Well positioned for bargain hunts ahead with strong financials; Buy

Deutsche Bank Markets Research Rating Buy Asia Hong Kong Property Property Company CK Property Date 26 August 2015 Forecast Change Well positioned for bargain hunts ahead with strong financials; Buy Reuters Bloomberg Exchange Ticker 1113.HK 1113 HK HSI 1113 Forecasts And Ratios Year End Dec 31 2014A 2015E 2016E 2017E Sales (HKDm) 47,987.0 57,440.6 66,283.1 77,606.4 EBITDA(HKDm) 15,160.0 19,961.8 22,553.9 25,896.6 Reported NPAT(HKDm) 47,276.0 14,777.4 16,622.1 18,408.4 DB EPS FD (HKD) 3.64 3.83 4.31 4.77 PER (x) – 13.6 12.1 10.9 DPS (net) (HKD) 0.00 1.49 1.72 1.91 Yield (net) (%) – 2.9 3.3 3.7 Source: Deutsche Bank estimates, company data Reiterating Buy on strong financial position/flexibility to make new acquisitions ________________________________________________________________________________________________________________ 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 25 Aug 2015 (HKD) 52.20 Price target - 12mth (HKD) 75.00 52-week range (HKD) 74.10 - 50.85 HANG SENG INDEX 21,252 Jason Ching, CFA Research Analyst (+852) 2203 6205 jason.ching@db.com Tony Tsang Research Analyst (+852) 2203 6256 tony.tsang@db.com Key changes Price target 88.00 to 75.00 ↓ -14.8% Sales (FYE) 59,534 to 57,441 ↓ -3.5% Op prof margin(FYE) 36.5 to 33.6 ↓ -7.8% Net profit(FYE) 16,065.9 to 14,777.4 ↓ -8.0% Source: Deutsche Bank Price/price relative 48525660646872766/15CK PropertyHANG SENG INDEX (Rebased) Performance (%) 1m 3m 12m Absolute -18.4 – – HANG SENG INDEX -15.4 -24.1 -15.6 Source: Deutsche Bank In our view, CKP’s strong financial position (9% net gearing and cash balance of HK$46bn) enables it to be flexible in timing the market and consequently leads to consistent above-industry-average profitability. While CKP’s current landbank in HK is relatively small, we have little doubt on management’s judgment on timing, and we do not see a risk of an earnings gap ahead. More importantly, we believe timing for acquisitions may emerge soon in light of recent market volatilities. Meanwhile, we expect the likely index inclusion into the FTSE EPRA/NAREIT to be a key near-term catalyst. Reiterating Buy. 1H15 underlying profit +9% YoY to HK$5,536mn; in-line with expectation CK Property reported 1H15 revenue +51% YoY to HK$17,740mn, driven by a surge in property sales. Meanwhile, rental revenue rose 46% YoY to HK$1,379mn, boosted by inclusion of the property portfolio previously held by Hutch. Net profit was up by 22% YoY to HK$6,890mn in 1H15 on the back of a HK$1,366mn disposal gain from Chongqing Metropolitan Plaza and revaluation gains of HK$1,299mn. Excluding revaluation gains, underlying profit was up 9% YoY to HK$5,536mn. An interim dividend of HK$0.35/shr was declared. Key beneficiary of a strong primary market; primary’s dominance to continue According to Centaline, CK Property was ranked second in the sales league table in Hong Kong, with total sales of HK$11.2bn in 1H15, marginally behind SHKP’s HK$11.4bn. In 1H15, primary volume hit a 10-year high by making up 25% of total transactions. We expect the share of the primary market to grow even further as developers’ competiveness over the secondary market increases with the ability to provide flexible payment options. We expect CK Property to be a key beneficiary of a strong primary market with the second largest launch pipeline among HK developers. Target price at 25% discount to our revised NAV estimate of HK$100/share Our target price is based on a 25% discount (formerly 15%) to our NAV estimate of HK$100/share (HK$103.5/share). Our revised target discount is below the historical NAV discount of the former CK Holdings, which we believe is appropriate in light of the market uncertainties and volatilities. As a cross check, our target price implies a 2015 PER of 20x, which we believe is reasonable given the higher contribution from investment properties/recurring income. Risks: government policy, sales momentum, and interest rate trend. 26 August 2015 Property CK Property Page 2 Deutsche Bank AG/Hong Kong Model updated:25 August 2015 Running the numbers Asia Hong Kong Property CK Property Reuters: 1113.HK Bloomberg: 1113 HK Buy Price (25 Aug 15) HKD 52.20 Target Price HKD 75.00 52 Week range HKD 50.85 - 74.10 Market Cap (m) HKDm 201,475 USDm 25,985 Company Profile As a fully-integrated, multi-discipline property developer, the