Proven strong execution track record deserves re-rating; reiterating Buy

Deutsche Bank Markets Research Rating Buy Asia Hong Kong Property Company New World Dev Date 28 September 2015 Forecast Change Proven strong execution track record deserves re-rating; reiterating Buy Reuters Bloomberg Exchange Ticker 0017.HK 17 HK HKG 0017 ADR Ticker ISIN NDVLY US6492743058 Forecasts And Ratios Year End Jun 30 2014A 2015A 2016E 2017E 2018E Sales (HKDm) 56,501.1 55,245.0 60,757.1 62,037.0 52,843.5 EBITDA (HKDm) 17,297.6 26,705.4 13,170.4 13,107.2 12,889.7 Reported NPAT (HKDm) 9,725.4 19,112.0 7,324.2 7,456.0 7,586.3 DB EPS FD (HKD) 0.75 0.75 0.81 0.83 0.84 PER (x) 13.3 12.7 9.6 9.4 9.3 DPS (net) (HKD) 0.42 0.42 0.42 0.42 0.42 Yield (net) (%) 4.2 4.4 5.4 5.4 5.4 Source: Deutsche Bank estimates, company data Reiterating Buy on strong fundamentals and attractive valuation; TP HK$13 ________________________________________________________________________________________________________________ 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 Sep 2015 (HKD) 7.83 Price target - 12mth (HKD) 13.00 52-week range (HKD) 10.84 - 7.41 HANG SENG INDEX 21,186 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 13.80 to 13.00 ↓ -5.8% Sales (FYE) 51,810 to 60,757 ↑ 17.3% Op prof margin (FYE) 13.1 to 18.5 ↑ 41.3% Net profit (FYE) 7,459.5 to 7,324.2 ↓ -1.8% Source: Deutsche Bank Price/price relative 689111214159/133/149/143/15New World DevHANG SENG INDEX (Rebased) Performance (%) 1m 3m 12m Absolute 1.7 -25.1 -19.0 HANG SENG INDEX -1.0 -22.0 -10.9 Source: Deutsche Bank Under the strong management led by Executive Vice-Chairman/Joint General Manager Mr. Adrian Cheng, NWD has seen a marked improvement in execution capability, product quality and transparency. Specifically, NWD has accumulated a strong sales track record over the past years and now ranks among the top developers in the sales league table. We believe NWD is well positioned with ample saleable resources, a growing rental portfolio (particularly following the completion of New World Centre ahead) and potential acceleration in farm land conversion (diversified source of landbanking). Moreover, dividend yield is attractive at 5.4%. We reiterate Buy. Underlying profit +4% YoY to HK$6,770m, in line with expectation NWD reported FY15 consolidated revenue dropped 2% YoY to HK$55,245m, mainly dragged by a marked decline in property sales in China (-23% YoY). However, rental revenue was up 2% YoY to HK$2,402m (HK was flat, China saw 7% YoY growth). Headline profit saw a 97% YoY surge to HK$19,112m, boosted by the disposal gain of hotels as well as higher revaluation. Excluding one-offs and revaluation, FY15 underlying profit was up 4% YoY to HK$6,770m, in line with expectation. Meanwhile, net gearing had declined to 4.1% by mid-15 (versus 27.3% in mid-13). A final dividend of HK$0.30/share was declared in FY15, bringing the total dividend in 2015 to HK$0.42/share (flat YoY). Strong sales momentum expected to continue in FY16 on ample new launches According to Centaline, NWD ranked second in the sales league table in FY15, with a total sales value of HK$28bn (attributable HK$17.2bn). We believe this strong sales momentum is sustainable on the back of an ample project launch pipeline in FY16. In particular, eight new projects (total of 2,588 units) are scheduled to be launched in FY16, bringing the total number of projects on-sale to 20 (total of 3,103 units). These new projects are Skypark, Double Cove Grandview, The Parkhill, Mount Pavilia, Bohemian House, Fleur Pavilia, Double Cove Phase V and 55 Conduit Road. Target price based on 35% discount to our revised NAV estimate of HK$20/shr Our TP is based on a 35% discount to our revised NAV estimate of HK$20/share (HK$21.23). Our target discount is smaller than the historical average of 46%, which we believe is appropriate as it reflects the execution capability, good launch pipeline and prospects for further NAV growth. Key risks: economic slowdown, interest rate changes and government measures. 28 September 2015 Property New World Dev Page 2 Deutsche Bank AG/Hong Kong Model updated:27 September 2015 Running the numbers Asia Hong Kong Property New World Dev Reuters: 0017.HK Bloomberg: 17 HK Buy Price (25 Sep