Nomura Hong Kong Property 120213

8/3/2019 Nomura Hong Kong Property 120213

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Hong Kong propertyPROPERTY

EQUITY RESEARCH

Weekly: 13 Feb 2012 (Vol. 5)

Spring arriving early?Secondary volumes continue topick up

February 13, 2012

This editions highlights:The secondary market is showing more signs of life. Flat viewing numbersrose 25% w-w and Midland's 35 housing estates volume index is up 146%to 138 transactions. Home prices also increased 0.60% w-w. While some

of this is just down to a seasonal pick-up post Chinese New Year, giventhe solid fundamentals of the housing market, we believe there is scope forthis perception of a pick-up to become a reality.

Physical market: Home prices rose 0.60% w-w. This has almostreturned the YTD home price change to flat, still down 0.45% YTD.Secondary volumes showed strong growth up from 56 to 138transactions, much higher than the 16-week average of 74 units and the52-week average of 115.

Best and worst: HK property stocks rose +1.7% w-w, outperformingthe HSI (+0.1% w-w) but underperforming their Chinese peers (+5.4%w-w). Best: Greentown China (+27.4% w-w); Worst: Henderson Land(-2.4% w-w).

FY11-13F consensus earnings: Developers (0.1%/-0.1%/0.3% w-w),landlords (-0.1%/0.0%/0.1% w-w) and REIT (0.5%/-0.6%/-1.2% w-w).

Top five news items1. Government dropping size restriction on new land sales

2. Five pricing options for new HOS sales

3. HK to face 14,000 labour shortage by 2018

4. Pay rise still intact but being scaled back a little

5. Kerry wins a residential site in Tuen Mun for HKD2,739mn

Fig. 1: Key property metrics/Weekly share price performance

Source: Company data, Centaline, Midland, Bloomberg, Nomura research, Note: Prices as of 10 February 2012

Research analysts

Hong Kong Property

Paul Louie - NIHK

[email protected]+852 2252 6189

Weekly share price performance:Key property metrics Last value w-w (%) Best Five HKD w-w (%)CCL Index 95.04 0.60 Greentown China 4.46 27.4

MIDL 35 Volumes 138 146.4 KWG Property 3.89 14.13m Hibor 0.40% 0.0 Beijing Capital Land 2.00 9.9HS Index 20,784 0.1 Shimao Property 9.57 9.1

HS Prop Index 26,270 0.6 HK Land 5.56 8.8

HK Property Reporting Calendar Worst Five HKD w-w (%)Company Date Period-end SHKP 109.70 0.1Champion REIT (2778 HK) 20-Feb FY11 Cheung Kong 104.80 0.0

Great Eagle (41 HK) 27-Feb FY11 Renhe Commercial 0.92 (1.1)SHKP (16 HK) 28-Feb FY11 Sino Land 12.56 (1.9)

Hong Kong Land (HKL SP) 1-Mar FY11 Henderson Land 42.50 (2.4)Hysan (14 HK) 8-Mar FY11

Swire Pacific (19 HK) 15-Mar FY11Cheung Kong (1 HK) 29-Mar FY11

See Appendix A-1 for analystcertification, importantisclosures and the status of

non-US analysts.


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Nomura | Hong Kong property February 13, 2012

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Physical market review

HK housing: home prices +0.60% w-w and -0.45% in YTD

Home prices rebounded by +0.60% w-w last week. This helped to narrow the YTD

decline to only -0.45%. Compared with 2011s intra-year peak, the CCL index is down

5.64%. Across the territories, Hong Kong Island was the only region showing a mild fall

in home price (-0.15% w-w). Kowloon experienced the largest rally of +2.06% w-w,

followed by New Territories East (+0.83% w-w) and West (+0.16% w-w).

Fig. 2: Home prices: Up 0.60% w-w

Source: Centa-City Leading Index

Fig. 3: Interbank lending rate: Stay flat

Source: Bloomberg

HIBOR flat but banks showing signs of re-engaging

There was almost no change in Hong Kongs 3-month interbank rate at 40bps but with 3-

month Libor down 2bps from 0.53% to 0.51%, this has reduced the Hibor-Libor spread to11 bps.

While there were almost no change in HK interbank rates, there is more anecdotal

evidence that the HK banks are starting to re-engage in their mortgage lending activities.

According to the Hong Kong Economic Times, HSBC and BOC have started to offer

mortgages at P-2.7% (effective interest rate at 2.3%) in order to attract mortgage

business. It further cited that post the Lunar New Year, some major banks have further

eased their mortgage approval process with select clients enjoying up to P-2.85%

(effective interest rate 2.15%) for mortgage loan up to HKD 2mn or above. Cash rebates

have also increased from 0.5-0.8% to the current 1%. Market participants believe the

mortgage business will be more competitive among banks when the developers launch

the major new projects. (Source: Hong Kong Economic Times, February 9, 2012)

Fig. 4: Mortgage policy changed by major banks after Lunar New year

Source: HKET

Meanwhile, Centaline Property in conjunction with Hang Seng Bank is introducing a

mortgage pre-approval service with LTV up to 90%. This service is effective from

February 10, 2012 to April 30, 2012. (Source: Hong Kong Economic Times, February 10,

2012)

50

60

70

80

90

100

110

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

5/FebWoW

(%)

YTD

(%)

Overall 0.6 -0.5

HKI -0.1 2.6

Kowloon 2.1 -1.1

NT East 0.8 -1.4

NT West 0.2 -0.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan/07

Apr/07

Jul/07

Oct/07

Jan/08

Apr/08

Jul/08

Oct/08

Jan/09

Apr/09

Jul/09

Oct/09

Jan/10

Apr/10

Jul/10

Oct/10

Jan/11

Apr/11

Jul/11

Oct/11

Jan/12

3M HIBOR (%) 3M LIBOR (%)

Before Lunar New Year Afte r Lunar New Year

Effective interest rate Minimum 2.3% for major banks Minimum 2.15% for major banks

Cash rebate 0.5-0.8% 1% (majority of banks)

Timing of approval 5 - 7 days 1 to 2 days

Estimated price conservative aggressive


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Volume: Primary market: Developers readying new launches;secondary volumes shows strong signs of recovery

With increased interest in the secondary market, developers are readying new launches

to try to tap into the potential demand. Over the past weekend, as developers continue to

sell mostly leftover units, overall activity level was largely flat, up 3% w-w to 35

transactions. Shun Tak/SHKP sold another 5 units of Chatham Gate this past weekend,

bringing its cumulative sales to 160 units (48% of overall project). Elsewhere, Cheung

Kong cleared another 15 units at Festival City III while NWD sold 4 units at The

Masterpiece in TST.

Key new projects to watch in the coming weeks include Wheelocks Lexington Hill in

Western District (104 units), Sino Lands Baker Residences in Hunghom (68 units),

Hendersons La Verte in Sheung Shui (16 units), SHKPs Park Island Phase 6 in Ma

Wan (65 units) and Tuen Mun Station (1,100 units) and Cheung Kongs Tsuen Wan

West (1,720 units) and TKO Area 85 projects (1,777 units).

Fig. 5: Primary weekend transactions

Source: Various Chinese press, Nomura research

Fig. 6: Secondary weekly transactions

Source: Midland Holdings, Nomura research

The secondary market is continuing to show strong signs of a recovery. Midland's 35

housing estates volume index rose 146% w-w to 138 transactions. This is higher than

the 16-week average of 74 units, the 52-week average of 115 units and also 2011s

average weekly transaction levels of 136. With estate agents reporting a further 25%

increase in weekend flat viewing numbers and a faster commitment by potential home

buyers, this suggests that the recent pick-up in secondary volume should have more

room to run.

Key dates to watch

Fig. 7: Data release dates

Source: Bloomberg, Nomura Research

#s W-W Y-Y YTD

Primary Weekend

Transactions (11-12 Feb)

35 3% 52% -61%

0

200

400

600

800

1,000

1,200

1,400

1,600

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Weekend Primary TransactionsMA-16 Week

MA-52 Week

#s W-W Y-Y YTD

Secondary Transactions

(30 Jan - 5 Feb)

138 146% 70% -43%

0

100

200

300

400

500

600

D

ec-06

M

ar-07

Jun-07

S

ep-07

D

ec-07

M

ar-08

Jun-08

S

ep-08

D

ec-08

M

ar-09

Jun-09

S

ep-09

D

ec-09

M

ar-10

Jun-10

S

ep-10

D

ec-10

M

ar-11

Jun-11

S

ep-11

D

ec-11

Secondary TransactionsMA-16 Week

MA-52 Week

February March April

Feb 20 Champion REIT FY11 results Mar 01 Hongkong Land FY11 results Apr 19 Unemployment rate (Mar)

Feb 20 January 2012 CPI Mar 01 Retail sales (Jan) Apr 23 March 2012 CPI

Feb 21 Unemployment rate (Jan) Mar 08 Hysan FY11 results

Feb 22 GDP (4Q) Mar 15 Sw ire Pacif ic FY11 results

Feb 27 Great Eagle FY11 results Mar 19 Unemployment rate (Feb)

Feb 28 SHKP 1HFY12 results Mar 22 February 2012 CPI

Mar 29 Cheung Kong FY11 results

Mar 29 Retail sales (Feb)


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News and views: Government droppingsize restriction on new land sales; fivepricing options for new HOS salesKey News1. Government dropping size restriction on new land sales

2. Five pricing options for new HOS sales

3. HK to face labour shortage of 14,000 by 2018

4. Pay rise still intact but being scaled back a little

5. Kerry won a residential site in Tuen Mun for HKD2,739mn

6. Housing Society launch old folks homes

7. Estate agents' application numbers down 50% y-y

8. Beijings office rent surged more than 75% a year

Government dropping size restriction on new land sales

On February 8, HK's Secretary for Development commented that for new land sales, theGovernment would prefer to continue to implement unit restrictions and forgo size

restrictions. The Secretary for Development commented that the construction of the new

Home Ownership Scheme (HOS) together with new supply along the West Rail and URA

projects have already helped to increase the number of small and medium-sized units.

So rather than imposing both size and unit restrictions, it is now more appropriate to just

impose unit restrictions in order to ensure that developers would provide at least a

certain level of supply. (Source: Hong Kong Economic Times, Development Bureau

press release, February 8&9, 2012)

Five pricing options for new HOS sales

The Housing Authority is considering five pricing options for the sale of the new HOSflats. Under the new HOS sales scheme, as the premium serves as a loan to the

homebuyers, fixed at the time of purchase", homebuyers only have to repay the premium

(i.e. loan) when the flat is sold and are able to pocket the difference. In terms of how to

handle the loan, the Housing Authority is considering the following five options:

(1) Interest-free loan.

(2) Loan with floating interest rate below the average best lending rate of the banks.

(3) Same as (2) but with a additional 1.5% " risk-adjusted factor.

(4) Loan with interest rate fixed at the time of purchase.

(5) Fixed interest rate loan at 2%.

(Source: South China Morning Post, February 7, 2012)

HK to face labour shortage of 14,000 by 2018

According to The Labour & Welfare Bureau, HK will face a labour shortage of 14,000

staff by 2018. It projected that HK's labour requirement will reach 3.596m in 2018 but

with HK's 300,000 baby boomers continuing to retire, HK's labour force will only be at

3.582mn then. This marks the first time that Labour & Welfare Bureau's study has

projected a labour shortage since the study began in 1988. The 14,000 jobs will have to

be filled by either foreign or mainland graduates or immigrants. By 2018, the four pillar

industries in Hong Kong are projected to increase. Tourism should see the strongest

demand for staff with an average growth rate of 2.9% y-y to 247,400, while financial

services firms are expected to grow 2.5% p.a. to 253,100. The study believes that the

staff demand would be focused on highly educated staff and predicts that there will be an


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excess of 8,500 low-education or low-skilled staff. (Source: Hong Kong Economic Times,

South China Morning Post, February 10, 2012)

Fig. 8: HK's labour force projection across four industries

Source: HKET

In related news, hiring intentions continue to be positive for the retail industry. While

financial services firms remain cautious, sales, marketing and retail companies are

continuing to increase headcounts with a 10% pay rise set for new hires. Links

Recruitment expects a mild growth of 0-5% for existing staff and a 5-10% increase for

new hires. On the other hand, Manpower Group pointed out those hiring remains

relatively quiet with job vacancies down 20% q-q. (Source: Hong Kong Economic Times,

February 8, 2012)

Pay rise still intact but being scaled back a little

The uncertain economic outlook has resulted in employers scaling back their earlier payincrease intentions. The Hong Kong Institute of Human Resource Managements

(HKIHRM) survey found that 95% of the firms still forecast a base pay increase of 4.7%;

this was down from 5.0% from its November 2011 survey. Among the different sectors,

non-government organisations are projecting the highest pay increases at 7.1%. This is

followed by construction and shipping/terminals at 5.7% and 5.5%. (Source: Hong Kong

Economic Times, Hong Kong Institute of Human Resource Management, February 8&9,

2012)

Fig. 9: Overall average base pay adjustment and forecast

Source: HKIHRM

Fig. 10: Base Pay Adjustment Forecast (Jan April 2012)

Source: HKIHRM

Kerry wins residential site in Tuen Mun for HKD2,739mn

Kerry Properties has beaten six other bidders for a 939,600sf (GFA) residential site in

Tuen Mun. The HK$2,739mn winning bid for the So Kwun Wat site translates to an AV of

HKD2,915psf, some 11% below market expectation. Surveyors estimate a break-even

price of HK$6,386psf for the project. As this was a unit-restricted site, Kerry is expected

to develop not less than 1,100 residential units, and the building height of the site has

been limited to 85 metres. Kerry considered the price of the land reasonable and

expected the total project cost around HKD6bn. (Source: Hong Kong Economic Times,

South China Morning Post, Kerry press release, February 10, 2012)

Industry 2018 2018 vs. 2010 pa. chg (%)

Tourism 247,400 +49,900 +2.9

Financial Industry 253,100 +46,200 +2.5

Professional Services 347,400 +58,700 +2.3

Trading and Logistics 781,700 +21,100 +0.3

Year

Base pay

adjustment

forecastedfor the year

(%)

Base pay

adjustmentfor the

year (%)

2012

4.7 (Jan 2012),

5.0 (Nov 2011) N/A

2011 +3.3 +4.2

2010 +2.0 +1.9

2009 +3.5 +0.6

2008 +4.0 +3.9

2007 +3.4 +2.8

2006 +2.4 +2.4

2005 +1.0 +1.7


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Fig. 11: Tuen Mun So Kwun Wat site details

Source: HKET

Housing Society launch old folks homes

The HK Housing Society (HKHS) is launching two projects in North Point and Tin Shui

Wai to cater the needs of better-off retirees above age 60. The scheme termed Joyous

Living" comprise of 588 units development at Tanner Hill in North Point and a 950 unitsdevelopment along Wetland Park Road in Tin Shui Wai. The developments will provide

homes sized between 500sf to1,000sf with a few around 1,300sf. The units will be

available for a long-term lease subject to a one-off lump-sum payment starting at a rent

of HKD3mn. The Tanner Hill and the Wetland Park Road projects are slated for

completion in early 2015 and late 2016 respectively. (Source South China Morning Post

& Hong Kong Housing Society, February 7&8, 2012)

Fig. 12: HKHS: Joyous Living Projects details

Source: HKHS

Estate agents' application numbers down 50% y-y

The low transaction volume and commissions levels over the past six months have

resulted in a significant drop in new estate agent applications. The number of

prospective licensees of the Estate Agents Qualifying Examination dropped 55% from

the peak of 4,000 in 2011 to only 1,800 in February 2012. The Estate Agents Authority

expects the number of prospective licensees to continue to drop. (Source: Hong Kong

Economic Times. February 8. 2012).

Site area (sf) 722,770

Plot ratio (x) 1.3

GFA (sf) 939,600

Units not less than 1,100

Winning bid price (HKD mn) 2,739

AV (HKD psf) 2,915

Bidders (no.) 7

Company awarded the land Kerry

Total project cost (HKD mn) 6,000

Other bidders

Cheung Kong,

Henderson Land,

SHKP, NWD, Sino

Land, China

Overseas Holdings

Project Tanner Hill Project Wetland Park Road Project

Location

Tanner Road, North Point, Hong

Kong

Tin Shui Wai Area 115, Wetland Park

Road, New Territories

Unit (no.) 588 about 950

GFA (sf)

500sf - 1,000sf (f ew units of

1,300sf are available)

500sf - 1,000sf (few units of 1,300sf

are available)

Type

Studio, one bedroom, tw o

bedroom and three bedroom units

Studio, one bedroom, tw o bedroom and

three bedroom units

Expected

move-in

date Early 2015 End of 2016

Facilities

Clubhouse, Wellness Centre, Day

Care Centre. Rehabilitation Centre,

Skilled Care Facilities, Restaurant

and Retail Store

Clubhouse, Wellness Centre, Day Care

Centre, Rehabilitation Centre, Skilled

Care Facilities, Restaurant, Retail, Hotel

and Store

Application Late 2013/early 2014 End of 2016


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Beijings office rent surged more than 75% a year

According to Cushman & Wakefield, an international property consultant, Beijings office

rent rose more than 75% y-y with demand outstripping supply. The surge in Beijings

office rents was a sharp increase compared with 2010 (+48%) and was the biggest

increase in the world last year. With office rents of USD130psf p.a., Beijing was the fifth

most expensive office location after HK, London, Tokyo and Moscow. On an overall

basis, Asia Pacific registered an 8% growth in rents last year, the highest rate of growth

among the world. (Source: South China Morning Post, February 7, 2012)

Fig. 13: Most expensive office rents in the world

Source: Cushman & Wakefield


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Share buybacks and weekly best & worstperformers

Share buybacks and stakeholder increases

Fig. 14: Recent insider transactions summary

Source: HKEx, SGX, Nomura research

With reporting season approaching, many property companies are now in their blackout

periods. There were no buyback or stakeholder increases last week

Weekly and YTD best and worst performers

Fig. 15: Weekly performance

Source: Bloomberg; prices as of 10 February 2012

Fig. 16: YTD performance

Source: Bloomberg; prices as of 10 February 2012

Over the past week, HK property stocks rose 1.7% w-w. While HK property stocks

outperformed the Hang Seng Index (+0.1% w-w), they underperformed their Chinese

peers (+5.4% w-w). On an individual basis, Chinese property companies performed the

best, taking up four out of five weekly best-performer slots, including Greentown China

(27.4% w-w), KWG Property (14.1% w-w), Beijing Capital Land (+9.9% w-w) and Shimao

Property (+9.1% w-w). HK Land was the only Hong Kong company within the top five

with its 8.8% w-w gain. On the flipside, Hong Kong developers accounted for four out offive worst-performer slots. Henderson Land was the worst performer of the week with an

-2.4% w-w decline. Year to date, KWG Property took over the top slot with its 48.5% gain

while Soho China was the worst YTD performer with its 1.4% gain so far in 2012.

Company Type (stake

increase/ share

buyback)

Time Frame Stake change

(mn shares)

Amount

Committed

(HK$mn)

Average Price

(HK$)

N/A N/A N/A N/A N/A N/A

27.4%

14.1%

9.9%9.1% 8.8%

0.1% 0.0%

-1.1%-1.9%-2.4%-5%

0%

5%

10%

15%

20%

25%

30%

GreentownChina

KWGProperty

BeijingC

apitalLand

ShimaoProperty

HKLand

SHKP

Ch

eungKong

RenheC

ommercial

SinoLand

HendersonLand

Weekly 5 Best Performers Weekly 5 Worst Performers

48%46%

44% 44%39%

7%4% 3%

1% 1%

0%

15%

30%

45%

KWG

Property

NewW

orldDev

ShimaoProperty

Guang

zhouR&F

Agil

eProperty

For

tuneREIT

Sw

irePacific

RenheC

ommercial

LinkREIT

SohoChina

YTD 5 Best Performers YTD 5 Worst Performers

Best Weekly: Greentown(+27.4% w-w)Worst Weekly: Henderson Land(-2.4% w-w)

Best YTD: KWG Property

(+48.5% w-w)

Worst YTD: Soho China

(-1.4% w-w)


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Consensus net income and DPS estimatechangesFig. 17: Consensus net income and DPS estimate changes

Source Bloomberg

As the earning season has begun, earning revisions are noted for every company except

Hang Lung Properties and HKR Intl. Developers saw their earnings cut by 0.1% for

FY12 while FY11 and FY13 earnings were raised by 0.1% and 0.3%. The most

prominent changes were for Prosperity REIT with its FY12-13F estimates cut by 1.6% w-

w and 2.3% w-w and Midland Holdings with its FY13F estimates adjusted upward by

2.8% w-w. Other notable revisions were for Cheung Kong (FY11-13F: 0.5%/-1.1%/-1.3%

w-w), Swire Pacific (FY11F: -1.2% w-w). The landlords saw mild revisions with FY11-FY13 earnings revised by -0.1%, 0.0% and 0.1% w-w, respectively. REITs DPS

estimates for FY11-13F were adjusted by 0.5%/-0.6%/-1.2% this week, respectively.

.

FY 2011 FY 2012 FY 2013

Net Income Net Income Net Income

Year End 10-Feb 3-Feb Change 10-Feb 3-Feb Change 10-Feb 3-Feb Change

Hong Kong Property Developers

1 HK Cheung Kong Dec 23,632 23,516 0.5% 22,332 22,578 -1.1% 25,871 26,206 -1.3%12 HK Henderson Land Dec 6,066 6,093 -0.4% 6,797 6,777 0.3% 6,740 6,725 0.2%16 HK SHKP Jun - - - 20,510 20,620 -0.5% 19,575 19,637 -0.3%17 HK New World Dev Jun - - - 5,545 5,535 0.2% 5,720 5,704 0.3%83 HK Sino Land Jun - - - 4,594 4,586 0.2% 5,670 5,584 1.5%

101 HK Hang Lung Properties Jun - - - 4,242 4,242 0.0% 5,893 5,893 0.0%480 HK HKR Int'l Mar - - - 1,120 1,120 0.0% 531 531 0.0%683 HK Kerry Properties Dec 4,070 4,057 0.3% 4,666 4,670 -0.1% 4,137 4,146 -0.2%

1200 HK Midland Holdings Dec 292 292 0.0% 324 324 0.0% 344 335 2.8%Average 0.1% -0.1% 0.3%

Hong Kong Property Investors

4 HK Wharf Dec 7,991 7,989 0.0% 9,538 9,545 -0.1% 11,043 11,043 0.0%14 HK Hysan Dec 1,274 1,274 0.0% 1,461 1,469 -0.6% 1,710 1,729 -1.1%19 HK Swire Pacific Dec 9,798 9,913 -1.2% 10,762 10,762 0.0% 11,071 11,071 0.0%41 HK Great Eagle Dec 1,402 1,401 0.1% 1,340 1,339 0.1% 1,288 1,286 0.1%

HKL SP HK Land (US$) Dec 697 692 0.6% 680 675 0.7% 786 776 1.3%Average -0.1% 0.0% 0.1%

FY 2011 FY 2012 FY 2013

DPS DPS DPS

Year End 10-Feb 3-Feb Change 10-Feb 3-Feb Change 10-Feb 3-Feb ChangeHK REITs

823 HK Link REIT Mar - - - 1.27 1.27 -0.2% 1.38 1.38 -0.2%808 HK Prosperity REIT Dec 0.12 0.12 0.0% 0.12 0.13 -1.6% 0.13 0.13 -2.3%

2778 HK Champion REIT Dec 0.22 0.22 0.9% 0.23 0.23 0.0% 0.21 0.21 -1.0%Average 0.5% -0.6% -1.2%

FY11F: Cheung Kong (1.9% w-w)& Kerry Properties (-1.2% w-w)

FY12F: NWD (+3.5% w-w) &Hang Lung Properties (+3.0% w-w)

FY13F: NWD (2.2% w-w) & HangLung Properties (1.4% w-w)

Major consensus changes:

FY11F: Swire Pacific (-1.2% w-

w) & Champion REIT (+0.9% w-

w)

FY12F: Cheung Kong (-1.1% w-

w) & Prosperity REIT (

-1.6% w-w)FY13F: Midland Holdings

(+2.8% w-w) & Prosperity REIT

(-2.3% w-w)

Major consensus changes:

FY11F: Swire Pacific (-1.2% w-

w) & Champion REIT (+0.9% w-

w)

FY12F: Cheung Kong (-1.1% w-

w) & Prosperity REIT (

-1.6% w-w)FY13F: Midland Holdings

(+2.8% w-w) & Prosperity REIT

(-2.3% w-w)


10/16
http://www.nomura.com/


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11

Appendix 2: Share-price performanceFig. 19: Price performance one week to one year

Note: Share prices as of 10 February 2012, close. Ratings are as of the date of the most recently published report (http://www.Nomura.com) rather than the date of thisdocument. Source: Bloomberg for not rated stocks, Nomura estimates

Mkt. Cap Currency Last 52 Wk 52 Wk Performance (%) Relative Performance (%)

Ratings (US $mn) Price High Low 1W 1M 3M 6M 1Y YTD 1W 1M 3M 6M 1Y YTD

Hong Kong Property Developers

1 HK Cheung Kong BUY 31,120 HKD 104.8 131.8 79.1 0 11 14 (2) (11) 13 (0) 2 4 (7) (3) 1

12 HK Henderson Land BUY 12,907 HKD 42.5 57.0 33.2 (2) 6 5 (3) (13) 10 (3) (3) (4) (7) (5) (2)

16 HK SHKP BUY 36,780 HKD 109.7 129.2 85.5 0 11 11 5 (7) 13 (0) 2 2 0 1 (0)

17 HK New World Dev BUY 7,174 HKD 9.2 13.5 6.1 6 34 32 9 (23) 46 6 23 21 4 (16) 30

83 HK Sino Land BUY 9,483 HKD 12.6 13.2 8.5 (2) 11 23 30 3 14 (2) 1 12 24 13 1

101 HK Hang Lung Properties NEUTRAL 16,028 HKD 28.0 36.3 20.9 3 19 7 7 (9) 26 3 9 (2) 2 (0) 12

480 HK HKR Int'l BUY 497 HKD 2.9 5.0 2.2 1 15 (8) (24) (39) 18 1 5 (16) (28) (33) 5

683 HK Kerry Properties BUY 5,975 HKD 32.4 42.0 22.9 7 24 12 (3) (13) 26 6 14 2 (7) (5) 12

1200 HK **Midland Holdings BUY 414 HKD 4.5 6.4 3.0 7 12 24 25 (18) 12 7 3 13 19 (10) (1)

Weighted Average 1 14 13 4 (10) 17 1 4 3 (1) (1) 4

Hong Kong Landlords

4 HK Wharf NEUTRAL 18,001 HKD 46.4 59.0 33.2 2 23 13 (9) (8) 32 2 12 3 (14) 0 17

14 HK Hysan NEUTRAL 4,171 HKD 30.7 39.3 22.5 1 17 21 (10) (6) 20 1 7 10 (14) 3 7

19 HK Swire Pacific BUY 16,251 HKD 85.6 103.9 69.3 2 11 3 6 (7) 4 1 1 (6) 1 1 (7)

41 HK Great Eagle BUY 1,632 HKD 20.3 29.0 14.2 1 29 24 (8) (18) 33 1 18 13 (12) (11) 18

HKL SP HK Land NEUTRAL 13,000 USD 5.6 7.5 4.2 9 14 21 (4) (14) 22 7 4 14 (8) (9) 9

Weighted Average 3 17 13 (3) (9) 20 3 7 4 (8) (2) 7

HK REITs

823 HK Link REIT NEUTRAL 8,411 HKD 29.0 29.4 23.1 3 3 6 13 22 1 3 (6) (3) 8 34 (10)

808 HK Prosperity REIT BUY 305 HKD 1.7 2.0 1.3 5 13 12 5 (2) 16 5 3 2 0 7 3

2778 HK Champion REIT NEUTRAL 2,129 HKD 3.4 4.8 2.7 8 14 10 (12) (24) 15 8 5 1 (16) (17) 2

1881 HK Regal REIT NR 864 HKD 2.1 2.7 1.4 1 16 18 (11) (8) 16 1 6 8 (16) 0 3

FRT SP Fortune REIT NR 842 HKD 3.9 4.1 3.2 1 3 12 11 3 7 (0) (5) 5 6 8 (4)

435 HK Sunlight REIT NR 511 HKD 2.5 2.6 1.9 2 8 12 12 10 12 2 (1) 2 6 20 (1)

Weighted Average 4 6 8 7 10 6 4 (3) (1) 2 20 (6)

China Property Developers

688 HK China Overseas Land BUY 16,052 HKD 15.3 17.9 10.0 2 17 15 (6) 17 18 2 7 5 (11) 27 5

1109 HK China Resources Land BUY 11,085 HKD 14.8 15.9 7.3 5 18 30 13 18 19 5 8 18 8 29 5

3377 HK Sino Ocean Land NEUTRAL 3,099 HKD 4.3 5.1 2.2 6 24 41 17 (9) 19 6 14 29 12 (1) 5

410 HK Soho China NR 3,486 HKD 5.2 7.4 4.6 3 2 4 (15) (5) 1 3 (7) (5) (19) 4 (10)

813 HK Shimao Property BUY 4,252 HKD 9.6 12.4 5.4 9 45 38 10 (8) 44 9 32 26 4 0 28

2777 HK Guangzhou R&F NEUTRAL 3,644 HKD 8.8 12.0 5.5 8 38 27 1 (13) 44 8 26 16 (4) (5) 27

2007 HK Country Garden BUY 7,707 HKD 3.6 4.2 1.9 8 20 34 1 21 24 8 9 23 (4) 32 10

3900 HK Greentown China NR 938 HKD 4.5 9.2 3.0 27 42 (2) (26) (46) 32 27 30 (11) (29) (41) 17

1813 HK KWG Property BUY 1,443 HKD 3.9 6.5 2.3 14 39 34 (19) (28) 48 14 27 22 (23) (21) 32

119 HK Poly (HK) Investments BUY 1,985 HKD 4.3 7.4 2.1 7 34 30 (11) (34) 27 7 23 19 (16) (28) 13

1387 HK Renhe Commercial NR 2,494 HKD 0.9 1.8 0.8 (1) 11 (13) (40) (24) 3 (1) 1 (21) (43) (17) (8)

1668 HK China South City Holdings NR 829 HKD 1.1 1.5 0.9 2 4 7 (10) (20) 8 2 (5) (2) (14) NA (4)

272 HK Shui On Land BUY 1,931 HKD 2.9 3.8 1.7 5 22 28 (4) (18) 22 5 11 17 (9) (11) 9

604 HK Shenzhen Investment NR 837 HKD 1.8 2.7 1.2 8 30 17 (3) (26) 29 8 19 7 (7) (19) 15

754 HK Hopson NR 1,217 HKD 5.5 9.6 3.6 8 42 22 (2) (38) 36 8 30 11 (7) (32) 20

917 HK New World China NR 2,206 HKD 2.0 3.0 1.5 5 22 22 (18) (31) 28 5 12 12 (22) (24) 14

2868 HK Beijing Capital Land NR 528 HKD 2.0 3.2 1.3 10 35 4 (8) (16) 31 10 24 (5) (13) (8) 16

3383 HK Agile Property BUY 4,263 HKD 9.6 14.2 4.2 5 37 53 (15) (12) 39 5 26 40 (19) (4) 23

200002 CH Vanke NR 13,506 HKD 8.9 11.6 6.0 6 14 9 (4) (7) 15 6 4 (0) (8) 1 2

Weighted Average 6 22 22 (3) (1) 22 5 11 12 (8) 8 9

China REITs

87001 HK Hui Xian REIT NR 2,601 CNY 4.1 5.2 2.7 1 15 20 N.A N.A (22) 1 6 N.A N.A N.A (31)

405 HK GZI REIT NR 525 HKD 3.8 4.4 3.1 4 11 9 (3) (5) 12 4 2 (1) (8) 3 (1)

625 HK REEF China Trust NR 259 HKD 4.4 4.4 4.4 0 0 0 0 0 0 (0) (9) (9) (5) 9 (11)

Weighted Average 1 14 17 (0) (1) (15) 1 4 (1) (2) 1 (25)

** Midland Holding- Property Broker


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Appendix 3: Asia Ex Japan PropertyResearch Team

Fig. 20: Asia Ex Japan Property Research Team

Name Country coverage Telephone Email

Paul Louie Regional Head, Asia & Hong Kong +852 2252 6189 [email protected]

Alvin Wong China +852 2252 1563 [email protected]

Aatash Shah India +91 22 4037 4194 [email protected]

Min Chow Sai Singapore +65 6433 6959 [email protected]

Jianping Chen China +852 2252 2139 [email protected]

Vineet Verma India +91 22 4053 3675 [email protected]
mailto:paul.louie@mailto:[email protected]:[email protected]:[email protected]:[email protected]:paul.louie@


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Appendix A-1

Analyst Certification

I, Paul Louie, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views about any

or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was, is or will be

directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of my

compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc.,

Nomura International plc or any other Nomura Group company.


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Important DisclosuresOnline availability of research and conflict-of-interest disclosuresNomura research is available on www.nomuranow.com, Bloomberg, Capital IQ, Factset, MarkitHub, Reuters and ThomsonOne.Important disclosures may be read at http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx or requestedfrom Nomura Securities International, Inc., on 1-877-865-5752. If you have any difficulties with the website, please [email protected] for help.The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, aportion of which is generated by Investment Banking activities. Unless otherwise noted, the non-US analysts listed at the front of this report arenot registered/qualified as research analysts under FINRA/NYSE rules, may not be associated persons of NSI, and may not be subject toFINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities heldby a research analyst account.Industry Specialistsidentified in some Nomura International plc research reports are employees within the Firm who are responsible for thesales and trading effort in the sector for which they have coverage. Industry Specialists do not contribute in any manner to the content ofresearch reports in which their names appear. Marketing Analystsidentified in some Nomura research reports are research analysts employedby Nomura International plc who are primarily responsible for marketing Nomuras Equity Research product in the sector for which they havecoverage. Marketing Analysts may also contribute to research reports in which their names appear and publish research on their sector. Distribution of ratings (US)The distribution of all ratings published by Nomura US Equity Research is as follows: 35% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 11% of companies with thisrating are investment banking clients of the Nomura Group*.59% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 2% of companies with thisrating are investment banking clients of the Nomura Group*.6% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 0% of companies with thisrating are investment banking clients of the Nomura Group*.As at 31 December 2011. *The Nomura Group as defined in the Disclaimer section at the end of this report.Distribution of ratings (Global)The distribution of all ratings published by Nomura Global Equity Research is as follows: 47% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 40% of companies with thisrating are investment banking clients of the Nomura Group*.43% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 45% of companies withthis rating are investment banking clients of the Nomura Group*.10% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 21% of companies withthis rating are investment banking clients of the Nomura Group*.As at 31 December 2011. *The Nomura Group as defined in the Disclaimer section at the end of this report.Explanation of Nomura's equity research rating system in Europe, Middle East and Africa, US and Latin AmericaThe rating system is a relative system indicating expected performance against a specific benchmark identified for each individual stock.Analysts may also indicate absolute upside to target price defined as (fair value - current price)/current price, subject to limited managementdiscretion. In most cases, the fair value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriatevaluation methodology such as discounted cash flow or multiple analysis, etc.STOCKSA rating of 'Buy',indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of 'Neutral',indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ' Reduce', indicates thatthe analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of 'Suspended', indicates that the rating, targetprice and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstancesincluding, but not limited to, when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the company.Benchmarks are as follows: United States/Europe: Please see valuation methodologies for explanations of relevant benchmarks for stocks(accessible through the left hand side of the Nomura Disclosure web page: http://go.nomuranow.com/research/globalresearchportal);GlobalEmerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology.SECTORSA 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance,indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. A 'Bearish' stance, indicates thatthe analyst expects the sector to underperform the Benchmark during the next 12 months.Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI EmergingMarkets ex-Asia.Explanation of Nomura's equity research rating system in Japan and Asia ex-JapanSTOCKSStock recommendations are based on absolute valuation upside (downside), which is defined as (Target Price - Current Price) / Current Price,subject to limited management discretion. In most cases, the Target Price will equal the analyst's 12-month intrinsic valuation of the stock,based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc.A 'Buy' recommendation indicates that potential upside is 15% or more. A 'Neutral' recommendation indicates that potential upside is less than15% or downside is less than 5%. A 'Reduce' recommendation indicates that potential downside is 5% or more. A rating of 'Suspended'indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certaincircumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subject company.
http://www.nomuranow.com/http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspxmailto:[email protected]:[email protected]://go.nomuranow.com/research/globalresearchportalhttp://go.nomuranow.com/research/globalresearchportalmailto:[email protected]:[email protected]://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspxhttp://www.nomuranow.com/


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Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage of the Nomura entityidentified in the top banner. Investors should not expect continuing or additional information from Nomura relating to such securities and/orcompanies.SECTORSA 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positiveabsolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocksunder coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted averagerecommendation of the stocks under coverage is) a negative absolute recommendation..Target PriceA Target Price, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any target price may beimpeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if thecompany's earnings differ from estimates.


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DisclaimersThis document contains material that has been prepared by the Nomura entity identified at the top or bottom of page 1 herein, if any, and/or, with the sole or jointcontributions of one or more Nomura entities whose employees and their respective affiliations are specified on page 1 herein or identified elsewhere in thedocument. Affiliates and subsidiaries of Nomura Holdings, Inc. (collectively, the 'Nomura Group'), include: Nomura Securities Co., Ltd. ('NSC') Tokyo, Japan;Nomura International plc ('NIplc'), UK; Nomura Securities International, Inc. ('NSI'), New York, US; Nomura International (Hong Kong) Ltd. (NIHK), Hong Kong;Nomura Financial Investment (Korea) Co., Ltd. (NFIK), Korea (Information on Nomura analysts registered with the Korea Financial Investment Association('KOFIA') can be found on the KOFIA Intranet at http://dis.kofia.or.kr ); Nomura Singapore Ltd. (NSL), Singapore (Registration number 197201440E, regulated bythe Monetary Authority of Singapore); Capital Nomura Securities Public Company Limited (CNS), Thailand; Nomura Australia Ltd. (NAL), Australia (ABN 48 003032 513), regulated by the Australian Securities and Investment Commission ('ASIC') and holder of an Australian financial services licence number 246412; P.T.Nomura Indonesia (PTNI), Indonesia; Nomura Securities Malaysia Sdn. Bhd. (NSM), Malaysia; Nomura International (Hong Kong) Ltd., Taipei Branch (NITB),Taiwan; Nomura Financial Advisory and Securities (India) Private Limited (NFASL), Mumbai, India (Registered Address: Ceejay House, Level 11, Plot F, ShivsagarEstate, Dr. Annie Besant Road, Worli, Mumbai- 400 018, India; Tel: +91 22 4037 4037, Fax: +91 22 4037 4111; SEBI Registration No: BSE INB011299030, NSEINB231299034, INF231299034, INE 231299034, MCX: INE261299034); Banque Nomura France (BNF), regulated by the Autorit des marches financiers and the

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