Sales started to slow down

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1 Deutsche Bank Markets Research Asia Hong Kong Industry HK Weekly Date 4 August 2014 Industry Update Sales started to slow down Jason Ching, CFA Cedric Lai Research Analyst Research Associate (+852) (+852) jason.ching@db.com cedric.lai@db.com 256 units sold in primary market during weekend A total of 256 units were sold in the primary market during the weekend, down from 522 units in the previous weekend. This is mainly due to drop in number of units sold (from 448 units to 153 units) at Mont Vert Phase I by Cheung Kong Holdings (0001.HK). By projects, the key contributors of sales were Mont Vert Phase I with 153 units, The REACH in Yuen Long with 28 units, Le Riviera in Shau Kei Wan with 22 units, Mayfair by the Sea II with 14 units, Double Cove in Ma On Shan with 2 units, and Harbour Pinnacle in Tsim Sha Tsui with 2 units. Volume also fell 30% WoW in the secondary market As reported by HKET, a total of 11 transactions were recorded in the top 10 popular estates last week, represented a 30% WoW decrease. Both City One Shatin and Kingswood Villas recorded with 3 transactions respectively. Midland expect transaction volume might remain in low level in the secondary market on a limited number of listings as well as the room for price negotiation has narrowed between buyers and sellers. CCL firmed by 0.27% last week Centa-City Leading Index was up by 0.27% WoW: According to Centaline, the Centa-City Leading Index (CCL) was recorded at , up 0.27% WoW. The index tracking mass estates (CCL Mass) was recorded at , up 0.44% WoW. Centaline said the CCL recorded the highest level in 71 weeks. The new batch of Mont Vert Phase I had 153 units sold The new batch of 246 units at Mont Vert Phase I, a new project in Tai Po by Cheung Kong, was on sales last Saturday (August 2). As reported by Sing Tao, 153 units which represented around 62% of total 246 units were sold during the weekend. The project has sold 588 units in total up to now. In our view, given the lower-than-secondary-market pricing strategy for the Mont Vert Phase I, the sales response was well within our expectations. Le Riviera had 22 units sold in their first batch of sales Le Riviera, another new project in Shau Kei Wan, HK Island by Hip Shing Hong was also on sales during the weekend. As reported by Sing Tao, 22 units which represented around 73% of total 30 units were sold. The developer has launched the second batch of total 30 units of the project with similar price compared to the unit prices of the first batch. The second batch of units will be sold shortly. Key new launches in August 2014 Lohas Park III Hemera by Cheung Kong with 1,647 units Mount Vert Phase I by Cheung Kong with 1,071 units The Wings IIIA by Sun Hung Kai with 960 units Mayfair by the Sea by Sino Land in Tai Po with 546 units Key statistics data to be announced in August Aug 2014 (Tue) Mid-year population for Aug 2014 (Thu) Volume statistics of merchandise trade for June 2014 Tender closing date for government land 8 Aug 2014 (Fri) Tsuen Wan Town Lot No. 383, Tsuen Wan, New Territories 8 Aug 2014 (Fri) Sha Tin Town Lot No. 598, Ma On Shan, New Territories Top picks Cheung Kong Hldgs (0001.HK),HKD SHK Properties Ltd (0016.HK),HKD Henderson Land Dev. Co. (0012.HK),HKD48.50 Sino Land Co (0083.HK),HKD13.20 Source: Deutsche Bank Companies Featured Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, 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. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014. Cheung Kong Hldgs (0001.HK),HKD A 2014E 2015E P/E (x) EV/EBITDA (x) Price/book (x) SHK Properties Ltd (0016.HK),HKD A 2014E 2015E P/E (x) EV/EBITDA (x) Price/book (x) Henderson Land Dev. Co. (0012.HK),HKD A 2013E 2014E P/E (x) EV/EBITDA (x) Price/book (x) Sino Land Co (0083.HK),HKD A 2014E 2015E P/E (x) EV/EBITDA (x) Price/book (x) Source: Deutsche Bank

2 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Feb-14 Mar-14 Apr-14 May-14 4 August 2014 HK Weekly Weekly transaction volumes Weekly sales and price updates Figure 1: Weekly primary sales volume Units Figure 2: Weekly secondary volume (top-35 estates) Total weekend primary sales Source: Sing Tao, Deutsche Bank Source: Midland, Deutsche Bank Figure 3: Centa-City Leading Index (CCL) CCL Index CCL(LHS) Average Source: Centaline, Deutsche Bank Page 2

3 Jan-92 Jan-92 Jan-92 Jan-92 Jan-92 Jan-92 4 August 2014 HK Weekly Taking a look at valuations Figure 4: Developer Disc to NAV Figure 5: Landlord Disc to NAV 80% 60% Developer Disc to NAV -1SD Avg +1SD 40% Landlord Disc to NAV -1SD Avg +1SD 40% 20% 20% 0% 0% -20% -20% -40% -40% -60% -80% -60% -80% Figure 6: Developer P/E 35 Developer P/E -1SD Avg +1SD Figure 7: Landlord P/E 50 Investor P/E -1SD Avg +1SD Figure 8: Developer P/E Figure 9: Landlord P/B 2.5 Developer P/B -1SD Avg +1SD 1.4 Investor P/B -1SD Avg +1SD Page 3

4 4 August 2014 HK Weekly Figure 10: Hong Kong property valuations DB Trade Report Mkt Cap 12M Daily T/O 1 Aug Target Implied Est. NAV EPS PE(x) Company Ticker Rating Ccy Ccy USDm USDm Price Price Upside NAV Disc 13A 14F 15F 13A 14F 15F Covered Cheung Kong 1 HK HKD HKD 42, % % SHKP 16 HK HKD HKD 40, % % Wharf 4 HK HKD HKD 23, % % MTRC 66 HK HKD HKD 22, % % Henderson Land 12 HK HKD HKD 18, % % Hongkong Land HKL SP Sell USD USD 16, % % Hang Lung 101 HK HKD HKD 13, % % Link REIT 823 HK HKD HKD 12, % % New World Dev 17 HK Hold HKD HKD 10, % % Sino Land 83 HK HKD HKD 10, % % Kerry Properties 683 HK Hold HKD HKD 5, % % Hysan Dev 14 HK Sell HKD HKD 5, % % Great Eagle 41 HK Sell HKD HKD 2, % % Shun Tak 242 HK Hold HKD HKD 1, % % Langham Hospitality 1270 HK HKD HKD % % Investments Swire Properties 1972 HK NR HKD HKD 19, NA NA NA NA Wheelock 20 HK NR HKD HKD 10, NA NA NA NA Hopewell 54 HK NR HKD HKD 3, NA NA NA NA K. Wah Int'l 173 HK NR HKD HKD 1, NA NA NA NA Wing Tai Properties 369 HK NR HKD HKD NA NA NA NA Swire Properties 1972 HK NR HKD HKD 19, NA NA NA NA Overall average -33% Source: Deutsche Bank, Company, Bloomberg Finance LP Consensus estimates for companies NR Page 4

5 4 August 2014 HK Weekly Figure 11: Hong Kong property valuations (cont d) Company Covered EPS growth % BVPS PB(x) DPS Dividends yield % Net gearing % Ticker FY13 FY14F FY15F FY13 FY14F FY15F FY13 FY14F FY15F FY13 FY14F FY15F FY13 FY14 F FY15F FY13 FY14F FY15F Cheung Kong 1 HK 20 5 (0) SHKP 16 HK (4) (9) Wharf 4 HK MTRC 66 HK (14) Henderson Land 12 HK Hongkong Land HKL SP (18) (28) (0) Hang Lung 101 HK Link REIT 823 HK New World Dev 17 HK (21) (15) Sino Land 83 HK 24 (23) (5) Kerry Properties 683 HK 8 (0) Hysan Dev 14 HK Great Eagle 41 HK (8) (4) Shun Tak 242 HK (15) Langham Hospitality 1270 HK (12) Investments Swire Properties 1972 HK (15) Wheelock 20 HK Hopewell 54 HK (9) (4) K. Wah Int'l 173 HK (57) (28) Wing Tai Properties 369 HK (26) 73 (39) NA NA Swire Properties 1972 HK (15) Overall average (1) Source: Deutsche Bank, Company, Bloomberg Finance LP Consensus estimates for companies NR Page 5

6 4 August 2014 HK Weekly Appendix 1 Important Disclosures Additional information available upon request Disclosure checklist Company Ticker Recent price* Disclosure Cheung Kong Hldgs 0001.HK (HKD) 1 Aug 14 14,15,17 SHK Properties Ltd 0016.HK (HKD) 1 Aug 14 14,17 Henderson Land Dev. Co HK (HKD) 1 Aug 14 NA Sino Land Co 0083.HK (HKD) 1 Aug 14 NA *Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies Important Disclosures Required by U.S. Regulators Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See Important Disclosures Required by Non-US Regulators and Explanatory Notes. 14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year. 15. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-related services. Important Disclosures Required by Non-U.S. Regulators Please also refer to disclosures in the Important Disclosures Required by US Regulators and the Explanatory Notes. 17. Deutsche Bank and or/its affiliate(s) has a significant Non-Equity financial interest (this can include Bonds, Convertible Bonds, Credit Derivatives and Traded Loans) where the aggregate net exposure to the following issuer(s), or issuer(s) group, is more than 25m Euros. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Jason Ching Page 6

7 Security Price Security Price 4 August 2014 HK Weekly Historical recommendations and target price: Cheung Kong Hldgs (0001.HK) (as of 8/1/2014) Previous Recommendations Strong Market Perform Underperform Current Recommendations Hold Sell *New Recommendation Structure as of September 9, Aug 12 Nov 12 Feb 13 May 13 Aug 13 Date Nov 13 Feb 14 May /03/2013:, Target Price Change HKD /07/2014:, Target Price Change HKD /03/2014:, Target Price Change HKD Historical recommendations and target price: SHK Properties Ltd (0016.HK) (as of 8/1/2014) Previous Recommendations Strong Market Perform Underperform Current Recommendations Hold Sell *New Recommendation Structure as of September 9, Aug 12 Nov 12 Feb 13 May 13 Aug 13 Date Nov 13 Feb 14 May /09/2012:, Target Price Change HKD /09/2013:, Target Price Change HKD /03/2013:, Target Price Change HKD /02/2014:, Target Price Change HKD Page 7

8 Security Price Security Price 4 August 2014 HK Weekly Historical recommendations and target price: Henderson Land Dev. Co. (0012.HK) (as of 8/1/2014) Previous Recommendations Strong Market Perform Underperform Current Recommendations Hold Sell *New Recommendation Structure as of September 9, Aug 12 Nov 12 Feb 13 May 13 Aug 13 Date Nov 13 Feb 14 May /10/2012:, Target Price Change HKD /03/2014:, Target Price Change HKD57.36 Historical recommendations and target price: Sino Land Co (0083.HK) (as of 8/1/2014) Previous Recommendations Strong Market Perform Underperform Current Recommendations Hold Sell *New Recommendation Structure as of September 9, Aug 12 Nov 12 Feb 13 May 13 Aug 13 Date Nov 13 Feb 14 May /02/2013:, Target Price Change HKD /02/2014:, Target Price Change HKD16.00 Page 8

9 4 August 2014 HK Weekly Equity rating key Equity rating dispersion and banking relationships : Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ), we recommend that investors buy the stock. Sell: Based on a current 12-month view of total shareholder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a or Sell. Notes: 1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were: : Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12- month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period % 40 % 22 % 23 % 7 % 10 % Hold Sell Companies Covered Cos. w/ Banking Relationship Asia-Pacific Universe Page 9

10 4 August 2014 HK Weekly Regulatory Disclosures 1. Important Additional Conflict Disclosures Aside from within this report, important conflict disclosures can also be found at under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. 2. Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at 3. Country-Specific Disclosures Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively. Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) and its(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases where at least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in the preparation of this research report, the Brazil based analyst whose name appears first assumes primary responsibility for its content from a Brazilian regulatory perspective and for its compliance with CVM Instruction # 483. EU countries: Disclosures relating to our obligations under MiFiD can be found at Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc. Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures Association of Japan, Japan Investment Advisers Association. Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the name of the entity. Reports on Japanese listed companies not written by analysts of Deutsche Securities Inc. (DSI) are written by Deutsche Bank Group's analysts with the coverage companies specified by DSI. Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no ) is regulated by the Qatar Financial Centre Regulatory Authority. Deutsche Bank AG - QFC Branch may only undertake the financial services activities that fall within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower, West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Business Customers, as defined by the Qatar Financial Centre Regulatory Authority. Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation. Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no ) is regulated by the Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya District, P.O. Box , Faisaliah Tower - 17th Floor, Riyadh, Saudi Arabia. United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no ) is regulated by the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai International Financial Centre, The Gate Village, Building 5, PO Box , Dubai, U.A.E. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority. Page 10

David Folkerts-Landau Group Chief Economist Member of the Group Executive Committee Guy Ashton Global Chief Operating Officer Research Marcel Cassard Global Head FICC Research & Global Macro

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