A new era for an old legend；initiating with Buy

Deutsche Bank Markets Research Rating Buy Asia Hong Kong Property Property Company CK Property Date 3 June 2015 Initiation of Coverage A new era for an old legend; initiating with Buy Reuters Bloomberg Exchange Ticker 1113.HK 1113 HK HSI 1113 Forecasts And Ratios Year End Dec 31 2013A 2014A 2015E 2016E 2017E Sales (HKDm) – 47,987.0 59,534.5 69,721.5 81,343.7 Reported NPAT(HKDm) 0.0 47,905.0 16,065.9 17,684.1 19,292.6 DB EPS FD (HKD) – 3.80 4.16 4.58 5.00 DB EPS growth (%) – – 9.5 10.1 9.1 PER (x) – – 11.3 10.3 9.4 DPS (net) (HKD) – 0.00 1.58 1.83 2.00 Source: Deutsche Bank estimates, company data Initiate with Buy on an enhanced operating platform; Target price HK$88 ________________________________________________________________________________________________________________ Deutsche Bank AG/Hong Kong 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) 124/04/2015. Price at 29 May 2015 (HKD) 47.00 Price target - 12mth (HKD) 88.00 52-week range (HKD) 47.00 - 47.00 HANG SENG INDEX 27,597 Jason Ching, CFA Research Analyst (+852) 2203 6205 jason.ching@db.com Tony Tsang Research Analyst (+852) 2203 6256 tony.tsang@db.com Cedric Lai Research Associate (+852) 2203 6183 cedric.lai@db.com We initiate coverage of CK Property with a Buy rating and target price of HK$88. Following the reorganization, CK Property has emerged as the largest pure-play property company in HK. This brings an enhanced operational scale and diversity in terms of geography and asset types, which provides better flexibility to adjust within the sector depending on different points in the property cycles across different cities. At our target, the shares would trade at a 15% discount to NAV, in line with the historical average of CKH, and on 21x PER, comparable to investment property peers. We forecast a rising dividend payout to reflect the new asset mix equating to a yield over 4% for FY16. The largest pure-play property proxy in Hong Kong following the reorganization Since the reorganization, CK Property has become the property flagship of CKH Holdings. It is the largest pure-play property co in Hong Kong with total development landbank of 15.8m sqm (vs. 6.6m sqm in the former Cheung Kong Holdings), an investment property portfolio of 1.5m sqm GFA (0.74m sqm GFA) and 14,670 hotel rooms under management (13,399 rooms). It will also manage 21m sqm of GFA of properties in HK/China and is the sponsor of three listed REITs in HK. At this scale, CK Property has second-largest IP portfolio and the largest hotel portfolio among listed HK property companies. Key beneficiary of a strong primary residential market in Hong Kong With 4,489 units for sale (second-largest pipeline, just behind SHKP’s 4,555 units), CK Property is a key beneficiary of a strong primary market in HK. We continue to argue that developers have a comparative advantage over the secondary market because they can provide second mortgages to buyers constrained by HKMA policies on mortgage lending. The terms of these loans are attractive to buyers that cannot meet the downpayment requirement but have good debt-servicing ability. We also note a buyer preference for primary units. Target price at 15% discount to our NAV estimate of HK$103.5/share We base our target price on a 15% discount to our NAV estimate of HK$103.5/share. Our target discount is in line with the historical NAV discount of the former Cheung Kong Holdings prior to the reorganization, which we believe is appropriate as a reference. As a cross-check, our target price implies a 2015E PER of 21x, which we believe is reasonable given the higher contribution from investment properties/recurring income. Key risks: government policy, property sales momentum and interest rate trends. 3 June 2015 Property CK Property Page 2 Deutsche Bank AG/Hong Kong Model updated:31 May 2015 Running the numbers Asia Hong Kong Property CK Property Reuters: 1113.HK Bloomberg: 1113 HK Buy Price (29 May 15) HKD 47.00 Target Price HKD 88.00 52 Week range HKD 47.00 - 47.00 Market Cap (m) HKDm 181,401 USDm 23,393 Company Profile As a fully-integrated, multi-discipline property developer, the Group is one of the largest developers of residential, office, retail, industrial, and hotel property in Hong Kong. With its long history of property development expertise, the Group has built many of Hong K