Morning Express. Focus of the Day SHKP (16.HK) 15 September FY17 review; Flatfish earnings ahead

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1 Focus of the Day Polling for the 2017 All-China Research survey has begun. This year, Institutional Investor partners with Caixin Media. Ballot invitation and reminders have been sent from Please click on the URL provided in the to proceed for voting. BOCOM international strives to provide value-added research and corporate access, and your vote for the BOCOM International sales and research teams is gratefully appreciated. In case you have not received the ballot, please apply at the following address: Indices Close 1d % Ytd % HSI 27, H Shares 11, SH A 3, SH B SZ A 2, SZ B 1, DJIA 22, S&P 500 2, Nasdaq 6, FTSE 7, CAC 5, DAX 12, SHKP (16.HK) FY17 review; Flatfish earnings ahead Alfred LAU, CFA alfred.lau@bocomgroup.com Last Closing: HK$135.3 Upside: -19.1% Target Price: HK$ NEUTRAL BUY FY17 core profit rose 7% to HK$25.9bn, or HK$24.9bn if excluding the disposal gain. Overall results were solid with steady rental income growth (+4% YoY) and property profit holding up at HK$10bn, helped by the ramp-up at new malls, e.g. YOHO Mall, and the booking of high-margin inventories, e.g. Cullinan (booked in 1HFY17). Nevertheless, we believe the guidance is still cautious, with FY18E Hong Kong sales target at only HK$36bn (+9% YoY), and the company has purposely delayed the launch of the remaining phases at Park YOHO, which we believe is possibly to prepare for the potential earnings gap in FY19 resulting from HKFRS15. The land cost at its major farmland conversion project in Sai Kung (Shap Sze Heung) may also be higher than the HK$2.5k/sqft (GFA) reported by the press, if including the significant infrastructure capex. And earnings contribution may also be 9-10 years away. Therefore, we believe the consensus has been overly optimistic on the company s growth prospects. In addition, management only maintained its 45% payout ratio, making current dividend yield at only 3%, which we believe is no longer attractive. Maintain Sell and target price of HK$109.4, based on a 30% target NAV discount. Indicators Close 3m % Ytd % Brent Gold 1, Silver Copper 6, JPY GBP EURO bps change 3 m 6 m HIBOR US 10 yield HSI Technical HSI 27, d MA 27, d MA 24, d RSI 55 Short Sell (HK$ m) 9,268

2 Property Sector HK/China property weekly Alfred LAU, CFA Hong Kong Property Sector China Property Sector UP MP OP UP MP OP Hong Kong property Fast track to HK land market. Country Garden bought 60% share of a Ma On Shan residential site with ASP up 55% to HK$10,500/sqft. SHKP will offer 120% mortgage at its upcoming launch of Wings at the Sea. We believe sales momentum will remain weak unless developers cut price like in Parc City. Therefore, we continue to prefer developers who have already secured profit, e.g. NWD (17.HK) and Kerry (683.HK). China property Expect faster REI in 2018 driven by land purchase. Real estate investment (REI) in August grew at the same pace as in July (8M17: +7.9% YoY). We expect REI growth to slow down in the near term before rebounding in 2018 as more developers are expected to speed up land replenishment in 4Q17. Sales continued to moderate in 8M17. We prefer developers with high lock-in, ample sellable resources in 2H17 and potential improvement in operation, e.g. KWG (1813.HK) and Logan (3380.HK).

3 Market Review Hong Kong stocks extended losing streak to a second day. The Hang Seng Index finished Thursday down 116 points, or 0.4%, at 27,777. Consumer staples advanced. Want Want (151.HK) rose 2.8% as the best blue-chip performer. Tingyi (322.HK) surged 8.5%. Uni-President (220.HK) added 3.7%. Mengniu (2319.HK) and Hengan (1044.HK) both gained 2.3%. Mainland developers extended gains. Country Garden (2007.HK) rose 5.3%. Sunac (1918.HK) rose 2.8%. KWG (1813.HK) added 2.6%. Shimao (813.HK) rose 0.9%. Smartphone component names diverged. Sunny Optical (2382.HK) rose 3.3%. AAC Tech (2018.HK) gained 0.5%. Cowell (1415.HK) slumped 5.7%. Auto names mostly fell. Brilliance China (1114.HK) lost 2.7%. Geely (175.HK) dropped 1.1%. Great Wall Motor (2333.HK) dropped 1.1%. Dongfeng Motor (489.HK) added 0.4%. US stock indexes mostly fell. The S&P 500 lost 2.75 points, or 0.1%, to 2, The Nasdaq Composite Index fell 31.1 points, or 0.5%, to 6, The DJIA rose points, or 0.2%, to finish at 22, European stocks posted modest gains. Stoxx Europe 600 added 0.1% to close at Hang Seng Index (1 year) 29,000 28,000 27,000 26,000 25,000 24,000 23,000 22,000 21,000 20,000 Source: Company data, Bloomberg HS China Enterprise Index (1 year) 12,000 11,000 10,000 9,000 8,000 Source: Company data, Bloomberg News Reaction NBS: China s short-term economic fundamentals remain unchanged. Liu Aihua, spokesperson of National Bureau of Statistics (NBS), said during a press conference that while certain items of August s economic data did show some slowdown, there was no significant change in the overall economic fundamentals in August, as production remained stable and economic restructuring continued; quality and efficiency enhancement continued; and the trend of "progress and improvement amid stability" remained unchanged. MoC: To continue to expand RMB settlement in cross-border trade and investment. Gaofeng, spokesperson of Ministry of Commerce (MOC), said on September 14 that the ministry is working with relevant departments to further expand the use of RMB for settlement in cross-border trade and investment, and enhance the ability of companies to withstand exchange risks. He emphasized that exchange rate movement is a double-edged sword to foreign trade development. Neither currency depreciation nor appreciation is a decisive factor of import/export. MoC: Outbound investment dropped 41.8% in Jan-Aug, showing irrational outbound investment has been effectively curbed. Gaofeng, spokesperson of MOC, said on September 14 that in the first eight months this year, Chinese investors made new non-financial direct investments in 4,789 offshore countries in 152 countries and regions, with aggregate investment of USD68.72bn, down 41.8% YoY, showing irrational outbound investment has been effectively curbed. Shanghai A-shares (1 year) 3,600 3,400 3,200 3,000 2,800 Source: Company data, Bloomberg Shenzhen A-shares (1 year) 2,300 2,100 1,900 1,700 Source: Company data, Bloomberg PBoC conducted RMB100bn of reverse repos on September 14, injecting RMB100bn. PBoC announced that, in order to offset the impact of tax payment and government bond issuance and maintain stable liquidity in the banking system, it has conducted RMB60bn of 7-day reverse repos, RMB30bn of 14-day reverse repos and RMB10bn of 28-day

4 reverse repos on September 14, at unchanged rates of 2.45%, 2.6% and 2.75%, respectively, resulting in net injection of RMB100bn on the same day. Analysis showed China s housing inventory fell to a three-year low. Latest statistics of NBS showed that as of the end of August, China s unsold commodity housing amounted to 624m sqm, down 11.44m sqm compared with July. Zhang Dawei, analyst with Centaline Property, said housing inventory has dropped to a three-year low. Based on the property sales volume of 120m sqm in August, the inventory absorption cycle is down to only 5.1 months.

5 Economic releases for this week - USA Date Time Event Survey Prior 13-Sep MBA mortgage applications (%) Sep PPI ex food & energy (MoM%) Sep Initial jobless claims (k) Sep CPI (MoM%) Sep CPI ex food & energy (MoM%) Sep Industrial Production(MoM%) Economic releases for this week - China Date Time Event Survey Prior 10-Sep Money Supply - M2(YoY%) Sep New Yuan Loans (RMB bn) Sep Retail sales (YoY%) Sep Industrial production(yoy%) BOCOM Research Latest Reports Date Report Analyst 14 Sep Internet Sector - Copyrights of digital music platforms in place, enabling platforms with high traffic flows to monetize in various ways 14 Sep Renewable Energy Sector - Highlights: China s PV power generation subsidies may be cancelled in its entirety by ; the pace of wind power investment in Gansu will significantly slow down during the period of the 13th Five-Year Plan ; and the upward trend of polysilicon prices ceased this week Internet Innovation Center: Gu Xinyu (Connie), CPA, Sun Mengqi (Brandy), Zhou Zhe (Gigi), Shan Ying Louis Sun 13 Sep Insurance Sector - Focus on impact of Document 134 on premium income in the short term Li Wan, CFA, FRM, Shanshan Li, CFA, Yufan Zhang 13 Sep Hengan (1044.HK) - Expect challenges in offline sales recovery due to structural issues Summer Wang, CFA 13 Sep Technology Sector - Outlook remains favorable for the camera module sector Chris Yim, Xinhe Deng 13 Sep Healthcare Sector - Healthcare sector weekly Grace Zhao, Zhao Li 13 Sep Huaneng Renewable (958.HK) - Stable performance of wind power business in August with an acceleration in power generation growth Louis Sun 12 Sep Transportation and Infrastructure Sector - Weekly transportation and infrastructure news wrap Geoffrey Cheng, CFA, Fay Zhou, Luya You 12 Sep China Infrastructure Sector - Takeaways from the Belt and Road Summit Fay Zhou, Geoffrey Cheng, CFA 12 Sep Automobile Sector - August PV sales volume increased 4.1% YoY; good figure in off season Angus Chan, Steve Liu 12 Sep Sunny Optical (2382.HK) - Strong outperformance in August; Vehicle lens to drive further upside Chris Yim 11 Sep Non-performing Asset Management - 1H17 business operation review of Huarong and Cinda Shanshan Li, CFA, Li Wan, CFA, FRM, Hannah Han 11 Sep Liquidity - Liquidity margin improved in early Sept, European Central Bank may finalize the QE adjustment scheme by Oct- 2017/09/08 Karen Tan 11 Sep Cement sector - Cement prices continued to surge, up 0.3% MoM Angus Chan, Steve Liu 11 Sep Internet Sector - Internet Weekly (4-8 September) Internet Innovation Center: Gu Xinyu (Connie), CPA, Sun Mengqi (Brandy), Zhou Zhe (Gigi), Shan Ying 8 Sep Property Sector - HK/China property weekly Carmen Wong, Alfred Lau, CFA, FRM, Philip Tse, CFA, FRM 8 Sep Sinotrans Limited (598.HK) - Takeaways from tele-conference on acquisition of China Merchants Logistics Fay Zhou, Geoffrey Cheng, CFA 8 Sep China Property Sector - Re-rating on better earnings outlook; growth sustainability is the key Philip Tse, CFA,FRM, Alfred Lau, CFA, FRM, Carmen Wong 8 Sep China Infrastructure Sector - 1H17 results review: Robust earnings momentum maintained on the back of strong contract backlog 8 Sep Longyuan Power (916.HK) - Curtailment improved and wind resources increased in August 2017 Louis Sun Source: Company data, BOCOM International Fay Zhou, Geoffrey Cheng, CFA

6 Hang Seng Index Constituents Company BBG Share Mkt 5 d Ytd week PE Yield P/B name code price cap chg chg Hi Lo 2016A 2017E 2018E 2017E 2017E (HK$) (HK$ m) (%) (%) (HK$) (HK$) (X) (X) (X) (%) (X) CKH HOLDINGS 1 HK , HANG LUNG PPT 101 HK , CKI HOLDINGS 1038 HK , HENGAN INTL 1044 HK , CHINA SHENHUA-H 1088 HK , HANG SENG BANK 11 HK , CHINA RES LAND 1109 HK , CHEUNG KONG PROP 1113 HK , HENDERSON LAND D 12 HK , AIA 1299 HK , KUNLUN ENERGY 135 HK , ICBC-H 1398 HK ,385, CHINA MERCHANTS 144 HK , WANT WANT CHINA 151 HK , SHK PPT 16 HK , NEW WORLD DEV 17 HK , GEELY AUTOMOBILE 175 HK , SWIRE PACIFIC-A 19 HK , SANDS CHINA LTD 1928 HK , CLP HOLDINGS 2 HK , AAC TECHNOLOGIES 2018 HK , BANK EAST ASIA 23 HK , PING AN 2318 HK ,156, MENGNIU DAIRY 2319 HK , N/A BOC HONG KONG HO 2388 HK , CHINA LIFE-H 2628 HK , CITIC 267 HK , GALAXY ENTERTAIN 27 HK , WH GROUP LTD 288 HK , CATHAY PAC AIR 293 HK , N/A N/A HONG KG CHINA GS 3 HK , BANKCOMM-H 3328 HK , SINOPEC CORP-H 386 HK , HKEX 388 HK , BANK OF CHINA-H 3988 HK ,367, WHARF HLDG 4 HK , HSBC HOLDINGS PL 5 HK ,520, POWER ASSETS 6 HK , MTR CORP 66 HK , CHINA OVERSEAS 688 HK , TENCENT 700 HK ,201, CHINA UNICOM 762 HK , LINK REIT 823 HK , SINO LAND 83 HK , CHINA RES POWER 836 HK , PETROCHINA-H 857 HK ,653, CNOOC 883 HK , CCB-H 939 HK ,676, CHINA MOBILE 941 HK ,655, LENOVO GROUP 992 HK , HANG SENG INDEX 27,777 17,845, ,128 21,

7 China Ent Index Constituents Company BBG Share Mkt 5 d Ytd week PE Yield P/B name code price cap chg chg Hi Lo 2016A 2017E 2018E 2017E 2017E (HK$) (HK$ m) (%) (%) (HK$) (HK$) (X) (X) (X) (%) (X) CHINA SHENHUA-H 1088 HK , SINOPHARM-H 1099 HK , CHINA RAIL CN-H 1186 HK , BYD CO LTD-H 1211 HK , ABC-H 1288 HK ,436, NEW CHINA LIFE-H 1336 HK , PICC GROUP-H 1339 HK , CHINA CINDA-H 1359 HK , ICBC-H 1398 HK ,385, POSTAL SAVINGS-H 1658 HK , CRRC CORP LTD -H 1766 HK , GF SECURITIES-H 1776 HK , CHINA COM CONS-H 1800 HK , CGN POWER-H 1816 HK , MINSHENG BANK-H 1988 HK , CHINA VANKE-H 2202 HK , PING AN 2318 HK ,156, PICC P&C-H 2328 HK , GREAT WALL MOT-H 2333 HK , CHINA PACIFIC-H 2601 HK , CHINA LIFE-H 2628 HK , BANKCOMM-H 3328 HK , SINOPEC CORP-H 386 HK , ZHUZHOU CRRC T-H 3898 HK , CHINA RAIL GR-H 390 HK , CM BANK-H 3968 HK , BANK OF CHINA-H 3988 HK ,367, DONGFENG MOTOR-H 489 HK , CITIC SEC-H 6030 HK , HAITONG SECURI-H 6837 HK , CGS-H 6881 HK , HUATAI SECURIT-H 6886 HK , CHINA TELECOM-H 728 HK , AIR CHINA LTD-H 753 HK , PETROCHINA-H 857 HK ,653, HUANENG POWER-H 902 HK , CONCH CEMENT-H 914 HK , CHINA LONGYUAN-H 916 HK , CCB-H 939 HK ,676, CITIC BANK-H 998 HK , HANG SENG CHINA ENT INDX 11,101 5,075, , ,

8 BOCOM International Unit 1701, 17/F, Low Block, Grand Millennium Plaza, 181 Queen s Road Central, Hong Kong Main: Fax: Rating System Analyst Stock Ratings: Buy: The stock's total return is expected to exceed that of the corresponding industry over the next 12 months. Neutral: The stock's total return is expected to be in line with that of the corresponding industry over the next 12 months. Sell: The stock's total return is expected to be below that of the corresponding industry over the next 12 months. Not-Rated: The analyst does not have conviction regarding the outlook of the stock's total return relative to that of the corresponding industry over the next 12 months. Trading Buy: The stock's absolute return is expected to be very attractive in the near term. This rating can be different from the rating with a view over the next 12 months. Analyst Industry Views: Outperform: The analyst expects the industry coverage universe to be attractive relative to the relevant broad market benchmark over the next 12 months. Market perform: The analyst expects the industry coverage universe to be in line with the relevant broad market benchmark over the next 12 months. Underperform: The analyst expects the industry coverage universe to be unattractive relative to the relevant broad market benchmark over the next 12 months. Broad market benchmark for Hong Kong is the Hang Seng Composite Index, for China A-shares is the MSCI China A Index, for US-listed Chinese companies is S&P US Listed China 50 (USD) Index. Trading Sell: The stock's absolute return is expected to be very unattractive in the near term. This rating can be different from the rating with a view over the next 12 months. Research Team Head of Deputy Head of Hao HONG, CFA (852) hao.hong Geoffrey CHENG, CFA (852) geoffrey.cheng Macro-Strategy Internet Hao HONG, CFA (852) hao.hong Yuan MA, PhD (86) yuan.ma Karen TAN (852) karen.tan Connie GU, CPA (86) connie.gu Grace HUA, CFA (852) Grace.hua Mengqi SUN (86) mengqi.sun Zhe ZHOU (86) zhe.zhou Shan Ying (86) ying.shan Banks/ Non-Bank Financials Property Shanshan LI, CFA (86) lishanshan Alfred LAU, CFA, FRM (852) alfred.lau Li WAN, CFA, FRM (86) wanli Philip TSE, CFA, FRM (852) philip.tse Hannah HAN (852) hannah.han Carmen WONG (852) carmen.wong Jennifer ZHANG (852) yufan.zhang Consumer Renewable Energy Summer WANG, CFA (852) summer.wang Louis SUN (86) louis.sun Environmental Services Technology Wallace CHENG (852) wallace.cheng Chris YIM (852) christopher.yim Gaming & Leisure Transportation & Industrials Alfred LAU, CFA, FRM (852) alfred.lau Geoffrey CHENG, CFA (852) geoffrey.cheng Fay ZHOU (852) fay.zhou Healthcare Automobile & Defense Grace ZHAO (86) grace.zhao Angus CHAN (86) angus.chan

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