it did last February. Also, due to Shimao s launch schedule and wider implementation of tightening measures in Tier 2 and 3 cities, we expect its contracted sales to be less impressive in 1Q 211. Downgrade from Outperform to a NEUTRAL. We expand our target price discount to NAV to 45% from 3% to reflect our concern about potential extra cash outflow for the Strait Cities project developments as well as contracted sales slowdown in the near term. Our new target price is set at HK$12. and we downgrade Shimao from Outperform to a NEUTRAL. Financial and valuation metrics Year 12/9A 12/1E 12/11E 12/12E Revenue (Rmb mn) 17, , , ,618.3 EBITDA (Rmb mn) 6, , , ,77.1 EBIT (Rmb mn) 5, , , ,77.1 Net attributable profit (Rmb mn) 2, , ,182. 4,795.2 EPS (CS adj.) (Rmb) Change from previous EPS (%) n.a Consensus EPS (Rmb) n.a EPS growth (%) P/E (x) Dividend yield (%) EV/EBITDA (x) ROE Net debt/equity (%) NAV per share (Rmb) Disc./prem. to NAV (%) Source: Company data, Thomson Reuters, Credit Suisse estimates China Property Sector 23

24 Figure 28: Share price to 12-month NAV discount (%) SD Avg. disc ount to 12 mth NAV = 4% + SD -SD -8 Aug 6 Oct 6 Dec 6 Feb 7 Apr 7 Jun 7 Aug 7 Oct 7 Dec 7 Feb 8 Apr 8 Jun 8 Aug 8 Oct 8 Dec 8 Feb 9 Apr 9 Jun 9 Aug 9 Oct 9 Dec 9 Feb 1 Apr 1 Jun 1 Aug 1 Oct 1 Dec 1 Feb 11 Prem./(disc) to 12 mth NAV Av g. discount +1 SD -1 SD Figure 29: Profit and loss forecasts summary (28-12E) Year-end 31 Dec (Rmb mn) E 211E 212E Turnover 7,196 17,32 21,857 26,642 33,618 Sale of properties 6,244 16,179 2,567 25,423 32,28 Hotel op. income IP rental income Gross profit 3,232 5,883 8,133 1,251 11,611 Fair val. gains on IP (123) 214 Other gains 442 1, SG&A (1,423) (1,758) (1,85) (2,354) (2,534) Core operating profit 2,252 4,272 6,283 7,897 9,77 Finance costs (35) (37) (363) (466) (451) Share of results of asso & JCE: Profit before inc. tax 1,785 5,71 5,928 7,55 9,67 Income tax expense (925) (2,17) (2,127) (2,932) (3,69) Profit for the year 86 3,63 3,81 4,618 5,458 Minority interests Equity hldrs of company 841 3,511 3,518 4,182 4,795 Underlying net profit 1,18 2,775 3,518 4,182 4,795 Chg (%) UL EPS (HK$) Total dividend (HK$) China Property Sector 24

25 China Property Sector 25 Appendix Figure 3: China map location of the top-1 worst tier 2 cities Urumqi Mid-western region Chongqing Chengdu Guiyang Kunming Xi an Beijing Tianjin Yellow River Yangtze River Bohai Sea Taiyuan Jinan Qingdao Nanchang Changsha Fuzhou Xiamen Guangzhou Shenzhen Haikou Sanya Heilongjiang Changchun Shenyang Dalian Wuxi Hefei Suzhou Shanghai Wuhan Nanjing Hangzhou Ningbo Y Bohai Rim region Yangtze River Delta region Mid-Western region Pearl River Delta region Top 1 cities to avoid Other Tier 1 and 2 cities 1 March 211

26 Companies Mentioned (Price as of 28 Feb 11) Agile Property Holdings ltd. (3383.HK, HK$9.82, NEUTRAL [V], TP HK$12.7) China Aoyuan Property Group Limited (3883.HK, HK$1.3) China Overseas Land & Investment (688.HK, HK$12.92, UNDERPERFORM, TP HK$13.) China Real Estate Information Corporation (CRIC.OQ, $6.66, OUTPERFORM [V], TP $11.) China Resources Land Ltd (119.HK, HK$12.64, NEUTRAL, TP HK$14.8) China Vanke Co Ltd-A (2.SZ, Rmb8.16, OUTPERFORM [V], TP Rmb12.3) Country Gardens Holdings Co. (27.HK, HK$3.9) E-House China Holdings Ltd (EJ.N, $12.9, OUTPERFORM [V], TP $2.9) Evergrande Real Estate Group Ltd (3333.HK, HK$3.66, OUTPERFORM [V], TP HK$5.3) Greentown China Holdings Ltd (39.HK, HK$7.79, UNDERPERFORM [V], TP HK$7.95) Guangzhou R&F Properties Co Ltd (2777.HK, HK$1.44, NEUTRAL [V], TP HK$1.3) Hopefluent Group Holdings Ltd. (733.HK, HK$4.58, OUTPERFORM [V], TP HK$6.1) Hopson Development Holdings (754.HK, HK$8.62, NEUTRAL [V], TP HK$9.9) Kaisa Group Holdings (1638.HK, HK$2.27, OUTPERFORM, TP HK$3.5) KWG Property Holding Limited (1813.HK, HK$5.3, OUTPERFORM [V], TP HK$7.4) Longfor Properties (96.HK, HK$11.) Poly (Hong Kong) Investments Ltd (119.HK, HK$6.21, OUTPERFORM [V], TP HK$9.9) Shenzhen Investment Ltd (64.HK, HK$2.42) Shimao Property Holdings Ltd (813.HK, HK$1.64, NEUTRAL [V], TP HK$12.) Shui On Land Ltd (272.HK, HK$3.66) Sino-Ocean Land Holdings Ltd (3377.HK, HK$4.76, NEUTRAL [V], TP HK$5.5) Beijing Capital Land (2868.HK, HK$2.44, NOT RATED) CC Land (1224.HK, HK$2.46, NOT RATED) China Prop. (1838.HK, HK$2.51, NOT RATED) CCRE(832.HK, HK$2.15, NOT RATED) Fantasia (1777.HK, HK$1.18, NOT RATED) Glorious (845.HK, HK$2.9, NOT RATED) SOHO China (41.HK, HK$5.59, NOT RATED) SPG Land (337.HK, HK$3.85, NOT RATED) Important Global Disclosures Disclosure Appendix Jinsong Du, Wenhan Chen & Ronney Cheung each certify, with respect to the companies or securities that he or she analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts stock ratings are defined as follows: Outperform (O): The stock s total return is expected to outperform the relevant benchmark* by at least 1-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock s total return is expected to be in line with the relevant benchmark* (range of ±1-15%) over the next 12 months. Underperform (U): The stock s total return is expected to underperform the relevant benchmark* by 1-15% or more over the next 12 months. *Relevant benchmark by region: As of 29 th May 29, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock s absolute total return potential to its current share price and (2) the relative attractiveness of a stock s total return potential within an analyst s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-japan Asia stocks, ratings are based on a stock s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks a 22% and a 12% threshold replace the 1-15% level in the Outperform and Underperform stock rating definitions, respectively, subject to analysts perceived risk. The 22% and 12% thresholds replace the +1-15% and -1-15% levels in the Neutral stock rating definition, respectively, subject to analysts perceived risk. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 2% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. China Property Sector 26