SECTOR: Real Estate HSI: 22,821 PRICE: HK$25.65 EARNINGS (reported in HK$m)

Transcription

1 Recommendation: BUY TP: HK$33.54 (+31%) China Overseas Land & Investment (688.HK) 30 August 2016 SECTOR: Real Estate HSI: 22,821 PRICE: HK$25.65 EARNINGS (reported in HK$m) For the fiscal year ended 31 Dec 1H15 1H16 % change Turnover 61,585 74, % Operating Profit 23,294 28, % Net Profit 16,317 19, % Net Profit (Underlying) 13,627 15, % Underlying EPS (HK$) % Note: Differences may arise due to rounding errors Time-sensitive data and value were retrieved as at 29 August Source: Bloomberg, HKEx, Company data, Platinum estimates KEY DATA For the fiscal year ended 31 Dec E 2017E 2018E Issued Capital (m Shrs) 9,860.6 Turnover 130, , , , ,517 M arket Cap (HK$m) 252,924 Operating Profit 35,319 38,098 46,593 60,160 68,807 Avg. 6M Turnover (HK$m) Net Profit 27,200 33,312 35,971 46,490 53, Week High/Low (HK$) / Net Profit (Underlying) 21,563 25,867 35,971 46,490 53,143 Net Gearing (%) 6.62 Underlying EPS (HK$) Book Value per Share (HK$) % Change 25.7% 2.5% 22.1% 17.3% 13.4% Free Float (%) DPS (HK$) Major Shareholder(s) CSCEC (61.18%) Dividend yield (%) 2.1% 3.6% 2.8% 3.3% 3.8% INTERIM RESULTS (reported in HK$m) SECTION 1 Positive outlook on accretive M&A Shareholder approval has been obtained, though the Company is still awaiting approvals from Ministry of Finance and Ministry of Commerce, expected in August/September. Platinum Broking A distinct property developer that has two national forces joining hands. The acquisition of CITIC s property portfolio includes 77 major projects (developed into varying phases), located in 25 Chinese cities. Total GFA acquired is 31.6m SqM (attributable interest of 23.5m SqM ). The initial consideration is to be settled through the issuance of new shares to CITIC as well as an asset transfer to CITIC with no outright cash outflow involved. Including a HK$62.8b net debt assumed by COLI, the total consideration is HK$99.9b. This implies a unit cost of RMB3,548 per SqM, which also includes a portion of construction cost invested by CITIC already. The acquisition represents a premium of 17% over CITIC s book value but a substantial discount of 33% compared to CITIC s estimated GAV. Post transaction, CITIC with a state background will become the second largest shareholder of COLI, alongside CSCEC whose interest will be reduced from 61% to 55%. o The deal is NAV accretive despite the increase in issued share capital. We estimate that if COLI refinanced CITIC s debt at COLI s borrowing cost of 4% pa, it would result in a cost reduction of HK$2.6b. Extra sellable resources of RMB 574b from CITIC s assets are paving the way for COLI s stronger earnings in the years ahead. IMPORTANT DISCLOSURES ARE PROVIDED ON THE LAST PAGE OF THIS REPORT

2 Exhibit 1: Financial Summary Income Statement (HK$m) Balance Sheet (HK$m) Year ended 31 Dec E 2017E 2018E Year ended 31 Dec E 2017E 2018E Fixed Assets Property Sales 126, , , , ,344 Investment properties 54,921 64,057 66,557 71,057 76,057 Property Rental 1,643 1,915 2,316 2,592 3,069 Property, plant & equip. 1,525 1,517 7,378 11,437 15,159 Others 2,839 2,465 2,662 2,875 3,105 Associates/JV investments 18,848 16,982 31,889 39,789 47,865 Total Turnover 130, , , , ,517 Other fixed assets 3,213 3,131 7,151 8,083 9,142 Cost of sales (91,648) (97,819) (128,057) (162,169) (178,339) Sub-total 78,506 85, , , ,223 Gross Profit 39,310 42,312 51,783 66,793 76,178 Current Assets Selling & admin exp (3,990) (4,213) (5,190) (6,633) (7,371) Inventory & PUD 231, , , , ,714 Operating profit 35,319 38,098 46,593 60,160 68,807 Trade & other receivables 8,450 11,203 17,486 22,350 24,834 Other income 8,288 10,322 1,662 1,566 1,673 Other current assets 31,367 21,500 41,485 44,364 46,844 Share of associates 1, ,442 5,551 5,662 Bank & cash 59, , , , ,328 Finance costs (545) (574) (729) (896) (1,230) Sub-total 331, , , , ,720 Profit before tax 44,324 48,823 52,968 66,380 74,911 TOTAL ASSETS 410, , , , ,943 Tax (16,573) (14,772) (16,148) (18,913) (20,644) Current Liabilitiess Minorities (551) (739) (850) (977) (1,124) Bank loan 22,542 7,269 40,000 40,000 40,000 Net profit 27,200 33,312 35,971 46,490 53,143 Presale deposits 55,950 47,495 69,945 89,398 99,337 Revaluation gains (5,637) (7,445) Trade and other payables 42,818 34,644 52,459 67,049 86,920 Underlying Net profit 21,563 25,867 35,971 46,490 53,143 Other current liabilities 67,774 24,285 33,531 38,677 44,340 Sub-total 189, , , , ,598 EPS (HK$) NET CURRENT ASSETS 142, , , , ,123 Underlying EPS (HK$) Long-term Liabilities DPS (HK$) Bank & other borrowings 74, , , , ,000 Payout ratio (%) 19% 31% 20% 20% 20% Other non current liabilities 7,707 8,744 10,539 11,398 12,377 Dividend yield (%) 2.1% 3.6% 2.8% 3.3% 3.8% Sub-total 82, , , , ,377 Share Capital Contract sales 140, ,633 95, , ,503 Shareholders' equity 133, , , , ,963 Minority interests 4,886 5,055 5,905 6,882 8,006 Booked Revenue to 3-yr Sub-total 138, , , , ,968 rolling contract sales 0.32x 0.30x 0.42x 0.43x 0.40x TOTAL LIABILITIES & EQUITY 410, , , , ,943 BVPS (HK$) Total Capital Employed 221, , , , ,346 3 Year Rolling CAPEX for land bank 44,437 45,775 60,000 45,000 35,000 Net debt 37,510 13,011 75,625 75,279 60,672 Enterprise value 295, , , , ,602 EV/EBITDA Ratio Analysis Cash Flow Statement (HK$m) Year ended 31 Dec E 2017E 2018E Year ended 31 Dec E 2017E 2018E Growth (%) Profit before tax 44,324 48,823 52,968 66,380 74,911 Turnover growth 59% 7% 28% 27% 11% D&A Net profit growth 18% 22% 8% 29% 14% Other non-cash adjustment (7,754) (10,222) (6,375) (6,220) (6,104) Core profit growth 26% 16% 30% 29% 14% Chg in working capital (40,943) (345) (81,984) 8,826 5,347 EPS growth 18% 8% 1% 17% 13% Cash from operation (4,248) 38,344 (35,246) 69,282 74,612 Core EPS growth 26% 2% 22% 17% 13% Capex (6,243) (1,812) (5,317) (8,280) (8,602) Margins (%) Other investing act. 1,775 2,595 (7,803) (784) (741) Property sales margin 28% 28% 28% 29% 30% Cash from investing (4,468) 782 (13,120) (9,064) (9,344) Rental income margin 82% 82% 82% 82% 82% Free cash flow (8,716) 39,126 (48,366) 60,218 65,268 Gross Margin 30% 30% 29% 29% 30% Issue of shares 2 42, Operating margin 27% 27% 26% 26% 27% Change in bank loans 22,371 19,052 65,493 8,051 14,000 Core profit margin 16% 18% 20% 20% 21% Other financing act. (6,430) (54,734) (10,371) (13,222) (14,442) Returns (%) Cash from financing 15,942 7,119 55,122 (5,171) (442) ROA (underlying) 7% 7% 7% 8% 8% ROE (underlying) 20% 17% 17% 19% 19% Net chg in cash & equiv. 7,226 46,245 6,756 55,047 64,827 Leverage ST debt/gross debt (%) 23% 6% 22% 21% 20% Op cash per shr (HK$) (0.52) 4.16 (3.57) Net debt to equity (%) 27.1% 6.6% 33.4% 28.5% 19.7% Op cash payout ratio (%) -106% 22% -20% 13% 14% Interest cover (x) FCF yield (%) -3% 15% -19% 24% 26% Op. cash flow int cover (x) Net Debt to EBITDA (x) Current ratio (x) Cash ratio (x) Asset Turnover (x) on total assets on contract sales Account receivable (days) DUPONT ANALYSIS (%) Net margin 21% 24% 20% 20% 21% Asset turnover ratio 37% 33% 36% 37% 36% Asset / Equity (x) ROA 8% 8% 7% 8% 8% ROE 22% 20% 17% 19% 19% Platinum Broking 2

3 SECTION 2 COMPANY BACKGROUND Leading PRC state-owned property developer. China Overseas Holdings Limited ( COHL ) is the parent of China Overseas Land & Investment ( COLI ), rendering the latter an indirect subsidiary of China State Construction Engineering Corporation ( CSCEC ), the ultimate holding company of COHL and the largest construction SOE in China. COLI, established in 1979, started out its business in HK and expanded to China one year after listing in HK in 1992, as a result of the injection of construction and contracting business from parent, COHL. It is engaged in property development and sales, property investment and other operations such as property management, with operations spanning across HK, Macau and Mainland China. It was included as a constituent stock in Hang Seng Index in 2007 by virtue of ranking among the top five residential developers in China. This industry leader is well known for its product quality and brand value. Its outstanding track record of execution, above-industry margins, low gearing and favourable borrowing cost made it the crown jewel that stands out from the peers. COLI has exposure to 32 mainland China cities with a total land bank of 41.44m SqM (attributable interest 38.5m SqM) as of Dec-15. Together with its 37.98% owned subsidiary, China Overseas Grand Oceans (COGO), which had a total land bank of 10.93m SqM (attributable interest 10.24m SqM), COLI acquired exposure to mass residential developments in emerging third-tier cities. Exhibit 2: Lank bank reserves of COLI at a glance, Dec-2015 Source: Company data Platinum Broking 3

4 SECTION 3 BUSINESS OUTLOOK A detail list of acquired projects and their related attributes is available in appendix. Key information on the acquisition of CITIC s property assets On 29 th June 2016, the Company disclosed details of its proposed acquisition of CITIC s property assets. The acquisition includes 77 major projects (some of which to be developed in varying number of phases), located in 25 Chinese cities. Total GFA acquired is 31.6m SqM (attributable interest 23.5m SqM). The initial consideration is to be settled partially by issue of new shares (worth HK$29.7b) to CITIC, whose shareholding will be 10% of the enlarged share capital and subject to a 2-year lock up period; as well as an asset transfer worth HK$7.4b to CITIC. Including a HK$62.8b net debt to be assumed by COLI, the total consideration is HK$99.9b. This implies a unit cost of RMB3,548 per SqM. The acquisition represents a premium of 17% over CITIC s book value. This is fair as average land prices were up by more than 50% in Tier 1 and 2 cities over the past 3 years. Post transaction, CITIC with a state background will become the second largest shareholder of COLI, alongside CSCEC whose interest will be reduced from 61% to 55%. The deal is now pending approval from the Ministry of Finance and expected to be case closed in August/September this year. Exhibit 3: Consideration paid for the transaction (HK$m) 85,126 CITIC's book value Source: Company data +17.3% over book cost Shareholders Equity: 18,007 CITIC Shareholder Loans Acquired: 4,343 CITIC Repayment Loans assumed: 39,901 External net debt assumed: 22,875 99,857 Acquisition consideration: 37,080 Consideration paid Shareholders Equity + Shareholder Loans Total net debt assumed: 62,776 Exhibit 4: Shareholding structure Shareholders Pre transaction Post transaction Shares (m) % of total Shares (m) % of total COHL 5,524 56% 5,524 50% Silver Lot 509 5% 509 5% CSCEC subtotal * 6,033 61% 6,033 55% The CITIC Sellers 0 0.0% 1, % The Vanguard % % BlackRock % % JPM Investment % % FIL Investment Mgmt % % APG Asset Mgmt % % JPM Whitefriars (UK) % % Genesis Investment % % JPM Asset Mgmt (UK) % % Norges Bank % % Other Institutionals 2,203 22% 2,203 20% Other Individuals % 984 9% Public Shareholders 3,827 39% 3,827 35% Total 9, % 10, % Source: Company data, Thomson Reuters Exhibit 5: Cost of consideration in per SqM terms Settlement of total consideration Initial consideration (HK$m) 37,080 Net debt to be assumed (HK$m) 62,777 Total consideation (HK$m) 99,857 Total attr GFA acquired (m sqm) Avg land cost (RMB/sqm) 3,548 Platinum Broking 4

5 Sizable land bank acquried in one-go at a fair cost. Attributable GFA acquired was 23.5 SqM, almost half of COLI s 2015 land reserves. o The amount alone is close to sustaining COLI s two more years of development needs, assuming an annual completion of 12m SqM. The average paid cost is RMB3,548 per SqM. o In comparison, the average unit land cost paid by COLI on its direct land acquisition were RMB4,783 /3,646 /4,450 /5,846 from FY12 through to FY15 respectively. o This deal puts COLI at an advantage as the secured growth now relives it from facing fierce competition in public auctions. o Another positive is that the paid cost includes a portion of construction cost that CITIC had already invested in the completed projects. o Therefore, the actual average land cost per SqM is way below the mark of RMB3,548 per SqM. Asset quality is optimal on all counts. 60% of the acquired portfolio s attributable GFA is located in COLI s ten major cities whose past sales consistently contribute a great amount to COLI s turnover. As a result, a lot of land resources have been consumed in the past. The acquisition greatly replenishes land bank in one-go at a reasonable cost. GFA in the major ten cities increased significantly by 143% to 24m SqM. COLI already has strong management and execution teams on the ground in those cities, acquired through years of establishment. Their continued strong execution on these upcoming resources could notably strengthen COLI s market share in these key markets. Exhibit 6: Distribution of CITIC s land bank by city (attributable GFA) 40.29% 13.84% 5.02% 2.28% 3.94% 1.72% 4.67% 3.01% 7.24% 4.84% 13.15% COLI's 10 major cities Beijing Shanghai Guangzhou Shenzhen Foshan Suzhou Qingdao Dalian Tianjin Chengdu other cities Platinum Broking 5

6 Beijing Guangzhou Shanghai Shenzhen Changsha Chengdu Chongqing Dalian Foshan Qingdao Suzhou Tianjin Zhuhai Changchun Dongguan Haikou Huangshan Huizhou Jiujiang Sanya Shantou Wanning Yangzhou Yantai Zhongshan Exhibit 7: Lank bank reserves (gross GFA) 80 COLI's land bank (Gross GFA) % % Pre Acquisition Pro forma Exhibit 8: Lank bank reserves (attributable GFA) 70 COLI's land bank (attr GFA) % % Pre Acquisition Pro forma COLI's 10 major cities Other cities COLI's 10 major cities Other cities Source: Company data Source: Company data In terms of attributable GFA, the acquired portfolio s exposure to Tier 1/2/3 cities is 13%/53%/34% respectively. The pre-transaction distribution of COLI s land bank is 12%/60%/28%. On a pro-forma basis, the mix undergoes a slight change to 12%/58%/30%. On a restated gross asset value (RGAV) terms and post-transaction, the proportion of the value of sellable resources in Tier-1 and Tier-3 cities is expected to increase (Tier-1: 36.0% to 37.3%, Tier-3: 12.2% to 15.4%). While concerns over its larger exposure to Tier-3 cities seem legitimate at face value, we note that some Tier 3 cities (i.e. Huizhou, Foshan and Dongguan) that are located in the periphery of Tier 1 cities (i.e. Guangzhou and Shenzhen) with a driving distance of 1-2 hours will enjoy spill-over demand, thanks to the improved connectivity of high speed railway. If managed carefully, there are still good contract sales to be booked, generating steady streams of cash flow. In addition, COLI s lower city tier arm, COGO is not unfamiliar with developments in Tier 3 cities. COLI may consider dispose those projects to COGO if it sees fit. Exhibit 9: CITIC s projects - Breakdown of gross and attributable. GFA ('000 sqm) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Tier 1: Gross: 7m sqm (22%) Attri.: 3m sqm (13%) Tier 2: 2: Gross: 15.7m sqm (50%) Attri.: 12.6m sqm (53%) Gross GFA Tier 3: Gross: 9m sqm (28%) Attri.: 8m sqm (34%) Attri. GFA TOTAL: Gross: 31.6m sqm Attri.: 23.5m sqm Exhibit 10: CITIC s projects - RGAV exposure RGAV HK$342m HK$491m 100% 90% 12.2% 15.4% 80% 70% 60% 51.9% 47.3% 50% 40% 30% 20% 36.0% 37.3% 10% 0% Pre transaction Pro forma Tier 1 Tier 2 Tier 3 Platinum Broking 6

7 An NAV accretive deal that allows room for strong earnings. Our estimated GAV of CITIC projects is HK$149b (in comparison to DTZ s independently appraised value of HK$158b). In other words, as COLI is only paying HK$99.9b as the consideration price, this represents a substantial 33% discount. o We think one of the propelling factors for CITIC to sell their projects at a discount is that by surrendering the absolute control they can immediately monetise the value of a large chunk of undeveloped land which would otherwise have taken them >10 years. o They can also participate in future returns by retaining 10% shareholding interests in COLI. Based on our pro-forma analysis, we estimate that the CITIC deal is 11.5% NAV accretive upon full contribution from CITIC projects. This will hinge on COLI management s capability to quickly realise the full value of CITIC s projects and the expected synergies. The acquired CITIC s property portfolio will create an extra RMB574b worth of sellable resources for COLI, on top of COLI s RMB748b and COGO s RMB105m sellable resources. The management during 1H16 results announcement revealed a revised FY16 sales target of HK$210b, 16.7% up from its mark of HK$180b announced earlier in March We expect an achievement of annual contract sales target of HK$220b, HK$240b and HK$278b from FY16E through to FY18E. Exhibit 11: Pro-forma analysis of 2016E NAV (Compare against DTZ) Platinum DTZ (*) Calculation of End-16E NAV HK$b HK$b 1. Pre Transaction -Development properties Investment properties GAV for COLI pre transaction Less: Net debt COLI NAV pre transaction Original no. of shares 9.86 Original NAV per share (HK$) CITIC as a standalone entity -Development properties Investment properties Hotel GAV for CITIC projects Less: Decrease in NAV (asset transfer) Less: Net debt added from CITIC NAV for CITIC deal Combined entity Pro-forma GAV Less: Decrease in NAV (asset transfer) Less: Net debt Pro-forma NAV Pro-forma no. of shares Pro-forma NAV per share (HK$) Accretion to NAV per share 11.5% Exhibit 12: Impact on book value and RNAV Total assets RNAV +36% +24% Pre Acquisition Pro forma Note *: As appraised by DTZ as at 30 April 2016 set out in the Circular regarding the Major Acquisition of Property from CITIC dated 30 June 2016 Platinum Broking 7

8 Maxmise value through margin expasnion. Potential dilutive effects from CITIC s lower-margin inventory on COLI s margin should be controllable as only 11% of the value of CITIC s land bank comes in the form of completed inventory v.s. undeveloped land (72%). Value of CITIC s undeveloped projects can be improved and maximised as there is plenty of scope for margin expansion based on COLI s track record of effective cost control and brand name. o COLI can command higher prices. o On the cost front, construction and finance cost could also be reduced. o Given the high borrowing cost borne by CITIC (7.90% in FY15) compared to COLI s average cost (4.23% in FY15), there are meaningful savings in finance costs if COLI could refinance CITIC debts in the onshore market at a more competitive rate. o COLI in Nov 2015 issued a RMB7b and RMB1b domestic bond at a coupon rate of 3.4% and 3.85% for the maturity of 6-year and 7-year respectively. o As most of CITIC s current debt are denominated in RMB, COLI s debt structure would undergo a major change with onshore debts accounting for over 50% for the first time. Management is confident in achieving a gross margin level of 30%. Exhibit 13: Breakdown of the value of CITIC s land bank Exhibit 14: Reduction in finance costs by 41% (HK$m) 6,216 2,555 3,662 Average funding cost 7.11% CITIC's expected interest expense Expected savings Average funding cost 4.19% COLI's realised interest expense on CITIC debt Exhibit 15: Profile of Debt Structure Exhibit 16: Gross Profit Margin Comparison 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% E RMB US$ HK$ GBP EUR 50% 35% 30% 25% 20% 15% 10% 5% 0% 33% 30% 30% 29% 29% 30% 29% 28% 26% 21% 18% 14% CITIC COLI COLI (CITIC inclu.) E 2017E 2018E Platinum Broking 8

9 Optimise leverage to a manageable level in a bid to spur shareholders return. COLI had a net gearing as low as 6.8% end-fy15. Immediately after CITIC acquisition, it would assume HK$62.8b net debt from the CITIC Group. Net gearing accordingly increased from 6.8% to 36.7%, in line with the managements target of ~30%. It is also seen as a low gearing level compared to the market average of 54%. Furthermore, as the acquisition is settled by shares issue and asset transfer, there is no outright cash inflow involved and yet it is NAV accretive. As a result, COLI s cash level remains very abundant, consistently above HK$100b, which if used is sufficient to buy up another company of CITIC size, adding two more years of land bank. Nevertheless, acquisition growth is bound to slow down in the next two years in order to maintain net gearing below management s acceptable level. Exhibit 17: Net debt of CITIC Target Group (HK$m) 87,475 20,355 67,119 CITIC Shareholders Loans acquired: 4,343 External net debt assumed: 22,875 CITIC Repayment Loans assumed 39, Exhibit 18: Impact on net gearing 60% 49.00% 50% 40% 38% 36.70% 30% 20% 10% 6.80% 0% Pre Acquisition Pro forma Source: Company data Total Debt Total Cash Net Debt Total debt/total cap Source: Company data Net gearing Open up M&A as a growth driver, with paced organic growth. Chairman acknowledged that COLI would turn their focus on M&A instead of direct purchase from the land market, where the transacted land prices are too high to preserve COLI s margin level. In fact, acquisition has become a key source to secure land bank. Over the past 3 years, COLI s total GFA of land purchased from public auctions equals to only 27m SqM whilst land originating from acquisitions now stands at 43m SqM (11m SqM from parent s asset injection in 2015 and 32m SqM from CITIC). These two transactions signalled that COLI is unique in integrating with national players that have less execution power over profit margins and less favourable financing cost. Having two strong national forces (CSCEC and CITIC) joining hands and with their major stakes in COLI, this comparative advantage will put COLI very different from its larger peers. Having formed a view that the Company has a track record of successful M&As, we believe COLI will continue to pursue good targets after they are given enough time to integrate with CITIC. As soon as their net gearing gradually comes down, with it taking place as early as FY18E, this would pave the way for more M&A growth. Platinum Broking 9

10 SECTION 4 VALUATION TP: HK$ % BUY. Trading at 7x/6x core EPS, 1.2x/1.1x book value with a yield of 2.8%/3.3% on FY16E and FY17E estimates respectively, COLI s valuation is still attractive with 1 SD from historical average. Our pro-forma FY16E NAV estimates factored in CITIC s property portfolio using a DCF valuation methodology at a WACC of 9.14%. We applied a 10% discount to our pro-forma FY16E NAV estimate of HK$37.27/shr, in comparison to 10 year average of 21% discount. This is appropriate as COLI is undergoing a major transformation that historical numbers have become less relevant. This implied a target P/E of 9.2x, P/B of 1.5x and a yield of 2.2% on FY16 estimates. Key downside risks. Slowing organic growth on a large base effect. Difficulties in sourcing good M&A targets in the future. Integration risks and weaker than expected margins. Exposure to FX debt and mismanagement of gearing. Exhibit 19: COLI s FY16E NAV and target price End-16E Per share Calculation of pro-forma NAV (HK$b) % of NAV (HK$) -Development properties % Investment properties % Hotel % 0.51 GAV for combined entity % Less: Net debt (19%) Less: Decrease in NAV (asset consideration) (2%) NAV for combined entity % Pro-forma no. of shares (m) Target discount -10% Target price (HK$) Current share price (HK$) Risk-free rate 2.83% Risk Premium 8.17% Beta % Cost of equity 11.82% Pre-tax cost of debt 3.85% Effective tax rate 25.00% Debt/Equity 30.00% WACC 9.14% Platinum Broking 10

11 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Volume (m shares) Share price (HK$) Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Exhibit 20: COLI s historical underlying P/E, P/B, discount to NAV and dividend yield Discount to NAV Average +1SD 120% -1SD +2SD -2SD 100% 80% 60% 40% 20% 0% -20% -40% -60% -80% Price/Book Ratio Average +1SD -1SD +2SD -2SD Underlying P/E Average +1SD -1SD +2SD -2SD (%) 3.5 Div yield Average +1sd -1sd +2sd -2sd Source: Bloomberg, Platinum estimates Exhibit 21: COLI s 2-year share price performance China Overseas Land & Invest (688.HK) Last price (Aug 29,16) = HK$25.65 SMA(50) = SMA(100) = SMA(200) = Volume (Aug 29,16) = 14.5m 6M avg. = 501.7m Source: Company data, Bloomberg Platinum Broking 11

12 Exhibit 22: Peer group valuation comparison Name Ticker Mkt cap EV Last price (HK$) 6M Vol. (m shrs) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E P/E (x) P/B (x) EV/EBITDA (x) Yield (%) ROA (%) (HK$b) (HK$b) Large Cap 1 COLI (*) 688 HK Wanda Comm(#) 3699 HK Vanke 2202 HK (0.78) (1.20) 4 CR Land 1109 HK Country Garden 2007 HK Evergrande 3333 HK Longfor 960 HK Shimao 813 HK Simple avg Mkt cap wtd avg Mid Cap 1 R&F 2777 HK Sino-Ocean 3377 HK Jinmao 817 HK Soho China 410 HK Agile 3383 HK Shui On 272 HK Sunac 1918 HK Kwg Property 1813 HK China South City 1668 HK Yuexiu Property 123 HK Greentown China 3900 HK Poly Property 119 HK COGO 81 HK Simple avg Mkt cap wtd avg Overall avg Overall mkt wtd avg Source: Company data, Bloomberg, Platinum estimates (*) Note #: Dalian Wanda Commercial Properties is due to be delisted from 4pm on 20 September ROE (%) Net debt/ebitda (%) Platinum Broking 12

13 SECTION 5 Appendix Exhibit 23: Key metrics used in valuations for development projects from the CITIC property portfolio (sqm) (RMB/sqm) (RMB/sqm) (RMBm) (RMBm) (RMBm) Development properties City Attri Year of Attri GFA interest completion Cost Price End-16E GAV Contract sales Revenue booked Completed 2016E 2017E 2018E 2016E 2017E 2018E 1 Beijing CITIC New Town Development Project Beijing 80% 14, ,492 38, Changchun CITIC City Changchun 60% 29, ,554 7, CITIC New Town City Plaza (Ph. 1 &2) Changsha 100% 168, ,587 10, Triumph Riverside Changsha 100% 68, ,644 7, CITIC City West Bank Chengdu 100% 121, ,992 7, CITIC Harbour City Dalian 80% 173, ,637 20,497 1, CITIC Fuchun Resort Dongguan 40% 10, ,576 12, CITIC Yuyuan Dongguan 40% 2, ,359 12, Forest Lake Lanxi Valley Dongguan 100% ,322 12, Dongtai Garden Dongguan 100% 1, ,087 11, CITIC Xiangzhang Villa Guangzhou 55% 18, ,115 9, CITIC Golden Coast Ph. 1-2 Shantou 100% 57, ,144 13, CITIC Mangrove Bay Garden City Shenzhen 100% 128, ,671 60,000 2,955 3,853 3, ,853 3, Suzhou Forest Lake Project Suzhou 100% 74, ,310 20, CITIC Juntai Tianjin 70% 4, ,249 22, Yantai Yinzhi Residence Yantai 100% ,661 7, Under Construction 1 Beijing CITIC Villa Beijing 100% 209, ,075 70,000 4,806 4,406 1,513 1,543 2,611 2,611 2,238 2 Beijing CITIC City Beijing 100% 944, ,995 80,000 24, ,397 11, ,106 12,318 3 CITIC New Town Cultural Plaza (Phase III) Changsha 100% 85, ,635 6, CITIC Triumph Town (West District) Changsha 100% 95, ,178 6, CITIC Triumph Town (East District) Changsha 100% 219, ,954 7, CITIC City East Bank Chengdu 100% 1,103, ,373 7,750 1,477 1,284 2,178 2, ,680 2,868 7 Ecological Health Town Plot 2 & 3 Chengdu 100% 1,833, ,000 8,000 3, , ,040 8 CITIC Wanjin City Chengdu 20% 197, ,965 7, CITIC Harbour City (Dalian Harbour Project) Dalian 80% 681, ,145 22,000 4, ,825 4, ,350 4, CITIC Harbour City (Taigu Project) Dalian 80% 283, ,153 22,000 1, ,193 1, ,205 1, Huangjiang Plot Dongguan 33% 79, ,058 22, , ,051 1, CITIC Jinshan Bay Foshan 100% 318, ,494 8, , CITIC Mountainside Lake Foshan 50% 781, ,160 13,296 3,126 2,117 1,421 4,107 1,724 1,730 3, Guangzhou Asian Games City Guangzhou 20% 907, ,030 13,600 3,157 1,811 1,513 2, ,369 2, CITIC Triumph Town Huizhou 100% 565, ,749 11,799 1, CITIC Harbour City Huizhou 100% 838, ,910 8, , , Lushan Xihai Jiujiang 100% 2,033, ,796 12,500 6, , , Qingdao CITIC City Qingdao 92% 555, ,355 14,667 2, Forest Lake Qingdao 100% 1,149, ,095 13,056 4, , , Shanghai Zhujiege Shanghai 100% 232, ,706 30,000 2,372 2,167 1,161 1, ,333 1, Shanghai Jiading Nanxiang Chenxiang Rd Shanghai 30% 30, ,801 30, New Westgate Garden Shanghai 100% 210, ,989 80,014 5, , , CITIC Binjiang Xian Shantou 45% 95, ,989 7, , CITIC Huating Shantou 51% 165, ,606 7, Haojiang Longhu Sands Project Remaining Shantou 100% 1,202, ,797 6,000 1, ,472 1, , Shenzhen Baohe Project Shenzhen 80% 275, ,414 40,000 3, , ,325 3, Suzhou Huanxiu Lake Garden Suzhou 33% 266, ,479 20,000 1,706 3,293 1,679 1, ,972 1, Suzhou Mudu 2013G102 Suzhou 40% 62, ,940 27, CITIC Park City Tianjin 100% 2,565, ,526 10,222 5, , , CITIC City Plaza Tianjin 51% 524, ,113 36,411 3,637 2,701 1,593 1, ,871 1, Shenzou Peninsula (Jinxin Part) Wanning 80% 32, ,725 26, Shenzou Peninsula (Renxin Part) Wanning 100% 412, ,990 11, Shenzou Peninsula (Renhe Part) Wanning 80% 556, ,544 17,732 3, ,638 1, , Shenzou Peninsula (Ruian Part) Wanning 80% 289, ,123 14, Yangzhou Jiajing Yangzhou 70% 190, ,678 10, Yangzhou Jinyuan Yangzhou 100% 105, ,384 11, Jiangdu Plot Yangzhou 100% 215, ,090 10, Yantai CITIC Plaza Yantai 100% 66, ,734 8, CITIC Southern Airlines International Plaza Zhuhai 51% 39, ,614 21, CITIC Mangrove Bay City Zhuhai 100% 425, ,129 39,500 5, ,569 4, ,562 4,567 TOTAL 21,747, ,539 37,112 49,608 76,518 22,491 59,663 72,317 Platinum Broking 13

14 Exhibit 24: Key metrics used in valuations for investment and hotel projects from the CITIC property portfolio Investment properties City Attri interest (sqm) (sqm) (%) (RMBm) Attr Year of End-16E Attri GFA lettable Cap rate completion GAV area Completed 2016E 2017E 2018E 2016E 2017E 2018E 1 Chongqing CITIC Tower Chongqing 100% 16,789 11, % CITIC Sunshine Aoyuan Dongguan 100% % CITIC La Defense Dongguan 100% 1, % Dongguan CITIC Commerical Plaza Dongguan 100% 4,754 3, % CITIC Triumph Residence Dongguan 49% % CITIC Guanlan Triumph Town Dongguan 30% 2,042 1, % CITIC Triumph Riverside Zhongshan 50% % CITIC West Bank Garden Zhongshan 100% 1,500 1, % Shenzou Peninsula (United Part) Wanning 80% 80,000 56,000 exist 7.0% 1, Under Construction 1 CITIC Southern Airlines Tower Sanya 51% 26,161 18, % Shanghai Zhujiege Shanghai 100% 14,111 9, % CITIC Cyberport Changsha 100% 446, , % 5, Hongzhou Center Haikou 83.16% 97,924 68, % 1, CITIC City Plaza Huizhou 100% 229, , % 1, Shanghai Jiading Nanxiang Chenxiang Road Shanghai 30% 49,072 34, % 1, sub-total 969,782 11, Attri interest (RMB/sqm/ month) (sqm) (sqm) (RMBm) 2016E 2017E 2018E 2016E 2017E 2018E Attr End-16E Room rate (RMB per available lettable Year of Gross rental (RMBm) GAV room) Attri GFA area completion Cap rate Hotel City Completed 1 Beijing Guotai Hotel Beijing 100% 11,287 7, % 876 1,000 1,000 1, Huizhou Tangquan Huizhou 100% 184, , % Shantou CITIC Nanbing Grand Hotel Shantou 100% 24,848 17, % Under Construction 1 Shenzou Peninsula (Jinxin Part) Wanning 80% 63,480 44, % Huangshan Taiping Lake Zhongxin Bay Huangshan 55% 222, , % 1, Suzhou Taihu Project Suzhou 100% 305, , % 1,251 1,000 1,000 1, sub-total 811,121 4, Spot rent (RMBm) Gross rental Total 1,780,914 16, Platinum Broking 14

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