Insights Treasures in China Warehouse Sector

China / Hong Kong Industry Focus
China Warehouse Sector

Refer to important disclosures at the end of this report
DBS Group Research . Equity 28 July 2015
Emerging strong players HSI: 25,129

ANALYST
• Initiating coverage on China’s warehouse sector in Carol WU · (852) 2863 8841·
view of its promising outlook supported by China’s carol_wu@hk.dbsvickers.com
e-commerce boom
Danielle WANG, CFA · (852) 2820 4915·
• Based on our analysis of global and domestic players, danielle_wang @hk.dbsvickers.com
we believe that those with access to land, low cost
Ken HE, CFA +86 21 6888 3375
funding, talents and tenants will stand out ken_he@hk.dbsvickers.com
• Initiating coverage on Chiwan Base (200053 CH), Andy YEE, CFA · (852) 2971 1773·
Beijing Properties (BPHL, 925 HK), China Fortune andy_yee@hk.dbsvickers.com
Land (CFLD, 600340 CH) and China South City (CSC,
1668 HK) with BUY ratings. Our analysis also Recommendation & valuation
includes key players, CMSTD (600787 CH), Vanke
(2202 HK / 000002 CH) and Wuzhou (1369 HK). T arg et Mkt F Y 15F
Cu rren c y Pric e Pric e R ec Cap PE
• Chiwan, BPHL, CSC and GLP stand out as our top
L o c al$ L o c al$ U S$ b n x
picks
Chiw an
Shortage of modern warehouses in China. Despite HKD 18.21 21.48 Buy 822 32.4
(200053 CH)
rapid investments in warehouses over the past few years, BPHL
HKD 0.6 0.70 Buy 523 n.a.
only 11% of China’s warehouses are of global standards. (925 HK)
This is insufficient to address the rapid growth in CSC #
HKD 2.39 2.96 Buy 2,467 8.9
demand from e-commerce and 3PL (third party logistics) (1668 HK)
players. As such, developers, e-commence players and CF LD
CNY 26.57 31.60 Buy 11,323 14.7
private equity have been investing more in the sector (600340 CH)
V anke-H
over the past three years. HKD 19.72 23.69 Buy 28,082 10.5
(2202 HK)
But, only those with access to land, low cost V anke-A
CNY 15.41 18.91 Buy 27,394 10.2
funding, talents and tenants will succeed. Access to (000002 CH)
land is the most difficult entry barrier. Despite the CM STD
CNY 13.36 n.a. NR 4,002 123.5
Chinese government’s growing emphasis to promote (600787 CH)
Wuzhou
growth and efficiency in the sector, industrial land HKD 1.38 n.a. NR 889 19.7
(1369 HK)
supply has been falling over the past two years. This
GLP #
implies that only those with land will be able to reap the (GLP SP)
SGD 2.54 3.17 Buy 8,989 37.3
benefits. Chinese players have advantages over their M apletree #
foreign peers in this aspect but foreign players often SGD 1.13 1.31 Buy 2,040 15.4
(MLT SP)
have easier access to capital, tenants and talents.
BPHL – Beijing Properties (Holdings) LImited
Chiwan, BPHL, CSC and GLP stand out. SOE-backed CMSTD – China National Materials Storage & Transportation Development
Chiwan owns Blogis, which has the second largest GLP – Global Logistic Properties
warehouse land reserve and potential for B-to-H CFLD – China Fortune Land Development
conversion. BPHL, another SOE-backed company, is Chiwan – Shenzhen Chiwan Petroleum Supply Base (Blogis)
focusing on cold chain and bonded logistics services, and
Mapletree – Mapletree Logistics Trust
it should outperform peers given the promising outlook
CSC – China South City
of this niche segment. CSC's leading position in trade
Wuzhou – Wuzhou International
mall business will allow it to have easier access to lands
Vanke – China Vanke
and grow its warehouse business. We continue to like
# FY15: FY16
GLP for its leading position in China. Vanke’s warehouse
Source: Thomson Reuters, DBS Vickers
business also has strong growth potential which is worth
of note if spun off. Based on closing prices as at 24 Jul 2015
www.DBS Vickers.com
ed-TH / sa- AH
Industry Focus
Table of Contents
Investment summary 3
Demand is still ahead of supply 4
E-commerce: the key demand driver 8
3PL: another growth driver 13
Cap rate compression to continue 15
Key successful model 17
Emerging China players 22
Players’ competitiveness 24
Valuation and top picks 28
Snapshot of the listed emerging warehouse players in China 30
Stock Profiles 38
Shenzhen Chiwan (200053 CH) 38
Beijing Properties (925 HK) 54
China South City (1668 HK) 68
China Fortune Land (600340 CH) 90
China Vanke (2202 HK/000002 CH) 106
CMST Development (600787 CH) 116
Wuzhou International (1369 HK) 126
Global Logistic Properties (GLP SP) 138
Mapletree Logistic Trust (MLT SP) 144
Page 2
Industry Focus
Investment summary Emerging players with a focused strategy may be like GLP
during its earlier years in China. Emerging players we included
The immature nature of China’s warehouse industry implies in our analysis are Chiwan (Blogis), BPHL, CMSTD, CFLD, CSC,
huge growth potential ahead. The e-commerce boom has led Wuzhou. GLP achieved 49% CAGR during the past nine years
warehouse construction to grow at a CAGR of 24% since in terms of completed GFA in China, compared with 81%
2009, yet China still lacks modern logistics facilities. According during the period between 2006 and 2010 when it
to the China Warehousing Industry Bluebook 2015, total commenced operations. Emerging players are those that are
warehouse space in operation had reached 910m sm as of Dec shifting their focus from other businesses to this sector or
2014. However, modern logistics space by the top 10 players diversifying into warehouses. Chiwan (Blogis) and BPHL shifted
is only 16.9m sm or 1.9% of total supply in the market. GLP their business focus from other businesses to warehouse
estimates that all modern logistics warehouses in China occupy investment and operations. Given their focused strategy, we
a GFA of c. 100m sm or just 11% of total stock. believe they are likely to achieve higher growth in the sector
just like GLP during 2006 and 2010. The core businesses of
E-commerce is the main demand driver. Market research firm
CFLD, CMSTD, CSC, and Wuzhou are not warehouses but that
iResearch expects China’s e-commerce GMV (gross
they are involved in industrial parks and trade malls that
merchandise value) to reach Rmb7,300bn in 2018 with a
generate demand for warehouse. The intention is to grow a
CAGR of 27% from 2014. Aliresearch expects online spending
warehouse portfolio alongside their main businesses. Vanke is
per capita per year to reach c.Rmb17,900 p.a. in 2020F,
an exception as it commenced its warehouse business from
representing a c.16% CAGR over 2014E-2020F.
scratch, after missing the opportunity to build up an
Rural e-commerce holds great potential. In 2014, >35% of the investment portfolio in the office and retail segments. Vanke is
urban population in China had made online purchases, but determined to grow its warehouse portfolio fast, with the
only c.10% of rural population had ever used e-commerce potential to spin it off in the coming years.
(source: Aliresearch). Given rising income in the low-tier
Emerging domestic players have better access to land to
markets, Aliresearch estimates rural online sales to reach
underpin high growth. Emerging players in the sector we
Rmb460bn in 2016F, translating into a c.60% CAGR. This
included in our analysis are Chiwan (Blogis), BPHL, CMSTD,
implies potential warehouse demand in transportation modes
CFLD, CSC, Wuzhou. Among them, SOE players like Chiwan
with closer links to lower-tier cities.
(Blogis), BPHL, and CMSTD may have a better chance to
3PL is another major demand driver for public warehouses. acquire land within their jurisdiction or catchment areas. CFLD,
These include LTL logistics (less than truckload) and CEP CSC, and Wuzhou have flexibility in utilising land in their
(Courier, Express and Parcel) firms. The growth of e-commerce industrial parks or trade mall projects for warehouse purposes.
has pushed up the demand for these two services and is hence Vanke has a presence in 60 cities through its residential
spurring leasing demand for public warehouses. The rapid projects, and should be able to have easier access to land than
growth of reverse logistics and cold-chain logistics also drive others given limited land supply in most cities.
demand for warehouses spaces.
Reduce funding cost, building up tenant base, and establishing
Cap rates set to compress. As a result of supply shortage, an operations team are also necessary. Among the emerging
annual rentals grew at 4-17% in the 14 cities we tracked in the domestic players, only BPHL’s funding cost is low, averaging
past four years. Due to the rapid warehouse construction over 4.3%. Borrowing cost for the others are above 6% with
the past two years, rental growth may slow a bit in 2015/16. Wuzhou and CFLD’s standing at 10.1% and 9.6% respectively.
Yet, we expect rents to see a stronger growth subsequently In comparison, GLP and Malpetree’s average funding cost are
due to (1) falling industrial land supply since 2013, and (2) much lower at 3.4% and 2.1%. Blogis and BPHL have an
growing focus on customer satisfaction, which will lead to established tenant base and are refining the mix along with
demand for modern logistics facilities. Capital value will grow increasing demand from e-commerce and coldchain operators,
faster than rentals, in our estimate, as more players enter the respectively. CFLD, CSC, and Wuzhou will mainly serve existing
market to compete for land and warehouse assets. As such, tenants in their industrial parks/trademalls.
the cap rate is likely to be compressed from the current 6-7%
Chiwan (Blogis), BPHL, and CSC are our top picks for emerging
and 8-10% in tier I and lower tier cities, respectively.
warehouse plays. SOE-backed Chiwan owns Blogis, which has
Entry barriers to the sector are high, so leading players will the second largest warehouse land reserve and potential for B-
have a higher chance to succeed. Our analysis shows that to-H conversion. BPHL, another SOE-backed company, is
access to land, low-cost funding, talents and tenants are key focusing on cold chain and bonded logistics services, and it
success factors. As local governments have lower incentives to should outperform peers given the promising outlook of this
supply industrial land, this creates high entry barrier to niche segment. CSC is dominant in the trade centre segment in
newcomers. As a result, even well-known global players, such tier 1/2 cities and has a fast growing e-commence platform
as GLP, need to consistently look for JV with or invest in and logistics properties business that is supported by Tencent
Chinese firms that have access to warehouse land. Some have (700.HK, BUY). We continue to like GLP for its leading position
even set up JVs with e-commerce players in order to secure in China. Vanke’s logistics business also has strong growth
land. potential which is worth of note if spun off.
Page 3
Industry Focus
Demand is still ahead of supply

Warehouse area: total area (sm) per capita
China’s logistics sector yet to mature
6
Despite rapid growth of logistics facilities over the past three
years, China still lags behind US substantially in terms of
5
warehouse stock per capita. Based on research by Global
Logistics Properties (GLP.SP, BUY), China’s leading logistics
4
player, the warehouse space per capita in the US is 5.06 sm,
12x that in China (0.41sm). The e-commerce boom has led
3 12X
warehouse construction to grow at a CAGR of 24% since
2009. Major investors such as Blackstone, Fosun, Brookfield,
Temasek and PGGM have poured money into China’s logistics 2
real estate sector over the past three years. According to the
China Warehousing Industry Bluebook 2015, total warehouse 1
space in operation had reached 910m sm as of Dec 2014.
However, modern logistics space by the top 10 major players is 0
China US
only 16.9m sm or 1.9% of total supply in the market. If we
include warehouses built by e-commerce players and third-
Source: GLP; DBS Vickers
party logistics (3PL) service providers, the percentage will
increase to 3.4%, albeit still insignificant. GLP estimated that Total warehouse space vs. modern logistics space by top
all modern logistics warehouses in China occupy a GFA of c. 10 major players
100m sm.
m sm
1,000
900
800
700
600
500
400
300
200
100
0
Total Top 10 players
Page 4
Industry Focus
Comparison of modern and old logistics facilities
Fixed asset investment in warehouse sector, 2009 to Logistics area comparison, key players
2014 (bn)
mm sqm
bn
12 GLP stake: 19.9%
600 GLP stake: 53.1%
10
500 8
6
400
4
300 2
0
Mapletree
Yupei
e-Shang
Goodman
Beijing Properties
Vipshop
GLP
Prologis
ACL
Blogis
200
100
0
2009 2010 2011 2012 2013 2014
Source: China Warehousing Industry Bluebook 2015
Page 5
Industry Focus
Comparison of logistics areas (2014E) 2014, much higher than matured countries such as the US
(<9%). China was ranked 28th out of 155 countries by the
World Bank in 2014 in terms of its logistics development
8
Strategic partners of Alibaba (based on Logistics Performance Index), lagging behind most
western countries and also Hong Kong, Taiwan and Malaysia.
4 High warehouse cost and imbalance of supply. According to
China Warehouse Industry Bluebook 2015, costs for
warehouses accounts for >30% of total logistics cost in China.
0 A key reason for the high warehouse cost comes from the
China Dangdang
VIPshop
Best Express (百世匯通)
YTO Express (圓通速遞)

Haier Logistics
Amazon (US
EMS
S.F.Express (順豐速運)
JD.com
operations)
falling supply of industrial land. As warehouse landlords often
generate lower tax revenue and employment, local
governments have little incentive to supply land to them. They
would rather sell land for commercial and residential uses
which bring in much higher revenue and employment to
support local GDP growth. Moreover, many firms tend to build
their own warehouses to fulfil their own needs. This leads to a
mounting supply of lower quality warehouses in transportation
Note: Alibaba Group rides on the logistics capability of its strategic modes.
delivery partners. Its China Smart Logistics (“Cainiao”) has secured
several locations in China to develop key distribution centres. Yet, the inefficient and immature nature of China’s logistics
Source: Companies, DBS Vickers sector implies huge room for growth. Despite the above,
China still sees huge growth potential in its logistics
Logistics facilities are more concentrated in Northern and development and warehouse sector. One key growth driver for
Eastern China due to the development of China’s highway and the sector is the bright growth outlook of China’s e-commence
railway systems. According to CBRE, tier 1 cities and Tianjin, industry.
and other cities in Guandong, Jiangsu and Liaoning saw the
highest supply of modern warehouses that meet international Logistics expenses as % of GDP, 2009 to 2014
standards.
Modern warehouse distribution in China (by 2016E) RMB bn
12,000 19%
10,000 18%
8,000 18%
6,000 17%
4,000 17%
2,000 16%
0 16%
2009
2010
2011
2012
2013
2014
Total Logistics Expenses (LHS) % of GDP (RHS)
Source: China Warehousing Industry Bluebook 2015
Source: CBRE; DBS Vickers
China lacks a matured logistics industry. Unlike many other

western countries, the e-commerce boom in China started in
the absence of a matured logistics network. The logistics
expenses as % of GDP in China is still high at 16.6% as of
Page 6
3.20
3.40
3.60
3.80
4.00
4.20
Germany
Netherlands
Belgium
United Kingdom
Singapore
Sweden
Source: The World Bank; DBS Vickers

Norway
Luxembourg
United States
Japan
Ireland
2014 World Bank Logistics Performance Index
Canada
France
Switzerland
Hong Kong
Australia
Denmark
Spain
Taiwan
Italy
Korea, Rep.
Austria
New Zealand
Finland
Malaysia
Portugal
United Arab Emirates
China
Page 7
Industry Focus
Industry Focus
E-commerce: the key demand driver

China internet users, 1994 to 2014
rd
Major demand drivers are 3 Party logistics players (3PL ),
retailers and manufacturers. Demand from e-commerce and mn people
3PL players is particularly growing rapidly. 700
E-commerce will see continued rapid growth. The number of 600

China’s internet users had reached 648m as of 2014, with
500
48% internet penetration rate. Market research firm iResearch
expects China’s e-commerce GMV (gross merchandise value) to 400
reach Rmb7,300bn in 2018 from Rmb2,814bn in 2014 with a
300
CAGR of 27%. Online retail sales achieved robust growth,
contributing 27% of China’s e-commerce GMV in 2014. 200
100
GMV of China’s online retail sales, 2011 - 2018
0
Dec-98
Dec-05
Dec-12
Jun-95
Jun-02
Jun-09
Oct-97
Feb-00
Oct-04
Feb-07
Oct-11
Feb-14
Apr-94
Apr-01
Apr-08
Aug-96
Aug-03
Aug-10
RMB bn %
8,000 80%
Source: iResearch
6,000 60%
Online shoppers as % of netizen population (2014)
4,000 40%
120%
2,000 20%
100%
0 0%
2014E
2015E
2016E
2017E
2018E
2011
2012
2013
80%
Online Retail Sales GMV (LHS) Growth rate (RHS)

60%
Source: iResearch; DBS Vickers

40%
More netizens are shopping online but still behind matured 20%
countries. Thanks to the promotion of computers and mobile
devices, improvements in telecom facilities, and cultivation of 0%
online buying habits, the number of e-commerce customers in UK US Japan China
China had reached 361m in 2014, accounting for 56% of the
total netizen population. This is still far below that in Japan Source: CNNIC, UK Statistics Bureau, A.T.Kearney, Statista.com
(75%), the US (76%), and the UK (97%). According to
Aliresearch, the number of e-commerce customers in China
could sustain decent growth to reach c.540m in 2020F, and
>25m new customers would start to buy online each year. In
2014, on-line shopping for the first time accounts for >10% of
total retail sales in China.
Page 8
Industry Focus
China online shopping users, 2011 to 2014 Study on new online shoppers in China
Y ear N u mb er o f n ew O n lin e s h o p p in g
mn % o n lin e s h o p p ers ex p erien c e b y n o w
400 60% ( n o . o f y ears )
350 2008 & before 74 7.5
50%
300 2009 34 5.5
250 40% 2010 53 4.5
200 30% 2011 33 3.5
150 2012 48 2.5
20% c.230m
100 2013 60 1.5
50 10% 2014E 88 0.5
0 0% A v erag e 3.5
2011
2012
2013
2014
Source: iResearch, DBS Vickers

Number of online shoppers (LHS)
Online shoppers as a % of total netizens (RHS) Plenty of upside potential for average online spending to grow.
Growth rate (RHS) Studies by Aliresearch show that in the first year, online
shoppers on average spend c.Rmb1,000 per annum; by the
Source: iResearch
fifth year, the spending would rise to c.Rmb15,000; by the
tenth year, spending would reach c.Rmb30,000. Since online
shoppers in China have on average 3.5 years of online
shopping experience, we believe there is plenty of upside
Online retail sales penetration surpassed 10% in 2014
potential for average online spending to grow. Aliresearch
expects online spending per capita per year to reach
c.Rmb17,900 in 2020F, representing a c.16% CAGR over
2014E-2020F.
Online
S hopping
10.7% Spending per online shopper per year
T raditional Online S hopping
Shopping
89.3%
RMB %
CAGR = 16%
20,000 41% 17,879 45%
16,000 36%
RMB 26.2 trillion GMV RMB 2.8 trillion 26%
12,000 21% 27%
10.3% Growth (%) 48.7%
7,153
8,000 6,173 18%
Source： iResearch 4,905
4,045 16%
4,000 2,872 9%
0 0%
Online spending to grow rapidly. Based on iResearch data, we
2010
2011
2012
2013
2014E
2020F
believe c.230m online shoppers have made their first online

purchase since 2011. In other words, these customers have less
than four years of online shopping experience, and they Spending per capita (LHS) Y-o-Y % (RHS)
account for c.60% of the total online shopper population in
China. As such, we estimate that online shoppers in China Source: iReserach, Aliresearch, DBS Vickers
have on average 3.5 years of online shopping experience, and
their average online spending was Rmb7,153 last year Rural e-commerce holds great potential. Despite sound e-
(iResearch data). commerce developments over the years, online operators have
mainly penetrated the urban markets so far, while rural areas
have been largely untapped due to less-developed infrastructure
and weak user awareness. In 2014, >35% of the urban
population in China had made online purchases, but only c.10%
of rural population had ever used e-commerce (source:
Aliresearch).
Page 9
Industry Focus
According to our estimates, online shoppers in rural areas on Large potential in rural e-commerce, given low spending
average spent c.Rmb2,600 last year, or merely 1/3 of the per capita
amount spent by their urban counterparts. Given rising income 2014E
in the low-tier markets, we believe the gap could narrow over
O nline shopper populat ion:
the medium term. Based on iResearch, Guangdong was ranked
m Urban Rural T ot al
No.1 in quantity of online orders in 2013; yet Hebei saw the
Population 293 69 361
fastest growth rate in the number of online orders. Aliresearch
estimates that online sales in the rural markets amounted to Spending per online shopper:
Rmb180bn last year. With improvements in payment channels RMB Urban Rural A v erage
and logistics facilities, rural online sales are expected to reach Spending 8,922 2,628 7,728
Rmb460bn in 2016F, implying a c.60% CAGR. K ey assumpt ions:
1) Rural e-commerce sales account for c.6% contribution
2) c.10% of rural population shops online
Source: CEIC, CNNIC, iResearch, Aliresearch, DBSV
Top 10 provinces in growth of online order quantities, 2013
Top10 Provinces by Compound Growth Rate of Online Shopping

Top10 Provinces by Quantity of Online Shopping Orders in 2013
Orders in 2013
Accumulated Compound Growth Accumulated

Quantity of Compound Growth Rate Rate From Jan. to Dec. Quantity of
Rank Province Orders (mn) From Jan. to Dec. (%) Rank Province (%) Orders (mn)
1 Guangdong 956.958 1.80% 1 Hebei 5.60% 411.171
2 Jiangsu 644.764 0.80% 2 Henan 3.50% 371.169
3 Shandong 575.499 -0.60% 3 Tianjin 3.00% 133.737
4 Zhejiang 574.933 0.80% 4 Sichuan 2.10% 324.188
5 Hebei 411.171 5.60% 5 Jiangxi 2.10% 207.286
6 Henan 371.169 3.50% 6 Guangxi 2.00% 208.820
7 Hubei 338.386 1.30% 7 Guangdong 1.80% 956.958
8 Fujian 338.122 1.00% 8 Xinjiang 1.70% 63.417
9 Hunan 329.912 1.10% 9 Guizhou 1.70% 72.994
10 Sichuan 324.188 2.10% 10 Shanxi 1.40% 175.086
Source: iReserach
E-commerce players expand fast to rural areas. In view of the actually encourage customers to spend more. Hence, with the
strong e-commerce potential in the rural markets, Alibaba evolution of rural e-commerce, we believe retail sales growth in
Group plans to invest a total of Rmb10bn within 3-5 years to China could be enhanced over the medium term.
enhance its rural exposure. Specifically, it aims to open c.1,000 Development of online sales lifts total consumption
rural operating centres and c.100,000 service stations in
villages. This would allow the e-commerce giant to penetrate For every ¥1 spent online
1/3 of the counties in China. JD.com has also been rolling out
its rural service centres (“京東幫服務店”) since 2014, and aims ¥1.00
to build c.2,000 service centres by 2017F. We believe the
= Replacing offline sales + Additional Sales
expansions of the leading e-commerce operators could
improve both infrastructure and customer awareness in the
Overall market ¥0.61 ¥0.39
rural markets, thereby helping to stimulate user demand ahead.
Rural e-commerce drives retail sales. Contrary to conventional
belief, development of rural e-commerce in China has not been 3rd & 4th- tier
cities ¥0.43 ¥0.57
fully carried out at the expense of offline retail sales, in our
view. An analysis by McKinsey shows that for every Rmb1
spent online in the rural markets, Rmb0.57 could be additional Note: E-commerce is more effective in stimulating retail sales in 3rd &
4th tier markets, as e-commerce offers greater convenience,
spending by the customers. This is mainly due to the lack of promotion and social networking effects to rural users.
retail infrastructure in the rural areas, and online sales could Source: McKinsey research (2013)
Page 10
Industry Focus
The growth of B2C segment drives logistics demand. China’s

China direct sales market share
e-commerce boom began in the C2C segment and then B2C
segment. B2C has continued to gain market share and is
estimated to account for 62% of the total online shopping Gome
Suning 4.5%
market compared with 54% at present. Tmall dominates the 8.5% Vipshop
B2C market share while JD.com leads in the direct sales 7.7%
YHD
ecommerce space. With the rapid growth of the B2C and 3.9%
direct sales segment, the need for modern logistics facilities has
Dangdang
grown rapidly. 3.6%
JD
GMV Mix of China’s Online Shopping market, 2011 to 49.0% Amazon China
2018 3.4%
Yixun
Others 2.9%
100% 14.8%
90% Jumei
1.8%
80%
70%
60% Source: iResearch
50%
40%
E-commerce logistics: Way to grow. With e-commerce
30%
developing rapidly in China, product deliveries have achieved
20%
10% swift growth. China Post estimates that nearly 14bn parcels
0% were delivered last year, representing a c.40% growth over
2013. Based on our estimates, c.60% of these parcels could be
2014E
2015E
2016E
2017E
2018E
2011
2012
2013
related to e-commerce. Given the busy order flow, online

shoppers are increasingly focusing on timeliness and accuracy
B2C C2C
of product deliveries, creating both opportunities and
challenges for e-commerce logistics.
Source: iResearch
China B2C market share
Suning
3.2%
Vipshop
2.9%
Gome
JD 1.7%
18.6%
YHD
1.4%
Dangdang
1.3%
Tmall
61.4% Amazon China
Others 1.3%
6.5%
Yixun
1.1%
Jumei
0.7%
Source: iResearch
Page 11
Industry Focus
Logistics model for e-commerce operators
Warehouse Delivery
Place an Process the Pick the Pack the Sorting Delivery

Order Order Order Order Center Station End
customer
Pickup
Station
Source: Companies
According to government data and estimates by Global

Logistics Properties (GLP), each online shopper shares a mere
1.4 sm in terms of logistics area per capita, versus 8.7 sm in the
US.
Warehouse space per online shopper between China

and the US (2014E),
sm
10
8.7
2 1.4
0
China US
Source: Government websites, GLP, CEIC
Page 12
Industry Focus
3PL: another growth driver Leading 3PL players

3PL is the major demand driver for public warehouses. These L T L play ers CEP play ers
include LTL logistics (less than truckload) and CEP (Courier,
Express and Parcel) firms. In China, both are at an infant stage • Deppon • Three Tongs and One Da
of development. The growth of e-commerce has pushed up • TNT Hoau • S.F . Express
the demand for these two services and is hence spurring • CNEX • China Postal Express
leasing demand for public warehouses. • Shenghui
The rapid growth of LTL market generates strong warehouse
Source: DBS Vickers
demand. Unlike US and Europe, the total market share of the
top 10 LTL players accounted for less than 2% market share,
according to CBRE. Only a few leading players, such as Deppon,
TNT Hoau, CNEX and Shenghui, have an annual turnover
exceeding Rmb1bn. Yet, the rapid growth of the e-commerce
segment has allowed market leaders to registered rapid growth
in turnover over the past few years, creating a great demand
for warehouse space. Deppon, for example, has become the
2nd largest tenant of GLP in terms of leased area.
Selected recent leases signed by Deppon
D at e G F A ( SM ) Pro jec t N ame Pro v in c e Cit y D ev elo p er

Q1 2013 68,000 GLP Park J iangxia Hubei Wuhan GLP
Q1 2013 23,000 GLP Park Hanan Heilongjiang Ha'erbin GLP
Q1 2013 53,000 GLP Park Langfang Hebei Langfang GLP
Q1 2013 24,000 GLP Park Hefei Hi-Tech A nhui Hefei GLP
Q4 2013 18,000 GLP Park Wangting J iangsu Suzhou GLP
Q4 2013 7,000 GLP Park Hunnan Liaoning Sheny ang GLP
Q4 2013 63,400 Goodman Lishui distribution Center J iangsu Nanjing Goodman
Q4 2014 16,000 GLP Park Yangzhou J iangsu Yangzhou GLP
Source: GLP
CEP service providers have also become key tenants for it signed nine new leases of a combined size of 143K sm with
warehouse landlords. In developed countries, commercial GLP in early 2014, becoming one of GLP’s key customers.
express accounts for a big part of CEP business volume. Yet, in
The emergence of new segments also increases demand for
China, consumer goods express represented >70% of total
warehouses. As China’s logistics segment evolves to become
CEP volume, based on CBRE's report. Differing from the LTL
more mature, some specialized segments such as reverse
market, the CEP market in China is much more concentrated
logistics and cold-chain logistics will gradually emerge.
with the top 6 players, including Three Tongs and One Da (三
According to a new regulation implemented in March 2014, a
通一达), S.F. Express and China Postal Express having >80%
consumer shall have the right to return most commodities
market share in total. The strong growth in e-tailing segment
purchased via the internet within seven days upon receipt of
has led to the strong growth of CEP service providers, which
the goods without giving any reason. This has created demand
create strong warehouse-related expenditures.
for reverse logistics and generates demand for warehouses.
The rapid expansion of 3PL companies generates additional
Cold-chain logistics are also growing more and more rapidly.
demand. We have seen both LTL and CEP service providers
According to China Warehousing Industry Bluebook 2015, the
tapping into each other’s businesses. For example, S.F. Express
cold-chain warehouse grew at 15% in 2014 to 24m tonnes.
is expanding into the bulky goods segment while LTL-focused
The growth rates in 2012 and 2013 were 7% and 10%
Deppon has lately ventured into the courier business. The new
respectively. While cold chain warehouse space per capita grew
trend in the 3PL market is to focus more on customer
rapidly from 53 litres in 2011 to 70 litres in 2014, the number
experience and product upgrading. All these efforts are
is still substantially lower than 372 litres in the US, implying
creating more demand for public warehouse space. A case in
strong growth potential.
point is Best Logistics, an integrated logistics service provider
set up in 2007. As a result of its fast expansion into nine cities,
Page 13
Industry Focus
Cold chain warehouse per capita
Liter
400
350
300
250
200
150
100
50
0
China Shanghai US
Source: China Warehouse Industry Bluebook 2015
Page 14
Industry Focus
Cap rate compression to continue

Rental growth estimate, 2015, selected cities
Decent rental outlook
Rents have seen decent growth over the past four years, as a %
7
result of strong demand. In the 14 cities we track, warehouse
rentals have grown at a CAGR of between 1% and 19% over 6
the past four years. While most expected tier I cities to see
stronger rental growth, tier II cities such as Nanjing and 5
Hangzhou witnessed the strongest growth at 19% and 17%
respectively. 4
3
Rental growth in selected cities, 2011 to 2015
2
RMB/sm/month
19% 1
45 17% 20%
40 18% 0
35 16%
11% 14% Shenzhen Guangzhou Shanghai Beijing
30 10%
25 12%
7% 7% 7% 7% 7% 10%
20 8% Source: CBRE; DBS Vickers
15 4% 4% 4%
3% 6%
10 1% 4%
5 2% Yet, growth may accelerate in the mid to long term as
0 0% warehouse users focus more on customer experience which
Shenyang
Shenzhen
Guangzhou
Shanghai
Chengdu
Dalian
Hangzhou
Nanjing
Chongqing
Qingdao
Ningbo
Wuhan
Tianjin
Beijing
will lead to stronger demand for modern logistic facilities.

More importantly, our analysis shows that industrial land
supply has fallen over the past two years in the 14 cities we
track. Beijing has seen the sharpest decline among all. As we
Rents (LHS) CAGR, 1Q11 to 1Q15 (RHS)
expect demand to continue to grow strongly, the falling supply
for industrial land will likely lead to undersupply of warehouses
Source: CBRE; DBS Vickers in two to three years' time, paving the way for stronger rental
growth.
Growth is likely to slow a bit in the near term. As a result of
strong leasing activities, we saw strong land supply and Land supply for 14 major cities, semi-annual 2010 to
construction from 2011 to 2013, which implies more 2H15
warehouses will become available in the market this year. In
mn sm
our interviews with industry players such as Goodman, E-Shang
120
and Carlyle, rentals are estimated to grow at 4% to 5% over
the next two years. This is in line with CBRE’s forecast. 100
According to CBRE, warehouse rents in the four tier I cities will
rise modestly by 0.5% to 6%, with Guangzhou seeing the 80
strongest growth in 2015.
60
40
20
0
1H10
2H10
1H11
2H11
1H12
2H12
1H13
2H13
1H14
2H14
1H15
Source: DBS Vickers; E-house
Page 15
Industry Focus
Land supply for tier I cities, 2010 to 2H15 Land price in Shanghai, 2007 to 2014
sm RMB m per mu
18,000,000 0.80 0.72
16,000,000
14,000,000 0.70
0.57
12,000,000 0.60
10,000,000
8,000,000 0.50 0.40
0.39
6,000,000 0.40 0.33 0.32
0.31
4,000,000 0.27
2,000,000 0.30
0 0.20
1H10
2H10
1H11
2H11
1H12
2H12
1H13
2H13
1H14
2H14
1H15
0.10
Shanghai Beijing 0.00
2007
2008
2009
2010
2011
2012
2013
2014
Guangzhou Shenzhen

Source: Evaluation & Research Centre of Shanghai Industrial Real
Estate
Land supply for tier 2 cities, 2010 to 2H15

Rental yields across property segments
sm
25,000,000
%
20,000,000 8
15,000,000 7
10,000,000 6
5,000,000 5
0 4
1H10
2H10
1H11
2H11
1H12
2H12
1H13
2H13
1H14
2H14
1H15
3
2
Tianjin Shenyang Qingdao 1
Dalian Nanjing Hangzhou
0
Ningbo Chengdu Chongqing
Industrial Office Shopping Residential
Wuhan Center
Beijing Shanghai
Source: CBRE
Capital value to grow faster
Falling land supply and strong acquisition interest led to strong

growth in land prices. While developers have a keen interest in
acquiring land for warehouse development, the local
governments’ low incentives to supply industrial land has led to
higher land prices over the past years. As discussed above, the
higher rental yield and promising rental outlook of the sector
are also attracting more foreign investments. As a result, we
expect capital appreciation to grow faster than rental growth
over the next few years. As a result, we expect cap rate
compression to continue.
Page 16
Industry Focus
Key successful model even global brands such as GLP need to consistently either look
for Chinese JV partners or invest in Chinese companies that
Entry barrier is getting higher have access to land to tap into China’s logistics market. Global
PE funds are also taking the same approach to enter China’s
Access to land is the most difficult entry barrier. Although the
logistics market. For example, Warburg Pincus and APG each
central government has been supportive of building a
has a big stake (>50% and 20% respectively) in the emerging
nationwide modern logistics system, local governments are less
warehouse player, E-Shang. Carlyle and Seatown (under
in favour of offering land for logistics properties. This is due to:
Temasek) also have big stakes in Yupei, another fast-growing
(i) logistics properties usually need a large parcel of land, but
warehouse landlord.
tax revenue from leasing warehouses is limited, and (ii) there is
limited contribution to the local economy and tax collections as
retail/online sales usually take place elsewhere. As a result,
Both domestic and global investors are keen to invest in warehouse players/assets in China
Date Investor Amount Investee

May-13 Alibaba, Yintai, Fosun, ForCHN, and leading domestic express carriers Rmb5bn Cainiao Network
Jul-13 Goodman, CPP US$500m Goodman
Aug-13 Carlyle, Seatown US$200m Yupei
Dec-13 Alibaba HK$1.86bn Haier RRS Express
Feb-14 BOC, HOPU Fund US$2.35bn GLP
Apr-14 PingAn Real Estate Rmb3bn Logistics property projects
May-14 APG US$650m e-Shang
Source: Company, DBS Vickers
Low-cost funding is another obstacle. As a result of the big of a “built-to-suit” model is required, we expect companies
initial investment required, access to low cost funding is also an with expertise in this area to be more likely to acquire tenants.
important factor for warehouse developers to succeed. Similar
to office and commercial properties, the payback period for a
warehouse investment is long. The rental yield for a typical
warehouse is about 6-7% in Beijing and Shanghai, and 8-9% in
lower-tier cities. Low-cost funding could ensure a higher return.
Access to talents is also critical. As a result of the rapid
expansion of leading warehouse players, the competition for
talents is becoming increasingly intensive, which also pushes up
the labour cost. According to DTZ, in Shenzhen and Qingdao,
wages have been increasing by 17% and 14% respectively per
year since 2009. This indicates a significant imbalance between
the demand and supply of labour. Many domestic developers
such as Vanke and CSC, and e-commerce players such as
Alibaba and JD.com, have also started their warehouse
businesses in recent years, which has resulted in a significant
shortage of professionals in this field. Without a strong brand
name, warehouse players would find it very difficult to locate
and attract talents. Even with right talents on board, new
market players will also need some time to cultivate the right
culture and accumulate knowledge on operation management.
Tenant acquisitions also take time to materialise. As a result of
greater focus on customer satisfaction, e-commerce or 3PL
players tend to choose well-known warehouse providers to
ensure service quality. This is why global brands such as GLP
and Goodman often find repeat customers. We have also seen
a trend that developers are increasingly signing master leases
with key tenants to provide services across the country. As more
Page 17
Industry Focus
Fast growth of leading players JV/partnership between key warehouse plays
While the industry is fragmented, major players are growing Dat e Ev ent
faster than smaller ones. As discussed above, the top 10 players Dec-10 GLP acquired 19.9% stake in Chiwan (Blogis)
account for only 1.9% of China’s warehouse market. GLP is (200053.CH) at HK$11.75/share or total
consideration of HK$547m or SG$92.7m
the largest player with nearly 60% market share in the modern
Apr-11 GLP acquired 53.1385% stake in Airport City
logistics space, followed by Blogis, Goodman, Prologis,
Dev elopment at Rmb2,483m (or
Mapletree and Yupei. Due to their strengths in the above-
US$375m/SG$485m)
mentioned areas, these industry leaders are growing their Aug-11 GLP acquired 90% stake in V ailog
warehouse GFA at a fast pace. Oct-11 GLP acquired 49% stake in Yupei from Equity
International (Equity International acquired 49%
Growth of key logistics property plays (2010-2014) stake in Yupei at US$46m in 2008) at US$53.6m
Mar-12 GLP acquired 1% stake in Yupei
(m sm) 2010 2011 2012 2013 2014 CAGR Early -2013 Yupei bought back 50% stake from GLP
GLP 3.2 4.6 5 6.3 10.7 27% J un-14 Wuzhou and GLP formed a J V (Wuzhou:GLP,
Blogis 0.7 0.7 0.9 0.9 1.4 16% 20:80) to co-dev elop logistics properties in China
Goodman 0.3 0.4 0.5 0.7 1.3 34% Aug-14 GLP announced to acquire 15.34% stake in
Mapletree 0.6 0.6 0.6 0.8 0.8 6% CMSTD at Rmb2bn or US$324m
Yupei 0.4 0.2 0.3 0.3 0.7 12% GLP also announced to form a J V with CMSTD
Prologis (AMB) 0.4 0.4 n.a. 0.6 0.7 12% (49:51) to dev elop logistics properties in China
e-Shang n.a. n.a. n.a. 0.3 0.6 100% with initial pipeline up to 1.3m sm
Airport City Dev 0.3 0.3 0.3 0.4 0.5 11%
Source: CBRE, GLP
Source: CBRE
Page 18
Industry Focus
Key logistic property plays in China
Company Stock code Profile

GLP GLP.SP A leading logistics developer with presence in China, Japan, Brazil and the US
Presence in 35 cities in China with total area of 21.8m sm (11.8m sm completed, 10.0m sm under development
and 12.1m sm of land reserves)
36.4%/10.0% owned by GIC/Lone Pine
Blogis n.a. Established by Chiwan (200053.CH) and China Nanshan Dev in Shenzhen
Manages 1.4m sm of warehouses in Shenyang, Langfang, Tianjin, Nanjin, Nantong, Shanghai, Kunshan, Wuhan,
Chengdu, Guangzhou, Shenzhen
Chiwan is also 19.9% owned by GLP
Goodman n.a. Started in 2001 with a total GFA of 2.2m sm completed so far
Owns 32 projects with 16 projects having been stabilised
9.9% owned by CIC, CPPIB is also an investor
Mapletree MLT.SP Asia-focused warehouse provider
Manages 9 warehouses in Shanghai, Guangzhou, Zhengzhou, Wuxi, Xi’an, HongKong
44.4% owned by Temasek
Prologis PLD.US Operates the world's largest portfolio of industrial properties, with a total area of 55m sm in 21 countries
Manages 23 warehouses with total GFA of 700k sm
Yupei n.a. Established in Shanghai in 2002
Owns 4.6m sm of landbank, of which 3.0m sm are under operation or development, covering 25 cities across
China
Carlyle, RRJ and Temasek Sea Town hold stakes
Focuses on cold-chain warehouses
Targets to list in HKEx by 2H16
e-Shang n.a. Established by Warburg Pincus with a total investment of US$200m
GS offered US$120m pre-IPO loan in 2013
APG invested US$650m to buy a 20% stake in e-Shang in 2014
Operates 1.5m sm of warehouses in 11 cities in China
2m sm of warehouses are under construction
ACL n.a. Established by Capital Airports Holding Co., GLP and other institutions including Beijing Shunyi District People's
Government in Dec 2004
53.1% owned by GLP
Manages total GFA of 480k sm in Beijing
BPHL 925.HK Started negotiations for various acquisitions of warehouse projects/land in 2011.
It had three warehouses generating rental income in 2014.
Owns 1mn sm warehouse landbank and aims to manage 3m sm o by 2019
Vailog n.a. Manages logistics properties in Shanghai, Chongqing, Chengdu, Nanjing, Beijing, Shenyang, and Langfang
90.0% owned by GLP
Page 19
Industry Focus
Several big new comers are growing fast. Several e-commerce

Comparison of logistics areas, newcomers (2014E)
players, such as Jingdong and Alibaba, have become
newcomers in this space. They build, own and operate their
own warehouses as the current supply of logistics space cannot 8
cope with their rapid expansions. Strategic partners of Alibaba
Alibaba adopts the asset-light approach. China Smart Logistics

4
(“Cainiao 菜鳥”, 48% held by Alibaba Group) has been
developing a smart logistics IT system. In this system, China
Smart Logistics utilizes its “big data” analytic capability to 0
process customer orders to come up with optimized delivery
China Dangdang
VIPshop
Best Express (百世匯通)
YTO Express (圓通速遞)

Haier Logistics
Amazon (US
EMS
S.F.Express (順豐速運)
JD.com
operations)
routes, and logistics partners such as S.F. Express (順豐速運)
and EMS provide the deliveries. China Smart Logistics has also
secured lands in key locations (e.g. Hangzhou, Guangzhou,
Wuhan, Chengdu, Beijing and Tianjin), to develop logistics
hubs for its network. As of June 2014, China Smart Logistics
had the capability to deliver c.17m parcels per day; the
ultimate goal is to deliver >100m parcels daily, which would
reach the buyers within 24 hours of order placement. Note: Alibaba Group rides on the logistics capability of its strategic
delivery partners. Its China Smart Logistics (“Cainiao”) has secured
JD.com pursues own logistics model. Aiming to offer timely several locations in China to develop key distribution centres.
and accurate deliveries to customers, JD.com has been
operating its own fulfilment infrastructure (i.e. warehousing Source: Companies, DBS Vickers
and delivery facilities) since 2007. As of Sep 2014, JD.com Yet, not all e-tailers are able to build their own logistics space
operated 118 warehouses (total GFA of c.2.3m sm), 2,045 as entry barriers to the industry are quite high. As a result, such
delivery stations and 1,045 pick-up stations across 1,855 a trend may not necessarily pose a great threat to standard
counties and districts. warehouse developers. Most small- and mid-sized e-tailers still
Besides, the company has been constructing highly-automated have to lease public warehouses.
warehouses, “Asia No.1 (亞洲一號)”, in key locations. The first
“Asia No.1” warehouse in Shanghai was launched in Oct 2014,
with c.100,000 sm of GFA (the 1st phase). It has also started to
build “Asia No.1” warehouses in Guangzhou, Wuhan and
Shenyang, to be launched this year. There are plans for more
“Asia No.1” warehouses in Beijing, Chengdu and Xi’an, to
improve JD.com’s logistics capability.
Page 20
Industry Focus
Logistics options for e-commerce players
E- t ailin g E- c o mmerc e
mark et en t erp rises L o g ist ic s D ist rib u t io n T ren d s o n lo g ist ic s/ d ist rib u t io n o p t io n s
C2 C Taobao Self-operating Third party • Looking to build self-operated warehouses and set up a logistics
and third party distribution and installation sy stem for home appliances and large-sized
items with Haier RRS Express
• 3PL
B2B A libaba Self-operating Third party • Looking to build self-operated warehouses and set up a logistics
and third party distribution and installation sy stem for home appliances and large-sized
items with Haier RRS Express
• 3PL
B2C V ancL Self-operating Self-operating • Built ov er 350,000 sm warehouses in ten cities such as Beijing, Shanghai,
Guangzhou, Xi'an, Chengdu and Wuhan as of end-2012
• Distributed by RF D Express and opened platform to third party
Uniqlo Third party Third party • 3PL
• Third-party distributors such as EMS, Yamato and S.F . Express
Haier Self-operating Self-operating • RRS, with 9 shipment bases and 90 distribution centers nationwide,
and third party cov ering a total GF A of 2 million sm.
• Large home appliances mainly distributed by RRS, and small ones by S.F .
Express and EMS.
J D.com Self-operating Self-operating • 7 logistics centers, 6 distribution centers in Tier I cities, and warehouses for
and third party large-sized commodities in another 21 cities.
• Mainly distributed by its own distribution team. License obtained in J une,
2012.
Suning.com Self-operating Self-operating • Logistics bases in 15 cities put into use as of 1H 2013. 14 logistics bases are
under construction and another 13 hav e acquired the land. 12 small-
commodities auto-sorting warehouses are under construction. 60 logistics
bases, 12 auto warehouses and 500 city distribution sites are scheduled to
complete by 2015.
• A cquired international express business license in J anuary 2014, and plan to
expand the number of couriers into 50,000 by 2015.
Sfbest.com Self-operating Self-operating • It has its warehouses in 26 cities and 3 integrated temperature-controlled
warehouses in eastern, southern and northern China
• S.F . Express
J umei.com Self-operating Self-operating • Ov er 40,000-sm warehouses with constant temperature located in Beijing,
and third party and third party Shanghai, Chengdu and Guangzhou
• Commodities are distributed by its own distribution team in Beijing, while by
3PL in other areas.
Source: CBRE; DBS Vickers
Page 21
Industry Focus
completed warehouses as yet. Although CMSTD claims to have

Emerging China players 1.5m sm of warehouse space in operation, most of its current
warehouses are aged facilities.
Limited number of investible listcos in the sector, but more In terms of warehouse land use rights on hand, CSC ranks the
may come into sight. We have identified listed companies in second with 4.9m sm, followed by Blogis, CMSTD, BPHL, and
Singapore, Hong Kong and China and those that have China Mapletree. In terms of city exposure, Blogis has landbanks in
logistics properties as their business development focus or 15 cities ranked the highest among the peers excluding GLP,
consider the sector as a key earning stream in the future and followed by CSC’s eight cities. Others have limited
included them in our analysis to select investible listcos in this diversification. In terms of exposure to first-tier cities and their
promising sector. These include GLP (GLP SP), Malpetree (MLT catchment areas, BPHL enjoys the most exposure.
SP), Chiwan Base (200053 CH) which owns 77% of Blogis,
Vanke, CSC, and Blogis may see higher growth in GFA in
China Fortune Land and Development (CFLD) (600340 CH),
operation in the coming years. Vanke is planning to increase its
China National Materials Storage and Transportation
GFA in operation to 10m sm in three years from nil at the
Corporation (CMSTD) (600787 CH), Vanke (2202 HK / 000002
beginning of this year. CSC has 4.8m sm warehouse land on
CN), Beijing Properties (BPHL) (925 HK), CSC (CSC) (1668 HK),
hand. Given that the development pace will be in line with
and Wuzhou (1369 HK). Going foward, we expect to see more
construction of trademalls, we assume these sites will be fully
players in the sector to be listed including Yupei and E-shang
operational in five years or later, which represents an annual
and spin-offs from current companies in separate listings or
growth rate of 34%. Blogis plans to add 720k sm of space per
REITs.
year in the next five years to reach 5m sm, representing annual
Emerging players with a focused strategy may be like GLP growth of c. 30%. BPHL plans to add c. 300k sm of space per
during its earlier years in China. GLP achieved 49% CAGR year in the next five years, representing annual growth rate of
during the past nine years in terms of completed GFA in China, 25%. If developers can execute on their expansion plans, GLP,
compared with 81% during the period between 2006 and Vanke, and Blogis are likely to the top three players in the
2010 when it commenced operations. Emerging players are sector.
those that are shifting their focus from other businesses to this
Players with a dedicated focus on logistics property are likely to
sector or diversifying into warehouses. Chiwan (Blogis) and
outperform. Blogis and BPHL are companies concentrating on
BPHL shifted their business focus from other businesses to
the warehouse market in China, compared with most other
warehouse investment and operations. Given their focused
companies that are exploring this market or forming a new
strategy, we believe they are likely to achieve high growth in
asset class. Vanke, CFLD, CSC, and Wuzhou’s main focus is on
the sector just like GLP during 2006 and 2010. The core
residential, trade mall, or industrial park projects. This is a
businesses of CFLD, CMSTD, CSC, and Wuzhou are not
double-edged sword for them. On one hand, their main
warehouses but that they are involved in industrial parks and
businesses may generate capital or demand for the warehouse
trade malls that generate demand for warehouse. The
segment. On the other hand, the warehouse business may not
intention is to grow a warehouse portolio alongside their own
get priority for capital/manpower allocation. GLP and
main businesses. Vanke is an exception as it commenced its
Mapletree consider China as their main growth driver for now.
warehouse business from scratch, after missing the opportunity
to build up an investment portfolio in the office and retail
segments. Vanke is determined to growth its warehouse
portolio fast, with the potential to spin it off in the coming
years.
GLP is the dominant player in the sector in many aspects. It has
the largest warehouse space in operation (11.8m sm), the
largest area under construction or in land reserve (21.8m sm) in
total. It has a footprint in 35 cities in China and covers all key
cities on the logistics nodes. These numbers rank far ahead of
other players in the industry. However, the other players are
growing fast as well.
Excluding GLP, Blogis ranks the highest in terms of GFA in
operation and city coverage among the nine players we are
comparing in this report. Blogis has 1.4m sm warehouse space
in operation and is considered the second largest modern
warehouse player in the sector. CSC, Mapletree, and CFLD
have 180k sm to 465k sm of space. Vanke and Wuzhou, which
have just started their warehouse land acquisitions, have no
Page 22
Industry Focus
Warehouse area in operation Warehouse space increase per annum
k sm k sm
14,000 4,000
12,000 3,500
10,000 3,000
2,500
8,000
2,000
6,000
1,500
4,000
1,000
2,000 500
0 0
Malpetree
Malpetree
Vanke
Yupei
Vanke
CMSTD*
Wuzhou
CMSTD*
BPHL^
Wuzhou
GLP
CSC
CFLD
GLP
CSC
BPHL
CFLD
Blogis
* Estimated * Estimated Blogis
Source: DBS Vickers; Company ^Landbank increase per year
Source: DBS Vickers; Company
Warehouse land use rights
GLP CSC B lo g is CM ST D B PH L M alp et ree CF L D Wuzhou V an k e

Shanghai * 297 * 212 33
Beijing * - 617 -
Guangzhou * 131 - 117
Shenzhen * 324 60 - -
Tianjin * 271 * 60 -
Zhengzhou * 712 - * - 78
Wuhan * 250 * 115 -
Wuxi * 118 * - 45
Nanjing * 107 * - -
Xi'an * 623 - * - 23
Qingdao * 133 - -
Chengdu * 194 - -
Chongqing * 639 - - -
Sheny ang * - * - - 101
Nanjing * 107 - -
Others * 2,570 560 * 63 125 260 88 76
Total 21,800 4,868 2,120 1,500 1,067 421 260 88 177
* The company has footprints in the city but we don’t have exact numbers.
Page 23
Industry Focus
Players’ competitiveness Access to capital – GLP, Mapletree and BPHL stand out
due to low funding cost, while others have to reduce
As mentioned in the previous section, access to warehouse funding cost to be competitive
land, low-cost capital, talents and tenant acquisitions are
critical for a player to succeed in this sector. Our comparison GLP and Mapletree have access to the lowest cost of funding.
shows that. GLP has access to stock market funding, both onshore and
offshore bank loans, overseas bond market, and established PE
Access to land – CFLD stands out but GLP, Blogis and funds. Mapletree has access to stock market funding and both
Vanke are competitive too onshore and offshore bank loans. Their funding cost is as low
as 3.4% and 2.1% respectively.
The companies have different channels in obtaining warehouse
land in the limited warehouse land supply environment. BPHL also enjoys low-cost borrowing of 4.3% at this moment.
It has access to onshore and offshore bank loans and capital
Overall, we consider CFLD, GLP, Blogis, and Vanke as having
injections from partners. It may also explore onshore corporate
better access to land than others.
bonds and offshore bonds issuance, given its SOE background.
CFLD has the best access to warehouses in the catchment area
Blogis and CMSTD can borrow at around the PBOC benchmark
of tier 1 cities. It is the operator of 22 industrial parks in the
rate. They have access to domestic MTN and bank loans, and
catchment areas of tier 1 cities, controlling the zoning, master
their current average funding cost is around 6% to 7%.
plan, and land sales of these parks. It has the advantage in
Limited by its B-share listing status, Blogis has limited access to
acquiring the warehouse land in these parks if it sees sufficient
the equity market, but if it can convert the B-shares into H-
demand.
shares, it may help the company to access the overseas lending
GLP and Mapletree, which are foreign players, are welcomed market. CMSTD has access to the A-share equity market,
by the cities that would like to attract foreign investments. As proven by its proposal to place new shares to GLP, but the
international brand names with connections to foreign timing is out of the company’s control.
companies, local governments may favour them in supplying
CSC’s average funding cost is 6.8% at present after four to
land in anticipation that they can bring in foreign companies as
five years’ of debt restructuring efforts. It currently has access
good tax sources for the park. However, our conversation with
to domestic mid-term loans, bank loans, offshore bank loans
industrial experts unveiled that such an advantage may
and bond markets, and the H-share equity market. However, in
dissipate as China is transforming from export-oriented
our view, it might need to further reduce fund cost to improve
economy to domestic consumption-driven economy. GLP has
its competitiveness in warehouse sector.
been forming JV or partnership with various local players to
enhance its access to land. Given GLP’s much larger scale than Vanke has the most diversified funding channel but still has
Malpetree, we view GLP is better than Malpetree in room to reduce funding cost for warehouse business. Vanke
accessibility to land. has access to both the A- and H-share stock markets, onshore
and offshore lending markets, including onshore MTN,
Blogis, BPHL, CMSTD are local warehouse operators with SOE
property PE funds, and extra cash from the residential
background. Showcases of well-run existing warehouses and
development business. However, Vanke’s current funding cost
the connections of parent companies are their advantages in
of 7.3% is still high in the context of warehouse rental yield.
land banking.
Wuzhou and CFLD’s funding costs are as high as 10.1% and
CSC and Wuzhou have similar channels to source warehouse
9.6% respectively, which are excessive for a warehouse play.
land. These two companies own or acquire large-scale
They have to reduce their funding costs and expand their
suburban land to develop trade malls and related supporting
funding channels to beat the competition.
facilities, which local governments encourage. They can use a
portion of their mega-sized sites for warehouse use. Given that Access to human resources: SG and HK listed companies
CSC’s current presence is mainly in tier 2 cities and Wuzhou's may have better chance to attract high quality talent
mainly in tier 3 cities, we view CSC’s ability as being better
than Wuzhou's. GLP, Mapletree, Blogis, and BPHL have well-established teams
for warehouse business. As newcomers enter the market, they
Vanke, although new to the warehouse sector, is the leader in
may face challenges in retaining their team, especially
the property sector with existing footprints in 60 cities. That
experienced senior staff.
will translate into familiarity with 60 cities’ local zoning and
land supply plans. Vanke’s brand name will also help the Vanke and CFLD can be competitive in assembling a new team.
company to access land. Given their corporate culture and disclosed management
remuneration, we believe they are competitive in the
recruitment process. However, Vanke’s management team may
need to change their mindset from fast asset turn to
warehouse development cycel. In order to adopt to the new
Page 24
Industry Focus
business, a different set of KPIs may be necessary for

warehouse team for maintaining their team
CSC and Wuzhou may be less competitive in attracting talent
compared with Vanke and CFLD. CMSTD may lose self-trained
manpower to competitors if the GLP placement deal cannot go
through, as ground check reveals that the company has a less
market-oriented corporate culture.
Access to tenants - GLP, Mapletree, Blogis, and BPHL

have established customer bases while others are
building up theirs
GLP, Mapletree, Blogis, and BPHL have an established

customer base. Their major tenants are manufacturers, 3PL,
freight forwarders, and e-commerce operators (both MNCs
and large domestic players). GLP and Mapletree may have
better brand names to provide consistent customer experience,
especially to MNCs, than Blogis. BPHL is also building a group
of specialised tenants for its cold chain warehouse.
Vanke and CFLD are building their tenant base through
strategic cooperation agreements. But Vanke signed a strategic
cooperation with China Railway Logistics Group to serve the
latter's nationwide warehouse needs. CFLD has established a
strategic partnership with JD.com to help the latter establish its
national warehouse network.
CSC and Wuzhou’s targeted tenants will be mainly SMEs
which are also users of their trade malls. CSC may have some
cooperation with JD.com through Tencent, while Wuzhou has
brought on GLP as partner. These could enhance these two
companies’ tenant profile.
Page 25
Industry Focus
Competitive advantages
Access to land Accessibility to capital Accessibility to tenants Accessibility to talent
Overall Score Comments Score Comments Score Comments Score Comments
GLP 19 4 Foreign player with good track record; 5 Low average funding cost of 3.4%; 5 Strong access to both MNCs and local 5 Senior managers can be
established network in China; Cash rich; tenants including JD.com, Deppon, Best from headquarters; MNC
partnership with local players access to equity market including REITs, Logistics, Sinotrans, brand name; competitive
overseas bank loans and bond markets; Schenker and Haier Logistics compensation packages
good access to property funds
Malpetree 17 3 Foreign player with good track record 5 Low average funding cost of 2.1%; 5 Strong access to both MNCs and local 4 Senior managers can be
access to equity market, overseas bank tenants like DHL, New Times Intl, APEX, from headquarters; MNC
loans and bond markets; Guangzhou Eastern American Steel brand name; competitive
access to property funds Structure Manufacturing, Shanghai Dia compensation packages
Retail, Zhengming, Digital China, etc.
BPHL 16 4 Focused business strategy will help the company 5 Low funding cost of 4.3%; 4 Current tenants include Nippon, Yamato, 3 Tough competition in
concentrate on sourcing for warehouse land; potential to access overseas bond MOL, Kerry, LF, SF, Vancl, DHL, Interlog, attracting talents.
SOE background and partnership with international market/bank loan with SOE background; KWE, Best Express, Yi Teng Zhong,
players will be helpful for accessing land too introduced foreign investors as partners Expeditors, Cosco, China Railway, Amazon,
for warehouse projects Sinotrans, and other food chain providers.
Chiwan 15 4 Focused business strategy; 3 Average funding cost of 6%-7%; 4 Current tenants include L&F, Volkswagen, 4 Enjoy self-trained talent
(Blogis) Good track record in warehouse operations will help access to onshore MTN; SF Express, Cardianal Health, Deppon, Ting pool, but will face
the company to source for warehouse land; proposed to issue RMB bonds; Tong, TOLL, ANE, Decathlon, Wastons, DHL, competitors' competition in
SOE background limited access to equity market JD, Nike, Mercedes-Benz, etc. maintaining them
CSC 13 4 Currently has large-sized land zoned for industrial 4 Average funding cost of 6.8%; 3 Mainly to serve SMEs who are users of their 2 Tough competition in
use in tier 2 cities, which can be partially used as Access to overseas bond market; trademalls, and e-commerce players. attracting talents.
warehouse facilities domestic loans and MTNs
Wuzhou 11 3 Currently has large-sized land zoned for industrial 3 Average funding cost of 10.1%; 3 Mainly to serve SMEs who are also owners 2 No warehouse operation
use in tier 3 cities, which can be partially used as currently borrowing through CBs, senior or tenants of their trademalls team in place yet; tough
warehouse facilities; notes, and domestic bank loans competition in attracting
partnering with GLP talents.
Vanke 14 4 Brand name in property sector; 4 Average funding cost of 7.3%; 3 Strategic cooperation with China Railway 3 Competitive compensation
In-depth knowledge on city zoning plan and land cash rich; Logistics Group; potential to bring in real packages
supply domestic and overseas equity/bond estate suppliers
market;
potential to bring in foreign property fund
CMSTD 10 3 The company has aged warehouses in 16 key cities 4 Average funding cost of 6% to 7% 2 Mainly raw materials producers; trying to 1 Traditional SOE culture;
including some in core areas. Upon relocation mainly bank loans; broaden its tenants base to consumer uncompetitive packages
requests made by the government, the company no MTN yet but may be able to do so; companies; if GLP is introduced as strategic
may be able to get larger sized land sites for modern proposed A-share placement to GLP shareholder, tenant mix may change
warehouse developments. But timing is uncertain. significantly
CFLD 12 5 As an industrial park operator in 22 cities including 2 Average funding cost is 9.6%; 3 Established strategic partner with JD to help 2 Competitive compensation
Beijing, Shanghai and catchment of key tier 1 cities, mainly funding through trusts and bank JD establish its national warehouse network packages
it is able to participate in the master planning and loans;
primary development of industrial parks and in turn
be able to access warehouse land.
Source: Companies, DBS Vickers
Page 26
Industry Focus
Financials
to support its expansion in warehouses. Vanke’s low net debt

BPHL, Chiwan, GLP have more revenue contribution from
ratio and gross debt ratio makes it the best prepared for
China warehouse sector. Although GLP currently has c. 37%
expansion. GLP is another player with a strong balance sheet
revenue from China, the contribution is expected to increase to
for expansion. CMSTD and BPHL’s balance sheets have some
over 70% by 2016. Vanke and CSC may see higher growth in
room to gear up for expansion. Chiwan’s net debt ratio looks
terms of warehouses under management, but revenue
high mainly due to different accounting treatments for
contribution from warehouses as % of total revenue is still
investment property revaluation. Our estimate of Chiwan’s net
limited. In terms of absolute revenue, Chiwan, CMSTD, and
debt ratio based on the same accounting base is c. 70%,
Mapletree’s base is relatively large, although this is far less than
which is high and the company may need to expand funding
GLP’s Rmb2.7bn.
channels. Wuzhou, CFLD and CSC’s current leverage is
Vanke and GLP have stronger financials for expansion. Vanke relatively high and their main business may require capital
has cash generated from its residential development business more than warehouse businesses.
China warehouse business as % of total revenue
Ch iw an
2014A CSC W u z h o u B PH L CM ST D CF L D V an k e GLP M alp et ree
( B lo g is )
Rev enue 7,806 4,308 162 21,477 26,886 713 137,994 4,354 1,495
Warehouse income-China 77 0 125 389 0 713 0 2,732 304
A s % o f t o p lin e 1% 0% 77% 2% 0% 100% 0% 63% 20%
Ch iw an
2015E CSC W u z h o u B PH L CM ST D CF L D V an k e GLP M alp et ree
( B lo g is )
Rev enue 9,881 5,531 245 20,857 34,167 586 171,805 4,622 1,542
A s % o f t o p lin e 1% 0% 82% 2% 0% 78% 0% 69% 18%
Ch iw an
2016E CSC W u z h o u B PH L CM ST D CF L D V an k e GLP M alp et ree
( B lo g is )
Rev enue 10,876 6,391 350 20,313 41,354 633 198,297 5,019 1,625
A s % o f t o p lin e 2% 0% 87% 2% 0% 82% 0% 76% 17%
Page 27
Industry Focus
Cash level, net debt to equity and total debt to total asset ratio
Ch iw an
CSC W u z h o u B PHL CM ST D CF L D V an k e GLP M alp et ree
(B lo g is) *
Cash lev el (Rmb mn) 6,938 1,802 1,242 1,446 16,194 375 62,771 8,891 484
Net debt to equity 65% 86% 37% 27% 83% 123% 5% 16% 0%
Tota debt to total asset 34% 28% 28% 25% 27% 52% 14% -16% 34%
Av erage funding cost 6.8% 10.1% 4.3% 6%-7% 9.6% 6%-7% 7.3% 3.4% 2.1%
* Based on Chinese accounting standard and warehouses are not revaluated. Its net debt ratio and total debt to asset ratio are estimated to be
c. 70%and c. 40%, based on our estimates
Valuation and top picks

GLP’s BP trend
GLP’s historical average P/BV multiple was 1.2x and discount to
NAV has been c. 20% on average since it was listed in 2010. (x)
The stock is currently trading at 1.1x P/BV and 29% discount to 1.6
NAV. Our analyst covering the stock from Singapore believes +2sd: 1.52x
GLP should trade at a narrower 10% discount to NAV given its 1.4
increasing exposure to the promising China warehouse market. +1sd: 1.36x
We believe the companies on our radar can justify 25%- 1.2 Avg: 1.2x
35%discount to NAV for their warehouse business, given
‐1sd: 1.04x
faster growth and promising market conditions, but also taking 1.0
into account their smaller scale and lower trading liquidity. We ‐2sd: 0.89x
applied sum-of-the-parts approach to incorporate these 0.8
companies’ various other businesses such as residential
developments, trade malls and ecommerce. 0.6
Jul-11 Jul-12 Jul-13 Jul-14
Beside GLP, we also like Chiwan (Blogis), BPHL and CSC as
emerging China warehouse plays. Source: Company, DBS Bank
Page 28
Industry Focus
TP and valuation methods
GLP CM ST D * Ch iw an B PH L CSC M alp et ree CF L D W u z h o u V an k e- A

SGD CNY HKD HKD HKD SGD CNY HKD CNY
Current price 2.54 13.36 18.21 0.6 2.39 1.13 26.57 1.38 15.41
PB 1.1 4.0 1.9 0.9 0.7 1.1 5.2 1.1 1.7
Discount to
27.9 n.a. 48.5 35.0 53.8 (9.7) 41.0 n.a. 15.7
NA V
PE F Y15 37.3 123.5 32.4 n.a. 8.9 15.4 14.7 19.7 10.2
PE F Y16 34.1 109.0 35.1 n.a. 7.6 14.8 11.8 15.6 9.2
35% discount to
NA V for 10% discount to
10% 25% 25% w arehouse, 55% NA V for industrial
V aluation On par w ith
discount Non-rated discount discount for other IP, 6.8x PE park business and Non-rated 12.5x PE
method NA V
to NA V to NA V to NA V for property sales; 10x PE for property
and 25x PE for sales business
ecommerce
TP 3.17 n.a. 21.48 0.70 2.96 1.31 31.60 n.a. 18.91
Upside 25% n.a 18% 17% 24% 16% 19% n.a 23%
Page 29
Industry Focus
Snapshot of the listed emerging warehouse players Rmb31.60 is based on SOTP valuation, with 10% discount to
in China NAV for industrial park/properties segment (benchmarking to
GLP, given both are leaders despite having different niche
Shenzhen Chiwan Base Petroleum (Chiwan (Blogis), markets) and 11.8x FY15F PE for residential/commercial
200053.CH, BUY). We initiate coverage with a BUY rating and properties segment (benchmarking to A-listed large developers’
HK$21.48 TP, implying 18% upside potential. Through its average). CFLD is now trading at 14.7x FY15F PE, with 2.0%
subsidiary Blogis, the company operates the second largest yield, which is not expensive given its leadership in the niche
portfolio of modern logistics properties in China. We are market and expected earnings CAGR of 30%. Better-than-
positive on the company given its good track record in logistics expected sales driven by ongoing Beijing-Tianjin-Hebei
properties business and solid development pipeline. The integration could be potential catalyst.
nearest comparable would be CMSTD as both are logistics
SOEs with similar size of warehouse portfolios. However, its Vanke (2202.HK / 000002.CH, BUY). We maintain our BUY
market cap is only one-fifth of CMSTD’s, which we think is calls on both Vanke-H/A with TP unchanged at
mainly punished by its B-share status and low liquidity. HK$23.69/Rmb18.91, based on 12.5x FY15F PE, benchmarking
Potential B-to-H conversion, if successful, should broaden its to its nearest comparable COLI’s 2012 peak valuation. Vanke is
funding sources and improve trading liquidity. Our HK$21.48 a newcomer to the logistics property industry, but it is looking
TP is based on 25% discount (larger than 10% we applied for to evolve into the second largest player in China in 3-5 years.
GLP given its smaller size and lower profitability) to its We believe its well establishment network with local
estimated NAV of HK$28.64. The stock’s valuation is attractive governments, partnership with global investors and third party
at 36% discount to NAV. logistics providers should provide easy access to land, fund and
tenants. Vanke-H/A shares are now trading at 10.5x/10.2x
Beijing Properties (Holdings) Limited (925.HK, BUY). We initiate FY15F PE, which is undemanding. Potential spin-off of property
coverage with a BUY and HK$0.70 TP. The company is now a management business and faster-than-expected growth in
pure warehouse play after its successful restructuring. To logistics properties could serve as re-rating catalysts.
differentiate itself from other logistics property developers, it
has a clear strategy focusing on bonded and cold chain CMST Development (600787.CH, not-rated). We do see
warehouses, which may enable it to command better pricing improvements in upgrading its aged warehouses. It will also
and profitability than peers. Our TP of HK$0.70 is pegged at a benefit from land relocation and land revaluation as some aged
25% discount (larger than 10% we applied for GLP given warehouses are located in the city centre. In addition, it will
smaller size and lower profitability) to its estimated NAV of likely bring in GLP as a strategic investor and co-develop its
HK$0.92. NAV could potentially go up to HK$1.70/share if it warehouse business with GLP. However, we think these
successfully obtains all the land use rights for the projects in positives are already in the price as the share is now trading at
the acquisition pipeline, which could serve as re-rating catalyst. 104x FY15F PE. We prefer Chiwan (Blogis) over CMSTD due to
It is now trading at 35% discount to NAV, which looks much cheaper valuation despite similar warehouse space.
undemanding. Wuzhou International (1369.HK, not-rated). The company has
China South City (1668.HK, BUY). We initiate coverage with over 10 years’ development in the logistic trade centre business
BUY and HK$2.96 TP, implying 24% upside potential. It enjoys in tier 2/3 cities. It has tapped into logistics properties business,
leading position in trade centres in tier 1/2 cities as well as a partnering with GLP and Ping An. However, the potential
fast growing e-commence platform and a logistics properties cooperation with these partners will take time to come to
business supported by Tencent (700.HK, BUY). Given its easy fruition. The development path looks similar to CSC, but we
access to land in tier 1/2 cities, it enjoys higher margins and prefer CSC over Wuzhou as CSC has better assets with a focus
profitability. Our SOTP-based TP of HK$2.96 is based on 35% on tier 1/2 cities. In addition, its current valuation of 20x PE
discount to NAV for warehouses, 55% discount for trademall, looks rich compared to CSC’s 8.9x.
25x FY15F PE for e-commerce (benchmarking to e-retailers’ PE GLP (GLP.SP, BUY). We maintain our BUY call on GLP, given its
valuation) and 6.8x FY15F PE for property sales business market leadership and potential growth driven by its robust
(benchmarking the average PE of mid-cap Chinese developers). development pipeline, established network and strong funding
CSC is attractively trading at 54% discount to NAV and 8.9x capabilities. Currently, GLP has 185 logistics projects in 35
FY15F PE. cities with total operating area of 11.8m sm in China, much
China Fortune Land Development (600340.CH, BUY). We larger than the second player’s 1.5m sm. Our TP of SG$3.17, is
initiate with a BUY and Rmb31.60 TP, implying 20% upside based on 10% discount to estimated NAV of SG$3.52.
potential. Its business model of building industrial cities Potential catalysts include better than expected new
surrounding Beijing and Shanghai, will greatly benefit from the development starts or new land acquisitions.
government’s new urbanisation plan and Beijing-Tianjin-Hebei
integration. Its easy access to land enables it to enjoy an asset-
light model and expand logistics properties. Our valuation of
Page 30
Industry Focus
Mapletree Logistics Trust (MLT.SP, BUY). We upgraded the of 38.6% is still well below management’s comfortable level of
stock from HOLD to BUY as its recent acquisitions exceeded 40-45%, providing headroom to acquire quality assets from its
expectations. Our DCF-based TP is SG$1.31, implying 16% Sponsor, Mapletree Investments. Better-than-expected
upside and 6.6% yield. Currently, it has a diversified portfolio acquisitions could be potential catalyst.
of 117 logistics properties in pan-Asia area, with 9 properties
located in China (total GFA of 421k sm). Current gross gearing
Page 31
Industry Focus
Peers valuation
Hist . Hist . Disc /

T arget Mkt PE PE av g. Y ield Y ield P/Bk av g. RO E RO E NA V (Prem)
Currenc y Pric e Pric e Rec om Cap F isc al 15F 16F PE 15F 16F 15F PB 15F 16F t o NA V
Company Name Code L oc al$ L oc al$ US$m Yr x x x % % x x % % L oc al$ %
Beijing Properties* 925 HK HKD 0.6 0.70 Buy 523 Dec n.a. n.a. 13.3 0.0 0.0 0.9 1.4 (1.4) (0.0) 0.92 35.0
CMST Dev elopment 'A'* 600787 CH CNY 13.36 n.a. NR 4,002 Dec 123.5 109.0 27.9 0.2 0.2 4.0 2.0 3.3 3.6 n.a. n.a.
Global Logistic Props.*# GLP SP SGD 2.54 3.17 Buy 8,989 Mar 37.3 34.1 14.7 1.3 1.5 1.1 1.2 2.9 3.2 3.5 27.9
China F ortune Ld.Dev .'A'* 600340 CH CNY 26.57 31.60 Buy 11,323 Dec 14.7 11.8 10.6 0.7 0.8 5.2 3.9 40.9 36.7 45.1 41.0
Shenzhen Chiwan 'B'*~ 200053 CH HKD 18.21 21.48 Buy 822 Dec 32.4 35.1 13.8 0.3 0.3 1.9 1.7 6.0 5.2 35.3 48.5
Mapletree Logist.Trust*# MLT SP SGD 1.13 1.31 Buy 2,040 Mar 15.4 14.8 11.5 6.6 6.9 1.1 1.1 7.2 7.5 1.0 (9.7)
China South City Hdg.*# 1668 HK HKD 2.39 2.96 Buy 2,467 Mar 8.9 7.6 4.8 4.8 5.7 0.7 0.7 8.1 9.1 5.2 53.8
Hy doo Intl.Holding 1396 HK HKD 1.11 n.a. NR 575 Dec 4.9 3.9 4.8 7.9 10.1 n.a. 1.6 16.0 n.a. n.a. n.a.
Wuzhou Intl.Hdg.* 1369 HK HKD 1.38 n.a. NR 889 Dec 19.7 15.6 9.6 1.8 2.2 1.1 1.5 6.1 6.9 n.a. n.a.
Zall Dev elopment Group 2098 HK HKD 3.08 n.a. NR 1,391 Dec n.a. n.a. 6.7 n.a. n.a. n.a. 1.4 n.a. n.a. n.a. n.a.
Goodman Group GMG AU AUD 6.32 n.a. NR 15,183 J un 17.0 15.9 23.7 3.5 3.8 1.7 1.4 11.6 10.6 n.a. n.a.
Prologis PLD US USD 39.86 n.a. NR 20,889 Dec 32.9 40.1 238.0 3.8 4.1 1.2 1.3 4.6 3.8 n.a. n.a.
Shenzhen Intl.Hdg. 152 HK HKD 13.7 n.a. NR 3,353 Dec 12.5 11.6 7.9 2.9 2.9 1.2 1.0 10.1 9.9 n.a. n.a.
Sinotrans 'H' 598 HK HKD 5.01 n.a. NR 2,746 Dec 12.3 10.9 11.6 2.3 2.6 1.3 0.9 10.5 10.8 n.a. n.a.
Kerry Logistics Network 636 HK HKD 11.94 n.a. NR 2,609 Dec 17.6 15.8 10.3 1.3 1.5 1.3 1.4 7.4 7.5 n.a. n.a.
Sitc International Hdg. 1308 HK HKD 4.84 n.a. NR 1,630 Dec 9.9 8.3 9.6 4.5 5.3 1.8 1.5 18.6 19.6 n.a. n.a.
Asr Logistics Holdings 1803 HK HKD 0.8 n.a. NR 83 Dec n.a. n.a. 15.2 n.a. n.a. n.a. 8.8 n.a. n.a. n.a. n.a.
China V anke 'H'* 2202 HK HKD 19.72 23.69 Buy 28,082 Dec 10.5 9.4 9.9 3.4 3.7 1.8 1.8 17.8 17.6 22.8 13.6
China V anke 'A'* 000002 CH CNY 15.41 18.91 Buy 27,394 Dec 10.2 9.2 9.5 3.4 3.8 1.7 1.5 17.8 17.6 18.3 15.7
~ Core PE
# FY15: FY16; FY16: FY17
Source: Thomson Reuters, *DBS Vickers
Page 32
Industry Focus
PE charts
Beijing Properties (925 HK) China Fortune Land (600340 CH)
x x
25
30
25 20
20 15
+1SD: 14.3x +1SD: 11x
15
Avg: 9.8x 10
Avg: 7.3x
10
-1SD: 5.3x 5 -1SD: 3.6x
5
0 0
Sep-13
Dec-10
Nov-11
Oct-12
Jul-15
Feb-10
Aug-14
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
China South City (1668 HK) China Vanke (2202 HK)
x x
20 12
18
11
16 +1SD: 9.8x
14 10
12 Avg: 8.9x
10 +1SD: 8x 9
8 8
6 Avg: 5x
-1SD: 8x
4 7
-1SD: 2x
2
6
0
May-15
Oct-14
Feb-15
Aug-14
Dec-14
Jun-14
Jul-15
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
China Vanke - A (000002 CH) CMST Dev (600781 CH)
x x
12
400
10 +1SD: 8.5x 350
300
8 Avg: 7.3x
250
+1SD: 175.7x
6 200
-1SD: 6x 150
4 Avg: 110.6x
100
2 50
0 -1SD: 45.6x
0
May-08
May-14
Oct-10
Mar-07
Mar-13
Jan-06
Aug-09
Dec-11
Jul-15
May-11
May-12
May-13
May-14
May-15
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Page 33
Industry Focus
PE charts (continued)
Global Logistic Properties (GLP SP) Mapletree Logistics Trust (MLT SP)
x x
20 9
18
+1SD: 14.8x 8
16 +1SD: 6.3x
7
14
6 Avg: 5.1x
12 -1SD: 6.7x
10 5
8 4
6 3 -1SD: 4x
4 Avg: 10.7x 2
2 1
0 0
Jan-11
Jan-14
Jul-12
Jul-15
Oct-11
Oct-14
Apr-13
Oct-11
Oct-14
Apr-13
Jan-11
Jan-14
Jul-12
Jul-15
Shenzhen Chiwan (200053 CH) Wuzhou Int’l (1369 HK)
x x
80 35
70 30
60 +1SD: 24.3x
25
50
20 Avg: 18.4x
40
+1SD: 30.4x
30 15
Avg: 19.2x
20 10
-1SD: 8.1x
10 5 -1SD: 12.5x
0
0
May-09
Feb-03
Mar-06
Jan-00
Jun-12
Jul-15
Mar-14
Mar-15
Sep-13
Sep-14
Dec-13
Dec-14
Jun-15
Jun-13
Jun-14
Page 34
Industry Focus
PB charts
Beijing Properties (925 HK) China Fortune Land (600340 CH)

x x
50.0 7.0
40.0 6.0
+1SD: 23.7x
30.0 5.0
+1SD: 4x
20.0 4.0
10.0 Avg: 5.2x Avg: 2.9x
3.0
0.0 2.0
-10.0 -1SD: -13.3x 1.0 -1SD: 1.9x

-20.0 0.0
Sep-13
Dec-10
Nov-11
Jul-15
Feb-10
Oct-12
Aug-14
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
China South City (1668 HK) China Vanke (2202 HK)

x x
2.0 1.9
1.8 1.8
1.6
1.7 +1SD: 1.6x
1.4
1.6
1.2 +1SD: 1x Avg: 1.5x
1.5
1.0
Avg: 0.7x 1.4
0.8
1.3
0.6 -1SD: 0.4x -1SD: 1.4x
1.2
0.4
0.2 1.1
0.0 1.0
May-15
Oct-14
Feb-15
Aug-14
Dec-14
Jun-14
Jul-15
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
China Vanke - A (000002 CH) CMST Dev (600781 CH)
x x
2.0 18.0
1.8 +1SD: 1.6x 16.0
1.6 14.0 +1SD: 10.1x
1.4 Avg: 1.3x 12.0
1.2 10.0
1.0 8.0
-1SD: 1.1x Avg: 7.9x
0.8 6.0
0.6 4.0 -1SD: 5.7x
0.4 2.0
0.2 0.0
May-08
May-14
Oct-10
Mar-07
Mar-13
Jan-06
Aug-09
Dec-11
Jul-15
0.0
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
May-11
May-12
May-13
May-14
May-15
Page 35
Industry Focus
PB charts (continued)
Global Logistic Properties (GLP SP) Mapletree Logistics Trust (MLT SP)
x x
6.0 2.0
1.8
5.0
1.6
4.0 1.4 +1SD: 1.2x
+1SD: 2.9x 1.2
3.0 1.0 Avg: 0.8x
Avg: 1.8x 0.8
2.0
0.6
1.0 0.4 -1SD: 0.4x
-1SD: 0.6x
0.2
0.0 0.0
Oct-11
Oct-14
Apr-13
Jan-11
Jan-14
Jul-12
Jul-15
Oct-11
Oct-14
Apr-13
Jan-11
Jan-14
Jul-12
Jul-15
Shenzhen Chiwan (200053 CH) Wuzhou Int’l (1369 HK)
x x
2.0
7.0
1.9
6.0 1.8
5.0 1.7
+1SD: 3x 1.6
4.0 +1SD: 1.5x
1.5
3.0
Avg: 2.2x 1.4 Avg: 1.3x
2.0 1.3
1.0 1.2 -1SD: 1.1x
-1SD: 1.3x
0.0 1.1
1.0
May-09
Feb-03
Mar-06
Jan-00
Jun-12
Jul-15
Mar-14
Mar-15
Sep-13
Sep-14
Dec-13
Dec-14
Jun-14
Jun-15
Jun-13
Page 36
Industry Focus
STOCK PROFILES
Page 37
China / Hong Kong Company Focus
Shenzhen Chiwan Petroleum
Bloomberg: 200053 CH Equity | Reuters: 200053.SZ Refer to important disclosures at the end of this report
BUY (Initiate Coverage) HUNTING FOR HIDDEN GOLD

Last Traded Price: HK$18.21 (CSI300 Index : 4,176)
Price Target : HK$21.48 (18% upside)
Second largest modern logistic player in China. Although many
Potential Catalyst: Potential acquisitions to enhance NAV know that Blogis is a key player in China’s logistics property sector,
Where we differ: Read the company from a logistic property play not many realize that it is a subsidiary under Shenzhen Chiwan
rather than Petroleum Base business Petroleum Base (Chiwan), which is listed on the Shenzhen Stock
Analyst Exchange as a B-share. Blogis has 1.4 mn sm completed by end-
Danielle WANG CFA +852 2820 4915 14 and expects to grow to 5m sm by 2019. Blogis contributed
danielle_wang@hk.dbsvickers.com
more than 50% of Chiwan’s revenue in 2014, which should rise
Carol WU +852 2863 8841
carol_wu@hk.dbsvickers.com
to c. 70% by 2017. GLP acquired a 19.9% stake in Chiwan in
Andy YEE CFA, +852 2971 1773 2010.
andy_yee@hk.dbsvickers.com
Good track record in warehouse operations; SOE background is
Ken HE CFA +86 21 6888 3375
ken_he@hk.dbsvickers.com an advantage. Blogis commenced operations of its first
warehouse in Shanghai in 2003 and currently has nine in
operation. All warehouses enjoy high occupancy rates. Chiwan is
Price Relative indirectly owned by SASAC through Nanshan Development Group
HK$ Relative Index
31.2
(51.79%). Its track record along with its SOE connections may
260
26.2
240 provide it with better chances of obtaining land for warehouse
use.
220
21.2 200
180
16.2 160
140
Successful B-to-H share conversion will strengthen access to
11.2 120
100
overseas bond market in the short term. Chiwan is proposing to
6.2
80
Jul-15 convert its current listing status as B-share to H-share this year. If
Shenzhen Chiwan Petroleum (LHS)
Relative SHSZ300 Index (RHS)
the proposal is approved at its shareholder meeting, the
conversion may take place in 2016. The conversion would help
Forecasts and Valuation increase awareness of the company among investors and improve
its trading liquidity. In addition, the conversion would also
F Y D ec ( R M B m) 2014A 2015F 2016F 2017F
enhance its ability to access the overseas bond market and in turn,
Turnov er 713 586 633 745
EBITDA 586 460 485 548 lift capital constraints for expansion purposes.
Pre-tax Profit 279 185 181 211
Net Profit 207 104 96 110 Valuation:
Core Net Profit 189 104 96 110 The company’s share price is trading at 36% discount to NAV.
EPS (RMB) 0.95 0.45 0.42 0.48 Compared with GLP’s 29%, we believe the valuation is attractive
EPS (HK$) 1.18 0.56 0.52 0.60 and the strong potential growth in rental income has not been
Core EPS (RMB) 0.82 0.45 0.42 0.48
Core EPS (HK$) 1.02 0.56 0.52 0.60
priced in. We rate the counter as BUY with a TP of
EPS Gth (%) 1.8 (44.9) (7.8) 15.1 HK$21.48/share based on 25% discount to NAV, representing
DPS (HK$) 0.16 0.06 0.05 0.06 18% upside.
BV Per Share (HK$) 9.15 9.66 10.13 10.66
Core PE (X) 17.8 32.4 35.1 30.5 Key Risks to Our View:
EV /EBITDA (X) 13.4 17.1 17.7 16.6 B-to-H share conversion, if unsuccessful, may restrict the
Net Div Yield (%) 0.9 0.3 0.3 0.3 company’s access to capital.
P/Book V alue (X) 2.0 1.9 1.8 1.7
Net Debt/Equity (X) 1.2 1.1 1.4 1.5
At A Glance
ROA E (%) 13.1 6.0 5.2 5.7
Issued Capital (m shrs) 350
EPS Rev (%) New New New Mkt Cap (HK$m/US$m) 6,374 / 822
Consensus EPS (HK$) 0.39 0.43 0.50 Major Shareholders (%)
Other Broker Recs: B:12 H:4 S:0 Shenzhen Nanshan Dev elopment 51.8
ICB Industry: Financials GLP 19.9
ICB Sector: Real Estate Holding & Development F ree F loat (%) 28.3
Principal Business: Warehouse development and operation 3m Av g. Daily V al. (US$m) 1.8
Source of all data: Company, DBSV, Thomson Reuters
www.dbsvickers.com
ed-JS / sa- AH
Company Focus
INVESTMENT THESIS
Profile Rationale
Incorporated in 1984, Shenzhen Chiwan Petroleum (Chiwan Focused business strategy on logistic properties and services
Base) was listed on the Shenzhen Stock Exchange and traded Second largest warehouse player in China at present
as B-shares in June 1995. Starting from 2003, the company
Likely to maintain in the top 3 in the coming five years based
expanded its logistic services from specialised services to
on current acquisition pipeline
model logistics by establishing Shanghai (Baoshan) Blogis.
After more than ten years of development, Blogis is now the GLP holds a 19.9% stake in the company
second largest modern warehouse provider in China. Based Good track record in warehouse operations and SOE
on its current plan, it is likely to remain within the top three background enable the company to access land
in the next five years. Matured properties are operating at high occupancy rates
51.79% owned by SASAC
Potential B-to-H conversion to enhance access to capital and
stock trading liquidity
Announced B-to-H conversion plan pending shareholders’
approval
If this materialises, it will help the company to access
low-cost offshore funding for expansion
In Vanke’s B-to-H conversion case, trading liquidation
increased 5.8x one year after the conversion compared with
one year before
Valuation Risks
Our TP is based on a 25% discount to our estimated NAV. Policy risk
B-to-H conversion may be prolonged due to unexpected
reasons
Execution risk
Aggressive expansion may stretch balance sheet
May hit talent bottleneck during expansion
Source: DBS Vickers
Page 39
SWOT Analysis
Strengths Weakness
 Strong expertise in warehouse and related logistics services  Although the company (through Blogis) is the second
as well as operating specialized petroleum logistics base. largest player in the modern logistics sector, its scale is
far smaller than the number 1 player
 Good track record in existing warehouses
 High gearing ratio may constrains its expansion
 Better chance of good corporate governance with GLP on its
Board
Opportunities Threats
 Solid pipeline for expansion in the next two to three years  Competition from new players entering the business
 SOE background can be helpful for land acquisitions  Fast expansion may stretch the balance sheet
 Low funding cost compared to local peers
Source: DBS Vickers
Page 40
BACKGROUND, MANAGEMENT & STRATEGY Decline in petroleum logistics demand; more effort to grow
Blogis. The decline in oil price has led to a decline in production,
Two business lines derived from specialised logistics services for and in turn, demand for related services. CNOOC’s own
petroleum and natural gas exploration. Incorporated in 1984, petroleum supply base started to operate this year. A certain
Chiwan was listed on the Shenzhen Stock Exchange and traded amount of Chiwan’s existing customers moved to CNOOC’s
as B-shares in June 1995. The company’s main business was to base. Earnings from this business are expected to decline by
provide specialised logistics services for petroleum and natural 50% y-o-y in 2015. Although Chiwan may acquire new projects
gas exploration and production operators in South China Sea. in Chengdu and Brunei to drive growth in the specialized
Leveraging on its expertise in logistics property and services built logistics services, the timing of acquisitions is not certain yet.
up from years of experience in serving needs of petroleum and Hence, Blogis is expected to drive the company’s earnings
natual gas exploration, it extended its business lines into general growth in the coming two to three years.
logistics property development and marine engineering. General Tenants are from both matured and emerging sectors. Blogis’
logsitics property development is growing and will be a key major tenants are 3PL, E-commerce players and manufacturing
contributor to the company’s revenue and profit. companies. L&F and Volkswagen are key customers, accounting
Sizeable logistics property business hidden in the illiquid B-share for 6.6% and 4.4% of Chiwan’s 2014 revenue.
listco. Starting from 2003, the company expanded its logistics SOE under Shenzhen government with GLP as a major
services from specialised services to model logistics by shareholder. Nanshan Development Group which is indiretly
establishing Shanghai (Baoshan) Blogis. After more than ten owned by State-Owned Assets Surpervision and Administration
years of development, Blogis is now the second largest modern Commission (SASAC), holds 51.79% of Chiwan. In 2010, GLP
warehouse provider in China. As of end 2014, Blogis has a bought 19.9% in Chiwan from Offshore Joint Services
warehouse landbank of c. 2.1m sm, including nearly 1.4m sm Company of Singapore at HK$11.75 per share. Blogis is
warehouse space completed, c. 386k sm under construction, 77.36% owned by Chiwan and 22.64% owened by Nanshan
and c. 343k sm of projects with land use rights but in the Development Group.
master planning stage. In addition, it has c. 1.7m sm GFA in the
acquisition pipeline. Blogis expects to expand its warehouse
landbank to 5m sm by 2019, through two to three new projects
each year.
Fast expansion potential from landbank. Excluding non-

warehouse space, our calculation shows the company has 2.1m
sm existing warehouse landbank on hand. Although the current
scale is small compared with GLP’s 21.8m sm, it is more than BJ
Properties’ 889k sm and Malpetree’s 421k sm. It has a solid
acquisition pipeline to boost its projects on hand. Leveraging on
its SOE background and experience, Blogis stands a better chance
than newcomers to the sector in acquiring warehouse land. Close
competitors include unlisted local players like Yupei and e-Shang.
Page 41
Projects by status GFA by city excluding those pending land use rights
Ezhou 7% Nanjing 6%
Completed
9% Wuhan 7% Shenyang 6%
In operation Zhenjiang 6%
26%
Under Tianjin 9% Kunshan 5%
construction
10% Qingdao 4%
Shanghai
Pending 12% Guangzhou
land use 3%
Got land Suzhou 3%
right Chengdu
use right Xi'an 13%
46% 14% Wuxi 3%
9%
Changsha 2%
GFA by city including those pending land use rights
Shenyang 4%
Nanjing 6% Zhenjiang 4%
Ezhou 6%
Kunshan 4%
Wuhan 6% Qingdao 3%
Guangzhou 3%
Suzhou 3%
Tianjin 9%
Wuxi 3%
Changsha 3%
Shanghai 8% Chongqing 3%
Hefei 2%
Langfang 2%
Xi'an 9%
Zhengzhou 2%
Changzhou 2%
Chengdu 13% Jiaxing 2%
Shenzhen 2%
Nantong 1%
Page 42
Current projects and those in the pipeline of acquisitions
Projec t name Est imat ed GF A (sm) Int erest s (%) Cit y St at us

1 上海宝湾 Shanghai Blogis 178,740 77.36 Shanghai In operation
2 明江宝湾 Mingjiang Blogis 118,190 77.36 Shanghai In operation
3 昆山宝湾 Kunshan Blogis 141,247 77.36 Kunshan In operation
4 廊坊宝湾 Langfang Blogis 86,495 77.36 Langfang In operation
5 天津宝湾 Tianjin Blogis 151,373 77.36 Tianjin In operation
6 成都新都宝湾 Xindu Blogis, Chengdu 67,400 77.36 Chengdu In operation
7 成都龙泉宝湾 Longquan Blogis, Chengdu 126,446 77.36 Chengdu In operation
8 广州宝湾 Guangzhou Blogis 130,813 77.36 Guangzhou In operation
9 深圳宝湾 Shenzhen Blogis 42,000 100.00 Shenzhen In operation
10 南京宝湾 Nanjing Blogis 107,000 77.36 Nanjing Completed
11 南通宝湾一期项目 Nantong Blogis Phase I 46,700 77.36 Nantong Completed
12 武汉宝湾项目 Wuhan Blogis 177,000 77.36 Wuhan Completed
13 石油后勤本部东高地项目 Petroluem Base 17,800 77.36 Shenzhen Completed
14 天津滨港宝湾项目 Tianjin Bingang Blogis 120,000 77.36 Tianjin Under construction
15 无锡项目 Wuxi project 118,000 77.36 Wuxi Under construction
16 镇江项目 Zhenjiang project 148,000 77.36 Zhenjiang Under construction
17 青岛胶州宝湾 Qingdao J iaozhou Blogis 132,667 77.36 Qingdao Got land use right
18 嘉兴宝湾 J iaxing Blogis 68,334 77.36 J iaxing Got land use right
19 常州宝湾 Changzhou Blogis 69,600 77.36 Changzhou Got land use right
20 阳逻宝湾物流园工程 Yangluo Blogis Park 72,667 77.36 Wuhan Got land use right
project
21 肥东宝湾 F eidong Blogis 93,334 77.36 Hefei Pending land use right
22 西安宝湾 Xi'an Blogis 133,334 77.36 Xi'an Pending land use right
23 咸阳宝湾 Xiany ang Blogis 211,001 77.36 Xi'an Pending land use right
24 江阴宝湾 J iangy in Blogis 124,001 77.36 Suzhou Pending land use right
25 重庆九龙坡西彭宝湾物流园项目 Chongqing 100,001 77.36 Chongqing Pending land use right
J iulongpu Xipeng Blogis Park Project
26 长沙（浏阳）宝湾物流园项目 Changsha 112,334 77.36 Changsha Pending land use right
(Liuy ang) Blogis Park project
27 南京（高新）宝湾物流园项目 Nanjing 116,667 77.36 Nanjing Pending land use right
(Gaoxin) Blogis Park project
28 郑州宝湾物流园项目 Zhengzhou Blogis Park 83,334 61.89 Zhengzhou Pending land use right
project
29 青武宝湾 Qingwu Blogis 93,334 77.36 Tianjin Pending land use right
30 沈阳宝湾物流园工程 Sheny ang Blogis Park 159,334 77.36 Sheny ang Pending land use right
project
31 成都新都国际油气技术服务产业基地项目 333,335 77.36 Chengdu Mostly pending land use
Chengdu Xindu International Petro Serv ice Base right
32 鄂州宝湾物流园项目 Ezhou Blogis Park project 245,001 77.36 Ezhou Pending land use right
Page 43
Board members
N ame an d Po s it io n Ex p erien c e
Mr. Tian J uny an Mr. Tian holds a Master's degree in Management from Huazhong Univ ersity of Science and Technology . He w as
Chairman prev iously an A ssociate Professor of School of Management of Huazhong Univ ersity of Science and Technology .
Since 1996, he had serv ed as Manager of Research & Dev elopment and Executiv e Senior V ice President of
Nanshan Group. Mr. Tian has been a Director since May -10. He is presently General Manager of Nanshan Group
and Chairman of the Sev enth Board of Directors of the company .
Mr. Ming Zhi Mei Mr. Ming holds a Bachelor's degree in F inance from Indiana Univ ersity and an MBA from Northw estern Univ ersity
V ice Chairman and The Hong Kong Univ ersity of Science and Technology . Since 1996, he has held important positions in the
departments of finance, manufacture, sales, market, strategic planning and integrated management of Owens
Corning. He joined ProLogis in 2003. A t present, he is the joint founder and CEO of Global Logistic Properties and
V ice Chairman of the Sev enth Board of Directors of the company .
Mr. F an Zhaoping Holds a Bachelor's degree in Economics from China F inance College and a Master's degree in Economics from the
Director Research Institute of the Ministry of F inance of China. Mr. F an has successiv ely held posts of F inancial Manager
and Superv isor of the company . He was also F inancial and Inv estment Manager of China Nanshan Dev elopment
(Group) Incorporation in 1991. He was Chairman of the sixth Board of Directors. A t present, he is Senior V ice
President of Nanshan Group and the Director of the Sev enth Board of Directors of the company .
Mr. Wang Shiy un Holds a PHD in F inance from Cambridge Univ ersity . He has worked in ICBC, The Univ ersity of Manchester,
Director/GM Univ ersity of Sheffield, Univ ersity of Southampton before joining China Nanshan Dev elopment (group)
Incorporation in 2004. He worked as Chief Economist and V ice General Manager of the Group and w as appointed
GM of the company in A pr 2015.
Mr. Shu Qian Graduated from Hunan Institute of F inance (merged Hunan Univ ersity in 2000) majoring in A ccounting, and
Director/Deputy - GM obtained a Master's degree in Maritime Economics and Logistics from Rotterdam Univ ersity in 2004. Since 2000,
Mr. Shu has worked in the finance department in Shenzhen Chiwan International F reight F orwarding Co., Ltd.,
w hich is part of Shenzhen Chiw an Wharf Holdings Limited. He joined China Nanshan Dev elopment (Group) Co.,
Ltd as A ssistant General Manager. Currently , he is General Manager of Research and Dev elopment Department of
Nanshan Dev elopment (Group) Co., Ltd. He has serv ed as a Director of the company since May 2013. He was
appointed as the company 's V ice General Manager in A pr 2015.
Mr. Kent Yang Mr. Yang has a Bachelor's degree in A rchitecture from Univ ersity of California, Los A ngeles and a Master's degree
Director in Real Estate Dev elopment from Columbia Univ ersity . He was the directing designer in Mark Lintott Design in
1993; professional consultant in Colliers J ardine in 1996; special assistant to Chairman and General Manager-China
in Taiwan F u J i Manufacture Co., Ltd. since 1997; General Manager of Wuxi Huay ang High Tech Inv estment Co.,
since 2005. He was the General Manager of GLP Park Lingang in 2005 and F irst V ice President of Global Logistic
Properties in 2007. A t present, he is the President of the China region of Global Logistic Properties and Director of
the Sev enth Board of Directors of the Company .
Mr. He Liming Holds a Master's degree. He has prev iously serv ed as Deputy Director of the Materials Department, the Personnel
Director Div ision of the Ministry of Domestic Trade, general manager of China Nonferrous Metal Materials Corporation, V ice
President and Secretary General, Executiv e V ice President of the China F ederation of Logistics and Purchasing. A t
present, he is President of the China F ederation of Logistics and Purchasing, President of China Society of Logistics,
the 42nd President of China International Trade Promotion's logistics industry branch, Chairman of A sia Pacific
Logistics A lliance. Since May 2013, he serv ed as an Independent Director of the company .
Mr. Chen Weijie A professor-lev el senior economist. He successiv ely serv ed the post of Manager of F inance Department of the
Independent Director Eastern Oil Company CNOOC Nanhai, F inance Department Manager of CNOOC Shenzhen Branch, President of
CA CT Operators Group, Deputy General Manager and Deputy Party Secretary of CNOOC Shenzhen Branch,
General Manager of China National Offshore Oil Corporation, Ministry of Planning. Currently , he is Deputy Director
of the Professional Committee of China's Economy Petroleum Institute; member of CNOOC/Shanghai J iaotong
Univ ersity Engineering Research Center's technical committee of new energy ; V ice Chairman of Tianjin Intercity
Railway Co and Tianjin Binhai New A rea High-tech Dev elopment Company . Since May 2013, he has serv ed as an
Independent Director of the company .
Source: Company
Page 44
Board members (continues)
N ame an d Po s it io nEx p erien c e

Mr. Chen Shujun Holds a Master's Degree in Business A dministration from F inance of Chinese Univ ersity of Hong Kong, Master's
Independent Director degree in A ccounting from City Univ ersity of Hong Kong International, Bachelor of Law degree from Tsinghua
Univ ersity (A dult Education). Prev ious appointments: Senior A ccountant, CPA China; Chinese Certified Tax A gent;
judicial expert; member of the tw elfth session of the Conference of Guangdong Prov incial People's Congress
Standing Committee of legislativ e consultants; council member of the fifth CPA A ssociation of Guangdong
Prov ince, rev iewing expert for Shenzhen Municipal Gov ernment Procurement F inance Committee; expert for
Shenzhen Science and Technology Committee; council member of the eighth A ccounting A ssociation, etc.
F ormerly Guangzhou CPA auditor and Manager. In 1998, he serv ed as Managing Partner of Shenzhen Guangshen
Certified A ccountants, legal representativ e of F orensic A ccounting Guangdong Guangzhou-Shenzhen and also
serv ed as an Independent Director of Shenzhen China Bicy cle Company (Holdings) Co., Ltd. Since May 2013, he
has serv ed as an independent director of the company .
Mr. Yu Xiufeng Senior partner of Beijing DeHeng (Shenzhen) Law Office, with a PHD from J ilin Univ ersity Law School and
Independent Director Economics; postdoctorate from J ilin Univ ersity Business School, and has studied in F aculty of Law of Waseda
Univ ersity . Mr. Yu is Shenzhen F ifth People's Congress legislativ e consultant, the fourth and fifth deputies of
Shenzhen City for NPC, the fourth and fifth members of the NPC Law Committee, the decision-making adv isory
committee of Shenzhen, member of Shenzhen Municipal People's Gov ernment (Legislativ e A ffairs) Legal Expert
A dv isory Committee, arbitrator for China International Economic and Trade A rbitration Commission and Shenzhen
A rbitration Commission, Executiv e Director for Shenzhen City Law Sixth Council, and part-time tutor at Peking
Univ ersity Law School and Northeast Univ ersity of F inance etc. He is also the Independent Director for Hy bio
Pharmaceutical and Shenzhen J injia Color Printing. Since May 2013, he has serv ed as an independent director of
the Company .
Mr. Zhang J ianguo Holds a Bachelor's degree from Shanxi Univ ersity of A ccounting. He serv ed in Chiwan Wharf Holdings Limited as
Superv isory Committee F inancial Manager, Chief F inancial Officer and V ice President. A t present, he is the CF O of Nanshan Group and
Conv ener has serv ed as the conv ener of the Board of Superv isors of the Company since May 2013.
Mr. Chen Hong Senior engineer; graduated from East China Institute of Water Conserv ancy . Since 2001, he successiv ely serv ed as
Superv isor Deputy General Manager of Shenzhen Haiqin Engineering Co., Ltd., Deputy Chief Engineer of China Nanshan
Dev elopment (Group) Co., Ltd. A t present, he is Chief Engineer of China Nanshan Dev elopment (Group) Co., Ltd.
He has serv ed as Superv isor of the company since J une 2012.
Mr. Li Hongwei Mr Li has a doctorate in sy stem engineering from South China Univ ersity of Technology . He was prev iously
Superv isor Manager, Board secretary , Director and Deputy GM of Chengdu Galaxy Power Co., Ltd., Board secretary and
Deputy GM of Shenzhen Seg Dasheng Co., Ltd, Deputy GM and GM of Business Management Department of
China Nanshan Dev elopment (Group) Incorporation. He is presently COO of Nanshan Group. He has serv ed as
Superv isor of the company since A pril 2011.
Mr. Chen Lei Bachelor's degree in International F inance from Shanghai J iao Tong Univ ersity and MBA from Univ ersity of
Superv isor Southern California. He is CPA and CTA of China. He was an auditor in Ernst & Young in 1998 and F inance
Manager of Shanghai New International Expo Center in 2001. A t present, he is Senior V ice President in Global
Logistic Properties and Superv isor of the Sev enth Board of Superv isors of the company .
Ms Sun Yuhui Bachelor's degree in Economics, Lanzhou Univ ersity , and a Chinese Certified Tax A gent. Since A ugust 2003, she
Employ ee Superv isor has been a Superv isor of the F inance Department in Nanshan Group. Since J uly 2010, she has serv ed in Shenzhen
Nanshan Real Estate Dev elopment Co., Ltd as Deputy Manager/Manager of F inance Department. A t present, she is
the F inance Manager of the company and has been Superv isor of the company since May 2013.
Mr. Huang Ronghui Graduated from Guangdong Communication Poly technic, specializing in road machinery . Serv ed as superv isor,
Employ ee Superv isor w arehouse manager, assistant general manager of the warehouse department of Shenzhen Chiwan Warehouse
Limited (now called Shenzhen Baow an). Since J une-06, he has been A ssistant GM for company 's petroleum
logistics div ision and Superv isor of the company since May -13.
Source: Company
Page 45
Management team
N ame an d Po s it io n Ex p erien c e
Mr. Wang Shiy un PHD in F inance from Cambridge Univ ersity . He worked in ICBC, The Univ ersity of Manchester, Univ ersity of
Director/GM Sheffield, Univ ersity of Southampton before joining China Nanshan Dev elopment (group) Incorporation in 2004.
He was Chief Economist and V ice General Manager of the Group and was appointed at GM of the company in
A pr 2015.
Mr. Shu Qian Graduated from Hunan Institute of F inance (merged with Hunan Univ ersity in 2000) majoring in A ccounting, and
Director/Deputy GM obtained a Master's degree in Maritime Economics and Logistics from Rotterdam Univ ersity in 2004. F rom 2000,
Mr. Shu w as in the financial department in Shenzhen Chiwan International F reight F orw arding Co., Ltd., under
Shenzhen Chiw an Wharf Holdings Limited. He joined China Nanshan Dev elopment (Group) Co., Ltd as A ssistant
General Manager. Currently , he is General Manager of Research and Dev elopment Department of Nanshan
Dev elopment (Group) Co., Ltd. He has serv ed as a Director of the company since May 2013. He w as appointed as
the company 's V ice General Manager in A pr 2015.
Mr. Wang J ianjiang Doctorate in Hy draulic Structure Engineering from Wuhan Water Resources and Electric Univ ersity . He worked in
Deputy GM/Chief Xinjiang Shihezi Univ ersity (the former Shihezi A gricultural College) from Mar 1985 to A ug 1992. He also worked
Engineer in the planning department, general engineering and department of planning and construction management in
China Nanshan Dev elopment (Group) Incorporation. He has been Deputy GM & Chief Engineer of the company
since F ebruary 2011.
Mdm. Yu Zhongxia Receiv ed a Bachelor's degree from Shan'xi F inance and Economics College, qualify ing as an A ccountant. Mdm. Yu
Deputy GM & CF O has taught at Xi'an Road Management College. She joined the company in 1992 and held the posts of F inancial
Manager A ssistant, F inancial Manager of CSE, Sy stem/A udit Manager A ssistant, Deputy F inancial Manager,
F inancial Manager, A ssistant GM, Deputy CF O and CF O. She is Deputy GM & has been CF O of the company
since Nov ember 2011.
Mr. Zhang Xiang Holds a Master's degree from Wuhan Marine Traffic Engineering College. He has serv ed as superv isor, assistant
Deputy GM manager, deputy manager of operation of the company . F rom October 2005 to May 2015, he serv ed as deputy
GM and GM of Guangzhou Baowan. Since F ebruary 2011, he w as GM of Offshore Oil Logistics Serv ice Div ision
of the company and Shenzhen Baow an. He had also serv ed as Superv isor of the Board of Superv isors of the
company . Deputy GM of the company since A pril 2014.
Mr. Song Tao Holds a Bachelor's degree in International F inance from Dalian Univ ersity of Technology and Master's in
Board Secretary Technology and Economic Management from Hebei Univ ersity of Technology . He held the posts of F inance
Superv isor and Deputy Manager of finance department in Shenzhen Baow an in A pril 2004. F rom A pril 2005 to
March 2012, he was the Securities Representativ e of the company . A t present, he is the Board Secretary and
Manager of Inv estment Department of the company .
Source: Company
Page 46
Shareholding structure
SASAC SASAC
100%
China
Merchants
Group
54.62% 100%
China
Merchants
Holdings Shenzhen Guangdong
CNOOC
SASAC SASAC
(Internationa
l)
100% 100% 100% 100%
China Guangdong
China Ocean Clifford
Merchange Shenzhen Guangye
Yinchuan CNOOC Oilfields Wong
(Nanshan) Investment Investment
Limited Holding Services Investments
Holding Holding Holding
(HK) Ltd Ltd.
36.52% 0.50% 26.10% 23.49% 7.83% 1.64% 3.92%
GLP China Nanshan Development (Group) Incorporation
19.9% 51.79%
S henzhen Chiwan Petroleum Supply Base Co. Ltd.

77.36% 22.64%
Blogis
Source: Company
Page 47
Rental growth likely to pick up in 2015/2016 driven by new

CRITICAL DATA POINTS TO WATCH warehouses in operation. Total rental income grew 37%, 25%,
and 8% in 2012, 2013, and 2014 respectively. The slowdown in
Good track record from warehouse projects in operation. Nine 2014 was mainly a reflection of no new warehouses
projects contributed rental income in 2014. Shanghai and commencing operations in 2013. However, in 2015, three new
Kunshan have maintained high occupancy rates in the past four projects in Nanjing, Nantong, and Wuhan will start operations,
years. Langfang saw some correction in occupancy rate in 2014 which will drive rental income. We estimated 12%, 16%, and
due to an increase in supply in the area and tenants had left. 26% growth in rental income in the coming three years.
Occupancy is expected to recover gradually with new supply
moderating. Decent yields on cost. Our estimates based on 2014 rentals
indicate that yields based on cost of existing projects range from
Improving net profit margins from warehouse projects. Average 9.8% to 19.9%, which are decent and reflect the company’s
net profit margins before sharing financial cost were 34% on successful execution capability in the warehouse sector. New
average in 2014, improving from 30% in 2013, 26% in 2012 projects are expected to generate 7-8% yields upon maturity.
and 17% in 2011. Guangzhou Blogis recorded relative low
margins due to new phases coming into operations in 2014.
Occupancy rates of the projects in operation
2014 2013 2012 2011

Y ear o f
o c c u p an c y o c c u p an c y o c c u p an c y o c c u p an c y
o p erat io n
(% ) (% ) (% ) (% )
Shanghai Blogis 100.0 100.0 100.0 100.0 2004
Mingjiang Blogis 100.0 91.6 90.9 - 2012
Kunshan Blogis 100.0 100.0 100.0 100.0 before 2011
Langfang Blogis 83.8 100.0 100.0 - 2012
Tianjin Blogis 93.6 100.0 98.0 89.0 before 2011
Xindu Blogis 90.2 97.8 97.2 92.6 before 2011
Longquan Blogis 96.4 96.0 93.6 99.2 2011
Guangzhou Blogis 92.0 100.0 100.0 100.0 before 2011
Shenzhen Blogis 87.1 80.0 n.a 73.0 before 2011
Source: Company; DBS Vickers.
Net profit margins of the projects in operation Y-o-y revenue growth rates of the projects in operation
2014 ne t 2013 ne t 2012 ne t 2011 2 0 1 4 yo y 2 0 1 3 yo y 2 0 1 2 yo y

p r o fi t p r o fi t p r o fi t p R e ve n u e g r o w t h (% ) g r o w t h (% ) g r o w t h (% )
S h a n g h a i B lo g i s 5 .6 9 .3 8 .3
ma rg in s ma rg i n s ma rg in s ma r
M i n g ji a n g B l o g i s 1 6 .1 1 3 0 .0 n .a
(% ) (% ) (% ) K u n s h a n B lo g is 1 0 .4 6 .7 1 6 .0
Sh a n g h a i B lo g is 60 45 54 La n g fa n g B l o g i s (2 3 .0 ) 8 0 .1 n .a
M in g jia n g B lo g is 50 54 56 Ti a n j i n B l o g i s 3 .0 1 0 .3 1 0 .4
Ku n sh a n B lo g is 47 42 39 X i n d u B lo g i s 4 .1 1 8 .8 2 3 .8
La n g fa n g B lo g is 32 33 25 Lo n g q u a n B l o g is 4 1 .2 3 7 .9 2 8 8 .3
G u a n g z h o u B lo g is 4 8 .2 7 .7 (0 .7 )
Tia n jin B lo g is 38 37 26
S h e n z h e n B l o g is 2 .7 6 .9 (3 .1 )
Xin d u B lo g is 29 25 17
Lo n g q u a n B lo g is 30 23 16 Source: Company; DBS Vickers
Gu a n g z h o u B lo g is 7 (3 ) (6 )
Sh e n z h e n B lo g is 14 13 3
Ave r a g e 34 30 26
* The net profit margins are before financial cost

Source: Company; DBS Vickers.
Page 48
Yield on cost based on our estimation by 2014 even smaller. In our view, B-to-H conversion will help the
company to increase its accessibility to the overseas bond
Es t imat ed market. In the longer term, the company may be able to try for
y ield o n
H+A share dual listing, which is more technically feasible than a
c ost
direct H-to-A share conversion. In Vanke’s case, share price
Shanghai Blogis 17.9%
went up by over 60% one year after the conversion. Trading
Mingjiang Blogis 15.1%
Kunshan Blogis 18.0% volume during the year after the conversion was 5.8x of that
Langfang Blogis 9.8% before the conversion.
Tianjin Blogis 17.0%
Net debt ratio higher than peers but no alarm bells. The
Xindu Blogis 14.2%
company’s net debt ratio has been over 100% in the past five
Longquan Blogis 18.9%
Guangzhou Blogis 10.4%
years. Based on China’s accounting standard, the company’s
investment property has not been revalued. Our estimate of
Source: Company, DBS Vickers Chiwan’s net debt ratio based on the same accounting base as
peers is c. 70%, which is higher than peers but not significantly.
Its total liability to total asset ratio was c. 63% by end-13 and
Increasing contribution from Blogis. Overall, we expect the end-14. We expect the company’s net debt ratio to increase
company’s revenue to fall 16% in 2015, dragged by a decline in further in the next two to three years. Total debt to total asset
Petroleum base business, but should start to rise from 2016 due ratio may increase as well but the company intends to keep this
to increasing contribution from Blogis. Revenue is expected to ratio below 70%. Short term debt as percent of total debt stays
grow 8% and 18% in 2016 and 2017 respectively. In the past at the level of low teens, which means no short term debt
four years, the contribution from Blogis to the company’s repayment pressure.
revenue increased from c. 43% in 2011 to 52% in 2014. We
expect the percentage to increase to 81% by 2017. New funding channels needed to fund the fast growth in Blogis.
Given the company’s SOE background and GLP as its major
Core earnings of Chiwan may start to grow in 2017. The shareholder, we believe the company has an advantage in
decline in petroleum base operations may result in core earnings securing domestic loans without a premium to the PBOC rate
declining by over 50% in 2015 based on our estimates. and mid-term notes. It has the potential to tap into the overseas
However, core earnings may start to rise again, by 15% in 2017 bond market with parent company’s credit enhancement. In
driven by rental income from new warehouses. Nanjing Blogis, addition, based on We believe it has the potential to increase
Nantong Blogis Phase 1, and Wuhan Blogis are expected to start total debt level if listed as H-shares.
operations in 2015. Wuxi Blogis, Zhenjiang Blogis, and Tianjin
Bingang Blogis are scheduled to start operations in 2016. We Share Price Drivers
expect Qingdao, Jiaxing, and Changzhou projects to generate
revenue in 2017. The company’s dividend policy is to pay no Successful acquisitions. There is a risk that potential projects in
less than 30% of its total net profit for the coming three years the pipeline cannot be acquired as planned due to various
or an average dividend payout ratio of 10% per annum. reasons. In our valuation of the company, we have not factored
in contribution from potential projects to be conservative.
Gross margins of Chiwan likely to stay high, but net profit Hence, successful acquisitions can serve as share price catalyst.
margins may be lower. Gross margins had been above 60% in Re-rating is possible along with scale expansion. Currently, GLP
the past and we believe this is sustainable. However, net profit is trading at 29% discount to NAV, while Blogis is trading at
margins may be compressed due to start-up costs of new 36% discount. We believe the gap is likely to narrow as Blogis’
projects in new cities and higher interest cost as borrowings scale is expanding and it is on its way to becoming a major
have increased. player in the sector.
Balance Sheet:
Valuation
Seeking B-to-H conversion in 2016. The company suspended
trading in its shares for one year from late Apr-14 and Our NAV is estimated to be HK$28.64/share. It is currently
announced its B-to-H conversion plan. The plan is awaiting trading at 36% discount to NAV. We believe valuation is
approval from shareholders. The company believes that B-to-A undemanding. If Blogis can successfully acquire the projects in
share conversion is technically more difficult than B-to-H. After the pipeline, its NAV can be boosted to HK$35.35/share. We
the recent fall in the A-share market and suspension of new believe there is substantial upside.
IPOs, the chance for B-to-A share conversion to take place is
Page 49
Key Risks:
NAV
Acquisition risks. There is a risk that potential projects in the
Current pipeline cannot be acquired as planned due to various reasons.
projec t s Pipeline T ot al
Financial risks. The company is on a fast expansion track in
GA V (Rmb mn) 9,695 4,953 14,648
these two years. Capital requirements for M&As and
-Unpaid land premium 1,987 3,715 5,701
construction are high.
-Net debt 2,426 2,426
NAV 5,283 1,238 6,521 Operation risks and competition risks. Competition in land
No. of shares 231 231 231 acquisitions in key cities is intensifying as more players are
NAV per share HKD 28.64 6.71 35.35 entering the market. There is also great competition in
attracting tenants.
Page 50
Key Assumption Sensitivity Analysis
F Y D ec 2015F 2016F 2017F

EPS EPS EPS
K ey A ssu mp t io n s
Ave r a g e FY1 5 FY1 6 FY1 7
A v erage rental growth in key cities 3% 3% 3%
r e n t a l (H K$ (H K$ (H K$
A v erage cap rate in key cities 6.8% 6.8% 6.8% g r o wt h c e n t s ) c e n t s ) c e n t s ) N AV
Be a r ca se -2% 0.45 0.40 0.44 26.88
Ba se ca se 3% 0.45 0.42 0.48 28.64
Bull ca se 8% 0.46 0.43 0.52 30.66
Source: DBS Vickers
Segmental Breakdown (RMBm)
F Y D ec 2013A 2014A 2015F 2016F 2017F
R ev en u es
Blogis 441 370 414 479 605
Chiwan base - 90 45 40 36
Handling 102 119 59 53 48
Port admin 81 66 33 26 21
Office renta 53 60 30 30 30
Others 15 9 4 4 4
T o t al 692 713 586 633 745
Page 51
Income Statement (RMBm) Margin Trends
F Y D ec 2013A 2014A 2015F 2016F 2017F

HK$m
50
Turnov er 692 713 586 633 745 45
40
Cost of Goods Sold (283) (286) (244) (271) (326) 35
G ro ss Pro f it 409 427 341 363 419 30
25
Other Opg (Exp)/Inc (90) (96) (100) (105) (111) 20
15
O p erat in g Pro f it 319 331 241 257 309 10
Other Non Opg (Exp)/Inc 5
0
A ssociates & J V Inc 63 62 62 62 62
2013A
2014A
2015F
2016F
2017F
Net Interest (Exp)/Inc (114) (114) (117) (138) (159)
Exceptional Gain/(Loss) 0 0 - - -
Pre- t ax Pro f it 268 279 185 181 211 Operating margin
Tax (53) (52) (43) (42) (49) Net margin
Minority Interest (16) (20) (39) (44) (52)
Profit attri. to PSCS
N et Pro f it 199 207 104 96 110
EBITDA 564 586 460 485 548

Sales Gth (%) 19.6 3.1 (17.9) 8.2 17.6
EBITDA Gth (%) 28.8 3.8 (21.5) 5.6 12.9
Opg Profit Gth (%) 33.6 3.8 (27.2) 6.8 19.9
Effectiv e Tax Rate (%) 19.9 18.5 23.0 23.0 23.0
Balance Sheet (RMBm) Asset Breakdown
F Y D ec 2013A 2014A 2015F 2016F 2017F Cash & ST

Other LT Invts
Net F ixed A ssets 1,797 2,345 2,762 3,413 3,929 Assets 7%
Inv ts in A ssocs & J V s 476 538 538 538 538 30% Other
Other LT A ssets 1,303 1,612 1,699 1,842 1,948 Current
Cash & ST Inv ts 300 375 394 229 259 Assets
Other Current A ssets 843 520 130 130 130 10%
T o t al A sset s 4,719 5,390 5,522 6,152 6,804
Invts in
ST Debt 311 301 1 1 1
Assocs &
Other Current Liab 382 563 563 563 563 JVs Net Fixed
LT Debt 2,259 2,518 2,818 3,318 3,818 10% Assets
43%
Other LT Liabilities 19 19 19 19 19
Shareholder's Equity 1,470 1,690 1,784 1,870 1,970
Minority Interests 278 298 337 380 433
T o t al Cap . & L iab . 4,719 5,390 5,522 6,152 6,804
Non-Cash Wkg. Cap 461 (43) (433) (433) (433)

Net Cash/(Debt) (2,270) (2,444) (2,426) (3,090) (3,560)
Page 52
Cash Flow Statement (RMBm) Operating cashflow
F Y D ec 2013A 2014A 2015F 2016F 2017F

HK$m
500
Pre-Tax Profit 273 291 185 181 211 450
Dep. & A mort. 177 199 209 219 - 400
Tax Paid (53) (52) (43) (42) (49) 350
A ssoc. & J V Inc/(loss) (63) (62) (62) (62) (62) 300
250
Chg in Wkg. Cap. 461 (43) (433) (433) (433) 200
Other Operating CF (361) 82 467 486 738 150
N et O p erat in g CF 434 414 323 350 406 100
Capital Exp. (net) (515) (744) (661) (960) (800) 50
0
Other Inv ts. (net) - - - - -
2013A
2014A
2015F
2016F
2017F
Inv ts. in A ssoc. & J V - - - - -
Div from A ssoc. & J V - - - - -
Other Inv esting CF
N et In v est in g CF (755) (399) (271) (960) (800)
Div Paid (116) (84) (34) (54) (76)
Chg in Gross Debt (338) (104) (300)
Capital Issues 0 - - - -
Other F inancing CF 180 249 300 500 500
N et F in an c in g CF (275) 60 (34) 446 424
Net Cashflow (595) 76 18 (164) 29
Page 53
Beijing Properties Holdings
Bloomberg: 925 HK Equity | Reuters: 0925.HK Refer to important disclosures at the end of this report
BUY (Initiate Coverage) ACQUISITIONS TO BEAR FRUITS SOON

Last Traded Price: HK$0.60 (HSI : 25,129) Small at present but has potential to grow into a big player in 2-3
Price Target : HK$ 0.70 (17% upside)
years. Compared with many other companies whose warehouse
business is just a supplement of their main business, Beijing
Potential Catalyst: Acquisitions done as planned
Where we differ: Earnings are more conservative than consensus
Properties Holdings Limited (BPHL) has restructured its business to
mainly focus on the warehouses business including both common
Analyst warehouses and cold chain logistics facilities. The company started
Danielle WANG CFA +852 2820 4915 negotiations for various acquisitions including both pure land and
completed projects in 2011. It had three warehouses generating
Carol WU +852 2863 8841
carol_wu@hk.dbsvickers.com rental income in 2014, while two more are expected to contribute
Andy YEE CFA, +852 2971 1773 revenue starting 2015. The company is expected acquisition of nine
andy_yee@hk.dbsvickers.com projects to bear fruits in 2015 and grow its landbank to 3mn sm by
Ken HE CFA +86 21 6888 3375 2019.
ken_he@hk.dbsvickers.com SOE background and low financing costs to win the tough battle of
land acquisitions. Limited land supply in the warehouse sector is a
Price Relative key entry barrier of the sector. With its SOE background, BPHL has
HK$
an advantage in acquiring warehouse land and projects. The well-
Relative Index
1.1 219
1.0 199 located Beijing Majuqiao project, which is considered the last piece
0.9 179
159
of warehouse site in Beijing, is a good example of BPHL’s strength
0.8
0.7
139 in acquiring high quality land parcels for warehouse use. In addition,
119
0.6
99 BPHL’s current low funding cost of 4.3% is also partially attributed
0.5
0.4
79
to its SOE background.
59
0.3 39 Partnership with global players to gain quality tenants. BPHL has
Jul-11 Jul-12 Jul-13 Jul-14 Jul-15
partnerships with Kerry Holdings at both equity and project levels,
Beijing Properties Holdings (LHS) Relative HSI INDEX (RHS)
with Mitsui and Mitsubishi at project level, and with PAG at equity
Forecasts and Valuation level. We believe the partnerships with these global players will help
F Y D ec ( H K $ ) 2014A 2015F 2016F 2017F it to build up expertise in operation and establish its solid tenant
Turnov er 203 306 437 504 base, while maintaining good corporate governance and financial
EBITDA 418 39 139 274
Pre-tax Profit 298 (30) 43 153
positions.
Net Profit 167 (59) (0) 81 Valuation:
Core Net Profit (162) (59) (0) 81 After its recent share price correction, the share is trading at a 35%
EPS (HK cents) 2.52 (0.87) (0.00) 1.20 discount to NAV and 0.9x P/BV. If we include the projects in the
EPS Gth (%) (78) (135) n.a. n.a.
acquisition pipeline, it would be trading at a 65% discount to NAV.
Diluted EPS (HK cents) 2.43 (0.86) (0.00) 1.19
DPS (HK cents) - - - - We believe the new acquisitions are likely to serve as catalysts for
BV Per Share (HK$) 0.65 0.70 0.70 0.72 share price upside and set our TP at HK$0.70 based on a 25%
PE (X) 23.8 n.a. n.a. 49.9 discount to NAV based on projects on hand but excluding those in
EV /EBITDA (X) 3.8 59.3 24.6 30.5 the pipeline.
Net Div Yield (%) - - - - Key Risks to Our View:
P/Book V alue (X) 0.9 0.9 0.9 0.8
BJPH may face execution risk during its fast expansion stage.
Balance sheet may be stretched if expansion is not well paced.
ROA E (%) 4.4 (1.4) (0.0) 2.0
Net loss in short term may concern investors.
EPS Rev (%) New New New At A Glance
Consensus EPS (HK cents) 0.40 2.30 Issue d Ca pita l (m shrs) 6,757
Other Broker Recs: B:3 S:0 H:0 Mkt Ca p (HK$m/US$m) 4,054 / 523
ICB Industry: Financials Ma jor Sha re holde rs (%)
ICB Sector: Real Estate Holding & Development Be ijing Ente rprise s Group Compa ny Limite d 67.4
Principal Business: Property development & management Pa cific Allia nce Group Limite d 12.4
Source of all data: Company, DBSV, Thomson Reuters, HKEX Ke rry Group 5.7
Fre e Floa t (%) 14.5
3m Avg. Da ily Va l. (US$m) 1.9
www.dbsvickers.com
ed-TH / sa- AH
Company Focus
INVESTMENT THESIS
Profile Rationale
In 2009, Beijing Enterprises Group (which is 100% owned by Pure warehouse play
Beijing SASAC) bought a 67.42% stake in 925.HK (which The main business focus of the company is on warehouse
was formerly named Peaktop) to consolidate and reorganise investment operations
all its property-related businesses and renamed it Beijing
Rental income account for c.90% of its revenue in 2017
Properties Holding Limited (BJHL). It also brought in Kerry
Global as a strategic investor in the same year. After A combination of SOE background and foreign investors
exploring opportunities in residential development and 67.4% owned by Beijing Enterprises Group which is under
commercial properties, BJHL has gradually established its the Beijing Government
business focus on logistics properties. At present, BJHL has Kerry is a partner at both equity and project levels
streamlined its real estate business into four business lines,
Mitsui and Mitsubishi at project level
namely (1) e-commerce and bonded logistics, (2) cold chain
and food supply chain logistics facilities, (3) specialised Ability to beat the competition in acquiring land and tenants
wholesale markets, and (4) other real estate. SOE background helps in accessing land
Partnership with foreign investors aid in sourcing for tenants
They are also building a tenant base in the cold chain niche
Valuation Risks
Our TP is based on a 25% discount to our estimated NAV. Policy risk
VAT reform is a sector-wide risk that may eat into
developers' margins and cash flows.
Execution risk
BJHL faced execution risk during its past expansion stage.
Financial risk
Balance sheet may be stretched if expansion is not well
paced.
Source: DBS Vickers
Page 55
Company Focus
SWOT Analysis
Strengths Weakness
 Focused business strategy  Current business scale is relatively small

 Strong access to warehouse land market and M&A  Management team's execution capability need to be
markets proven
 Partnership with global players for expertise and capital  No other businesses as a cash cow to fund the
warehouse business
 Low funding cost compared to most local peers
 Solid pipeline to expand in the coming two to three years  Competition from new players entering the market
 Emerging market opportunities in both general warehouse  Fast expansion may strain balance sheet
and cold chain businesses
Source: DBS Vickers
Page 56
Company Focus
BACKGROUND, STRATEGY & MANAGEMENT Toncheng wholesale centre project which will be completed and
begin operations in 2H15. The Tianjin Zhongyu project is fully
leased to the project’s partner while the Quzhou Tongcheng
SOE with Kerry Holdings as a major shareholder too. In 2009, project is expected to start operations in September with 90%
Beijing Enterprises Group (which is 100% owned by Beijing occupancy rate.
SASAC) bought a 67.42% stake in 925.HK (which was formerly
named Peaktop) to consolidate and reorganize all its property- Acquisition of key Beijing Majuqiao project to bear fruit this
related businesses and renamed it Beijing Properties Holding year. Another key project that BPHL has been negotiating with
Limited (BPHL). It also brought in Kerry Global as a strategic the government on and planning since 2011 is the Beijing
investor in the same year. Majuqiao project located near South 6th Ring Road with a total
estimated GFA of over 600k sm. This project is considered the
Clear business focus. After exploring opportunities in residential
last logistics site in Beijing, as well as the largest integrated
development and commercial properties, BPHL has gradually
logistics facility in North China. BPHL is expecting the first phase
established its business focus on logistics properties. At present,
of the land (366k sm) to be taken over from the government in
BPHL has streamlined its real estate business into four business
2H15. Preleasing rate has reached 65% at present. It has also
lines, namely (1) e-commerce and bonded logistics, (2) cold
recently announced the acquisition of Wuhan Jianghe project
chain and food supply chain logistics facilities, (3) specialized
with 115k sm rental area.
wholesale markets, and (4) other real estate.
Mid-scale existing landbank. Excluding the non-warehouse
Three e-commerce and bonded logistics projects in operation.
space, our calculation shows that BPHL has 1m sm existing
As of end-14, BPHL had three projects in operation generating
warehouse landbank on hand. Although the current scale is
rental income, namely Shanghai Phoenix WGQ, Tianjin WSL
small compared with major players in the sector, it has the
Logistics, and Tianjin Transwealth Logistics with a total
potential to grow big.
completed floor space of c.250k sm. All three projects are
enjoying high occupancy rates, stable rent, and good tenant Solid acquisition pipeline, scale likely to expand fast in 2015. It
mixes. SF Express took up the entire space in phase I of Tianjin has eight normal warehouse projects, three cold chain projects,
Transwealth Phase I and has signed a preleasing agreement for and one wholesale market project with warehouse components
all the space in Phase II. In addition, it also has a small-scale in the pipeline. Five out of the eight normal warehouse projects
shopping centre in Guangzhou and a Holiday Inn hotel in are completed and expected to be acquired in 2015. Two cold
Beijing in operation. Both are profitable. chain projects are expected to be acquired in 2015 as well. If
the acquisitions come through as planned, the company will
Two self-built projects to start operating in 2H15. BPHL also has
own a c. 2m sm landbank including 1m sm completed by end-
a cold chain warehouse (Tianjin Zhongyu project) and a Quzhou
2015. Landbank scale may reach c. 3m sm by end-2017.
Page 57
Company Focus
Solid pipeline:
Current projects and those in the pipeline of acquisitions
Pla nne d
La nd a re a re nta bl e Compl e te d
Proj e c t Sta tus Owne rshi p (sqm) a re a (sqm) GFA (sqm)
E-c omme rc e a nd bonde d l ogi sti c s 1,897,430 1,650,055 611,205
1. Beijing Majuqiao Project Current project 76% 401,300 549,200 -
2. Shanghai Phoenix WGQ Current project 100% 153,618 211,985 211,985
3. Tianjin Airport Project Current project 70% 92,868 59,836 36,836
4. Wuhan Jianghe Project Acquisition announced 100% 198,668 115,300 -
5. Wuhan Economic Development Zone Project Expected to be acquired in 2016 70% 231,840 152,478 -
6. Shenyang Yuhong Project Expected to be acquired in 2017 72% 74,000 47,861 -
7. Xiamen Project Expected to be acquired in 2015; 100% 140,915 93,600 81,600
construction completed
8. Meishan Project Expected to be acquired in 2015; 100% 146,512 99,929 99,929
9. Nanning Project Expected to be acquired in 2015; 38% 86,670 54,905 54,905
10. Guangdong Foshan Project Phase I expected to be acquired in 2015; 80% 188,733 176,789 37,778
11. Shanghai Songjiang Project Expected to be acquired in 2015; 85% 87,849 88,172 88,172
12. Wuhan Caidian Project Expected to be acquired in 2017 100% 94,457 -
Col d c ha in a nd food suppl y c ha in l ogisti c s 320,682 343,678 72,142
13. Tianjin Zhongyu Cold Chain Logistics Park Current project 60% 85,638 67,986 67,986
14. Beijing Huitong Shiye Expected to be acquired in 2015 70% 97,800 144,732 4,156
15. Qingdao Jingchangshun Project Expected to be acquired in 2015 80% 15,351 15,000 -
16. Beijing Pinggu Mafang Expected to be acquired in 2016 N/A 121,893 115,960 -
Spe c ia li se d whole sa l e ma rke ts 951,107 885,400 342,000
17. Quzhou Project Current project 100% 284,437 286,000 342,000
18. Quzhou Aolai Project To be acquired N/A 666,670 599,400 -
Spe c ia li se d re a l e sta te 13,065 41,818 86,056
19. Holiday Inn Downtown Beijing Current project 75% 7,057 N/A 26,963
20. Guangzhou Metro Mall Current project 99% 6,008 41,818 59,093
Tota l a re a 3,182,284 2,920,651 1,111,403
Attri buta bl e a re a 870,674 1,039,454 699,286
Source: Company
Page 58
Company Focus
Solid customer base in both common warehouse and cold chain

Established JV with Mitsui and Mitsubishi Estate to develop e-
logistics segments. BPHL targets a diversified customer base
commerce and bonded logistics business. In July 2014, BPHL
with one-third being e-commerce players, one-third forwarding
brought in Mitsui and Mitsubishi as strategic investors holding
companies and the rest third-party logistics companies. It is also
35% of China Logistics Infrastructure (Holdings) Limited which
building up its cold chain customer group including Citic
is BPHL’s subsidiary that conducts its e-commerce and bonded
International Logistics, Beijing Henghui Investment Group,
logistics business line. BPHL has raised US$146m from Mitsui
Beijing Federation of Industry & Commerce Aquatic Production
and Mitsubishi.
Chamber of Commerce, Henan Topin Group, etc.
Kerry is a partner at both the listco’s equity level and project
Management team able to ensure support from the parent.
level. As mentioned, Kerry Holdings holds 5.25% of the
BPHL’s chairman resigned in Jan 2014 to focus on his role in the
company’s shares at present. It also holds a 16% interest in the
parent company. The company is currently lead by vice
Beijing Maojuqiao project. BPHL can leverage on Kerry’s
chairman, Mr. Yu Li. Most of the other members in the
experience and expertise in warehouse operations. Kerry
executive teams and senior management team have experience
Logistics under Kerry Holding can also be a potential tenant of
in the financial markets, studied overseas or hold positions in
BPHL’s facilities.
the parent company. We believe the company’s management is
PAG, another strategic equity investor. PAG invested USD80m building up their expertise in logistics property operations and
in BPHL’s five-year convertible bonds in Feb 2014 carrying 4% their roles in the parent company will assist in gaining support
coupon with a conversion price of HK$0.74/share. If converted, from its parent.
it would make up 11.84% of the company’s enlarged share
base.
Page 59
Company Focus
Key Management Team
Ex ec u t iv e D irec t o rs
M R. Y U LI 51 V ice chairman, Mr. Yu is the chairman and an executiv e director of the Beijing Enterprises Group Real-
Estate Co., Ltd ("BE Real Estate"). Mr. Yu obtained an Executiv e MBA degree from the Peking
Univ ersity . Mr. Yu has extensiv e experience in corporate management. Mr. Yu joined the Group in
J anuary 2011.
M R . Q IA N X U 51 Chief executiv e officer, Mr. Qian is the general manager and an executiv e director of the BE Real Estate.
Mr. Qian graduated from the Economics and Management F aculty of the Beijing Industrial Univ ersity
with a Bachelor's degree in Economics and has obtained his EMBA degree from Tsinghua Univ ersity . Mr.
Qian has extensiv e experience in mergers and acquisitions, corporate restructuring and financial
management. Mr. Qian is a director of Brilliant Bright Holdings Limited ("Brilliant Bright"), w hich is a
controlling shareholder of the Company . Mr. Qian joined the Group in J uly 2009.
M R . SIU K IN W A I 46 Chief financial officer and company secretary , Mr. Siu graduated from the City Univ ersity of Hong Kong
with a Bachelor's degree in A ccountancy and is fellow members of the A ssociation of Chartered
Certified A ccountants and the Hong Kong Institute of Certified Public A ccountants and a member of
the Institute of Chartered A ccountants in England and Wales. Mr. Siu has extensiv e experience in
financial management and corporate adv isory . Mr. Siu is a director of Brilliant Bright, w hich is a
controlling shareholder of the Company and also serv es as the chief financial officer of Beijing Holdings
Limited ("BHL"). Mr. Siu was appointed as the chief financial officer of Genv on Group Limited
("Genv on", SEHK stock code: 2389) on 23 September 2014, and has resigned as the chief financial
officer of the Genv on w ith effect from 27 March 2015. Mr. Siu also serv es as the independent non-
executiv e director of A gritrade Resources Limited (SEHK stock code: 1131) since A ugust 2010. Mr. Siu
joined the Group in J uly 2009.
M R . J IA N G X IN H A O 50 V ice general manager of the Beijing Enterprises Group Company Limited ("BE Group"), an executiv e
director of BE Real Estate, an executiv e director and a v ice president of Beijing Enterprises Holdings
Limited ("BEHL") (SEHK stock code: 392) and an executiv e director of Beijing Enterprises Water Group
Limited ("BE Water") (SEHK stock code: 371), BEHL and BE Water are respectiv ely subsidiaries and
associated companies of the BE Group. Mr. J iang graduated from F udan Univ ersity in 1987 with a
Bachelor's degree in Law , and then in 1992 with a Master's degree in Law . Mr. J iang w as a lecturer at
Peking Univ ersity betw een 1992 and 1994. F rom 2000 to 2005, Mr. J iang was a manager of the
inv estment dev elopment department of BHL, and the general manager of Beijing BHL Inv estment
Center, a wholly ow ned subsidiary of BHL. He serv ed as a policy analy st of the Chinese State
Commission for Restructuring Economic Sy stem from 1987 to 1989. Mr. J iang has extensiv e experience
in corporate finance and corporate management. Mr. J iang joined the Group in J anuary 2011.
M R . Y U L U N IN G 53 Graduated from the Economics and Management F aculty of the Beijing Industrial Univ ersity with a
Bachelor's degree in Economics. Mr. Yu has extensiv e experience in property dev elopment, corporate
restructuring and financial management. Mr. Yu joined the Group in J anuary 2011. MR. LIU XUEHENG
A ged 41, obtained his MBA from the Cambridge Univ ersity of the United Kingdom. Mr. Liu has
extensiv e experience in the equity inv estment, corporate finance, IPO listings, and mergers and
acquisitions. Mr. Liu is a co-founder of Partners Capital International Limited and V ision F inance Group
Limited and is currently an executiv e director of V ision F inance Group Limited. Mr. Liu also serv es as an
executiv e director of Genv on. Mr. Liu also serv es as an independent non-executiv e director of
Guangshan Railw ay Co., Limited (SEHK stock code: 525). Mr. Liu joined the Group in J anuary 2011.
M R . A N G R EN Y I 29 Holds a Bachelor's degree in Env ironmental Engineering from the Harv ard Univ ersity . Prior to joining our
Board, Mr. A ng Reny i had been an analy st of energy and natural resources group in J .P. Morgan A sia
Pacific. He has extensiv e experience in the areas of banking and capital markets. Mr. A ng joined the
Group in December 2012.
Source: Company
Page 60
Company Focus
Management Remuneration Structure
Sen io r man ag emen t t eam

M R . D O N G Q IL IN 50 Manager of the Securities and Capital Market Department of the BE Group and an executiv e v ice
president of the Company and 北京允中投資咨詢有限公司 (Beijing Yun Zhong Inv estment
Consulting Co., Ltd) ("BYZCC"), a w holly ow ned subsidiary of the Company . Mr. Dong graduated from
the Univ ersity of Science and Technology Beijing with a Master's degree in Public A dministration (MPA )
and obtained the professional and technological qualifications of Senior A ccountant and Certified Public
A ccountant of the PRC. Mr. Dong has extensiv e experience in corporate management and financial
operation. He was appointed as an executiv e v ice president of BYZCC in Nov ember 2009 and w as
appointed an executiv e v ice president of the Company in F ebruary 2014 MR.
L I CH A N G F EN G 42 Executiv e v ice president of the Company and BYZCC, of the chairman and an executiv e director of
China Logistics Infrastructures (Holdings) Limited ("China Logistics"), a subsidiary of the Company . Mr. Li
graduated from the Northern J iaotong Univ ersity with a Master's degree in Transportation Management
and obtained the professional and technological qualification of an Engineer of the PRC. Mr. Li has
extensiv e experience in corporate management and logistics property inv estment and dev elopment. He
was appointed as an executiv e v ice president of BYZCC in Nov ember 2009 and was appointed an
executiv e v ice president of the Company in F ebruary 2014.
M R . Z H U SH IX IN G 45 Executiv e v ice president of the Company and BYZCC. He also serv es as the chairman and an executiv e
director of Genv on, an associated company of the Company . Mr. Zhu graduated from the Beijing Sport
Univ ersity and the Central Univ ersity of F inance and Economics w ith Bachelor's degrees in Management
and F inance respectiv ely , and obtained the professional and technological qualification of an A ssistant
Economist of the PRC. Mr. Zhu has extensiv e experience in real estate project construction management.
He w as appointed as a v ice president of BYZCC in J une 2010 and was promoted as an executiv e v ice
president of BYZCC and w as also appointed as an executiv e v ice president of the Company in October
2014.
M R . W A N L EE CH A M 54 Treasurer of the Company , Mr. Wan graduated from the Hong Kong Baptist College in 1983 with the
Honours Diploma in A ccounting and receiv ed a Master's degree in Information Technology from the UK
Cov entry Poly technic in 1988. He is a fellow member of the A ssociation of Chartered Certified
A ccountants and an associate member of the Hong Kong Institute of Certified Public A ccountants. Prior
to his serv ice with the Company , he was the General Manager in F inance and A dministration of the
China Digital satNet Limited and the Project F inancial Controller of the C.P. Pokphand Co. Ltd. (SEHK
stock code: 43). Mr. Wan has extensiv e and v aluable experience in financial management. He was
appointed the treasurer of the Company in F ebruary 2014 and w as appointed as the chief financial
officer of China Logistics in October 2014.
M R . CH EN G CH IN G F U 41 F inancial controller and deputy company secretary of the Company , Mr. Cheng graduated from Curtin
Univ ersity , Perth, Western A ustralia with a Bachelor's degree in Commerce, major in A ccounting and
F inance, and then obtained his MBA degree in Univ ersity of South A ustralia. He is a fellow member of
Hong Kong Institute of Certified Public A ccountants and a member of CPA A ustralia. He was appointed
the financial controller and deputy company secretary of the Company in October 2013.
M R . T IA N Y U E 52 V ice president of the Company and a senior v ice president of BYZCC, the general manager and an
executiv e director of China Logistics. Mr. Tian graduated from Northw estern Poly technical Univ ersity
with a Bachelor's degree in Industry Electrification. Mr. Tian has extensiv e experience in corporate
management, commercial property operation and property leasing management. He was appointed as a
v ice president of BYZCC in J une 2010 and w as promoted as a senior v ice president of BYZCC and was
also appointed as a v ice president of the Company in F ebruary 2014.
M S. L I X IN 50 Senior v ice president of BYZCC. Ms. Li graduated from Renmin Univ ersity of China w ith a bachelor's
degree in Industrial Economics and Management, and obtained the professional and technological
qualification of Senior A ccountant of the PRC. Ms. Li has extensiv e experience in financial management.
She was appointed as a senior v ice president of BYZCC in F ebruary 2014.
M R . J IA N G W EI 51 Senior v ice president of BYZCC. Mr. J iang graduated from Harbin Railw ay Technical College majoring in
railw ay engineering. Mr. J iang has engaged in the fields of railway project construction and automobile
trading for a long time and has extensiv e experience in engineering and trading. He w as appointed as a
senior v ice president of BYZCC in October 2014.
Source: Company
Page 61
Company Focus
Shareholding structure
Source: Company
Page 62
Company Focus
CRITICAL DATA POINTS TO WATCH Fast rental income growth expected in the coming three years.
We expect the company to achieve a 35% CAGR for its revenue
Projects in operation achieved high occupancy rate and high
in the coming three years based on current land bank, driven by
margins. The company has three projects contributed rental
new warehouse facilities entering into operational stage.
income in 2014, recording 95% to 100% occupancy rate.
Although it is likely to continue to make loss in 2015 and 2016
Phase II of Transwealth project in Tianjin has been full preleased
due to high interest costs and expenses for expansion, core net
to SF Express and Tianjin Zhongyu, cold chain project, has been
profit is expected to turn black in 2017. If the pipeline comes in
100% preleased to Quzhou Fruit and Vegetable Association.
as planned, as some of the targeted projects are completed
Based on our estimation, most of the company’s projects record
ones, revenue CAGR in the coming three years may be boosted
rental yield of 6% to 11% at present. New projects are
to 57% and FY17 core earnings may exceed HK$180m.
expected to generate 6% to 7% yield when matured.
Cold chain space may help achieve better margins than peers. If
High gross margins expected despite of slight decline from
BPHL’s acquisition pipeline goes through, it will have 12% of
2013 and 2014 level. Gross margins of these projects came in
the landbank for cold chain warehouses which usually charge
as high as 94% to 100%. Blended with a small hotel operation
more than twice the common warehouse rental and hence
and warehouse related management fee, the company’s gross
generate higher margins.
margin stayed above 80% in 2013 and 2014. We expect as
new projects came in, its gross margins may decline slightly but
still above 75% in the coming three years.
Rental, occupancy rate and gross margins of existing projects
O c c u p an c y rat e R en t al G ro ss marg in s
Plan n ed
N ame o f G ro u p In t eres t ren t ab le
c o mp an y (% ) area ( sm) 2014 2013 2014 2013 2014 2013 M ajo r t en an t s
BIPL* 76 549,200 0 0 n.a n.a n.a n.a InterLog, Best Express, DHL, China
Railway Group, etc.
Shanghai Phoenix 100 211,985 94 79 106,815 19,878 94 98 Nippon Express, Kintetsu
WGQ Express, MOL Logistics, Mitex
Logistics, DCH, etc.
WSL Logistics 70 24,922 96 97 17,740 6510 97 97 Kintetsu Express, Nippon
Express, Kerry Logistics,
Transw ealth 70 34,700 100 - 1,286 0 100 - SF Express
Logistics
Tianjin Zhongy u 60 66,497 F ully preleased to Mr. Zhang, the
partner of the project
* Joint venture of the Group.

Note 1: Those tenants of BIPL had signed binding letter of intent only.
Note 2: SF Express had underwritten the whole area of 11,700 m2 of Phase I of Transwealth Logistics for their self use and had entered into a
letter of intent for underwriting the whole area of 23,000 m2 of Phase II upon its completion. 65% by the Company and as to 35% by MJQ, a
joint venture incorporated by the Mitsui & Co., Ltd. and the Mitsubishi Estate Co., Ltd., if MJQ converts the Redeemable Equity Instrument to
ordinary shares of China Logistics. (RMB880mn)
Source: DBS Vickers
Page 63
Company Focus
Balance Sheet: Key Risks:

Room to gear up for expansion. As at end-14, BPHL’s net debt- Acquisition risks. There is a risk that potential projects in the
to-total equity ratio stood at 34% and its total cash level was at pipeline cannot be acquired as planned due to various reasons.
HK$1.2bn. Given the fast expansion in the coming years, the
company may gear up but the management’s target is to keep Financial risks. Fast expansion is expected in these two years.
its net debt-to-equity ratio below 100%. BPHL has budgeted Capital requirements for M&A and construction are high.
HK$2-3bn for new project acquisitions and construction CAPEX.
Equity fund raising could be an option to contain gearing. Short Operation and competition risks. Competition in land
term debt as percentage of total debt by end 14 was 31% acquisitions in key cities are intensifying as more players enter
which is a manageable level, although higher than 19% by end- the market. Competition in attracting tenants is undergoing the
13. same trend. Operation risk does exist although the sector is an
emerging one.
BPHL’s average funding cost by end-14 was 4.3%, thanks to its
SOE background and partnerships with international players. As
the company's gearing ratio is rising, its funding cost may
increase slightly. Support from parent company in overseas
bond market might be necessary to keep its funding cost
advantage.
Share Price Drivers
Successful acquisitions as planned. There is a risk that potential
projects in the pipeline cannot be acquired as planned due to
various reasons. When we valued the company, we
conservatively excluded contributions from the projects. Hence,
the successful acquisitions of new projects can serve as a share
price catalyst.
Valuation
Our estimated NAV for BPHL is HK$0.92/share. It is currently
trading at a 35% discount. We believe the valuation is
undemanding. If the company’s pipeline came in as planned, its
NAV will be 85% higher. BUY with a TP of HK$0.7/share or
16% upside, based on 25% discount to NAV.
NAV
H K $ mn Ex ist in g Pip elin e T o t al

GA V 9,950 8,220 18,170
-Unpaid land premium 2,451 2,930 5,382
-Net debt 1,254 1,254
NA V 6,245 5,289 11,534
No. of shares 6,767 6,767 13,533
NA V per share (HK$) 0.92 0.78 1.70
Source: DBS Vickers
Page 64
Company Focus
F Y D ec 2014A 2015F 2016F 2017F EPS EPS EPS

K ey A ssu mp t io n s A v erag e F Y 1 5 F Y 1 6 F Y 1 7
A v erage rental growth in key cities 3% 3% 3% 3% ren t al ( H K $ ( H K $ ( H K $
A v erage cap rate in key cities 6.8% 6.8% 6.8% 6.8% g ro w t h c en t s ) c en t s ) c en t s ) NA V
Bear case -2% (0.88) (0.02) 1.17 0.92
Base case 3% (0.87) (0.00) 1.20 0.92
Bull case 8% (0.86) 0.02 1.24 0.93
Source: DBS Vickers
Segmental Breakdown (HK$)
F Y Dec 2013A 2014A 2015F 2016F 2017F
Rev enues
Sale of properties
Gross rental income 36 156 251 382 449
Serv ices fees earned from a - 44 55 55 55
Management fee 0 3 - - -
T ot al 36 203 306 437 504
Page 65
Company Focus
Income Statement (HK$) Margin Trends
F Y D ec 2013A 2014A 2015F 2016F 2017F

HK$m
2,500
Turnov er 36 203 306 437 504
2,000
Cost of Goods Sold (4) (36) (78) (105) (114)
1,500
G ro ss Pro f it 32 167 228 332 390
1,000
Other Opg (Exp)/Inc (117) (186) (189) (193) (194)
500
O p erat in g Pro f it (85) (19) 39 139 196
0
Other Non Opg (Exp)/Inc (10) (32) (22) (22) (22)
(500)
A ssociates & J V Inc (18) (18) - - 78
2013A
2014A
2015F
2016F
2017F
Net Interest (Exp)/Inc 7 (97) (47) (74) (98)
Exceptional Gain/(Loss) 882 464 - - -
Pre- t ax Pro f it 776 298 (30) 43 153 Operating margin
Tax (53) (107) - (11) (38) Net margin
Profit attri. to PSCS - - - - -
N et Pro f it 701 167 (59) (0) 81
EBITDA 778 418 39 139 274

Sales Gth (%) 225.7 466.2 50.6 43.0 15.3
EBITDA Gth (%) n.a. (46) (91) 254.3 97.2
Opg Profit Gth (%) n.a. n.a. n.a. 254.3 40.8
Effectiv e Tax Rate (%) 6.9 35.9 - 25.0 25.0
Balance Sheet (HK$) Asset Breakdown
F Y D ec 2013A 2014A 2015F 2016F 2017F

Cash & ST Other
Invts Current
Net F ixed A ssets 21 887 865 842 820 13% Assets
Inv ts in A ssocs & J V s 994 929 929 1,590 2,251 5%
Other LT A ssets 3,604 6,004 6,770 7,276 7,620 Net Fixed
Cash & ST Inv ts 468 1,242 966 1,901 1,545 Assets
9%
Other Current A ssets 361 493 500 508 513
T o t al A sset s 5,448 9,555 10,029 12,117 12,749 Invts in
Other LT
Assocs &
Assets JVs
ST Debt 210 845 845 845 845 63%
10%
Other Current Liab 456 1,505 1,589 1,644 1,661
LT Debt 905 1,851 1,851 3,851 4,351
Other LT Liabilities 381 1,042 1,042 1,042 1,042
T o t al Cap . & L iab . 5,448 9,555 10,029 12,117 12,749
Non-Cash Wkg. Cap (95) (1,012) (1,089) (1,136) (1,148)

Net Cash/(Debt) (646) (1,454) (1,730) (2,795) (3,650)
Page 66
Company Focus
Cash Flow Statement (HK$) Operating cashflow
F Y D ec 2013A 2014A 2015F 2016F 2017F

HK$m
Pre-Tax Profit 776 298 (30) 43 153 200
Dep. & A mort. 9 22 22 22 22
150
Tax Paid (4) (12) (11) (38)
A ssoc. & J V Inc/(loss) 18 18 (78) 100
Chg in Wkg. Cap. (0) (1) (1) (1) (1)
50
Other Operating CF (1) (0) 0 0 0
N et O p erat in g CF (28) 26 116 176 170 0
Capital Exp. (net) (1,135) (247) (719) (443) (259)
(50)
Other Inv ts. (net) (40) (374) - - -
2013A
2014A
2015F
2016F
2017F
Inv ts. in A ssoc. & J V (205) (535) - (661) (661)
Div from A ssoc. & J V 29 20 22 22 29
Other Inv esting CF (145) (241) 78
N et In v est in g CF (1,497) (1,377) (697) (1,081) (812)
Div Paid (30) (66) (116) (159) (213)
Chg in Gross Debt 67 2,244 2,000 500
Capital Issues 0 8 - - -
Other F inancing CF 172 (76) 421 - -
N et F in an c in g CF 208 2,111 305 1,841 287
Net Cashflow (1,316) 760 (276) 935 (356)
Page 67
China South City
Bloomberg: 1668 HK EQUITY | Reuters: 1668.HK Refer to important disclosures at the end of this report
BUY (Initiating coverage) GROWING LOGISTICS AND E-COMMERCE

Last Traded Price: HK$2.39 (HSI : 25,129) PLATFORM
Price Target : HK$2.96 (24% upside) Competitive advantage in Tier1 and 2 cities
Potential Catalyst: Better than expected sales in July-Sept CSC is a leading trade centre developer in Tier 1 & 2 cities which
Where we differ: Our earnings estimates are more conservative owns a 29m sm land bank at low average costs of Rmb293/sm.
than consensus Riding on its location and costs advantage, CSC could expand its
logistic warehouse and e-commerce platform along with its large
Analyst
Andy YEE CFA, +852 2971 1773 integrated trade centre projects. This creates potential values for the
andy_yee@hk.dbsvickers.com company given the under supply of warehouse spaces in key cities.
Danielle WANG CFA +852 2820 4915 We also believe both sectors possess the potential to be spun-off in
danielle_wang@hk.dbsvickers.com the long run.
Carol WU +852 2863 8841 Building up logistics portfolio in existing projects
carol_wu@hk.dbsvickers.com CSC’s logistics and warehouse facilities in operation increased
Ken HE CFA +86 21 6888 3375 significantly to 465k sm from last year’s 68.2k sm and management
ken_he@hk.dbsvickers.com targets to grow it further to 1m sm in 2-3 years. Given CSC’s
acquisition pipeline in Tier 1/2 cities and its plan to allocate 15% of
Price Relative each project for logistics and warehouse facilities, we believe CSC
HK$ Relative Index
has the potential to grow its logistic portfolio quickly at reasonable
4.8 374 land costs.
4.3
324
3.8 E-commerce platform on the right track. Leveraging on Tencent’s
274
3.3
2.8
platform, CSC has linked its e-platform to Wechat and Wechat
224
2.3
174
payment system. It has also set up online stores at JD.com to
1.8
124
promote the products sold at its various outlets. Supported by the
1.3
0.8 74 growing online users, we expect CSC’s revenue from e-Commerce
Jul-11 Jul-12 Jul-13 Jul-14 Jul-15
to grow at 18% CAGR in coming two years to reach HK$282m by
China South City (LHS) Relative HSI INDEX (RHS) FY16/17.
Forecasts and Valuation
Moderate sales growth outlook for trade centres. CSC’s contracted
F Y M ar ( HK $ m) 2014A 2015A 2016F 2017F sales fell by 20% y-o-y last year mainly due to government’s slower
Turnov er 13,468 9,758 12,351 13,595
than expected relocation of existing wholesale markets which
EBITDA 6,343 6,064 4,666 5,287 caused delays in buyers’ decision. As we have yet seen improvement
Pre-tax Profit 6,169 5,859 4,316 4,913 in sales sentiment, we expect a 4% CAGR sales growth for 2015
Net Profit 3,494 3,728 2,053 2,404 and 2016.
Core Profit 2,616 1,790 2,053 2,404
EPS (HK$) 0.56 0.49 0.27 0.31 Valuation:
Core EPS (HK$) 0.42 0.23 0.27 0.31 Initiate with BUY, HK$2.96TP implies 24% upside. We initiate
Core EPS Gth (%) 37.2 (43.9) 14.8 17.1 coverage on CSC with BUY and HK$2.96 TP based on SOTP
DPS (HK$) 0.140 0.140 0.116 0.135
valuation. In our estimate, CSC’s contract sales and earnings will
BV Per Share (HK$) 2.89 3.11 3.23 3.41
PE (X) 4.3 4.9 8.9 7.6 post 4% and 16% CAGR in the next two years. Current valuation
EV /EBITDA (X) 3.1 5.7 8.5 7.8 implies 24% upside and offer attractive value with 5.9% dividend
Net Div Yield (%) 5.9 5.9 4.8 5.7 yield.
P/Book V alue (X) 0.8 0.8 0.7 0.7
Key Risks to Our View: A slower than expected economy in China
ROAE (%) 19.5 16.6 8.1 9.1 and delays in relocation of existing wholesale market may
potentially cloud CSC’s sales and earnings outlook.
Earnings Rev (%) New New
Consensus EPS (HK$) 0.28 0.35 At A Glance
Other Broker Recs: B: 6 S: 1 H: 1 Issue d Ca pita l (m shrs) 8,001
Mkt Ca p (HK$m/US$m) 19,122 / 2,467
ICB Industry: Financials
Ma jor Sha re holde rs (%)
ICB Sector: Real Estate Holding & Development
Mr. Che ng Chung Hing, ED &Co-cha irma n 30.6
Principal Business: Property development & management
Te nce nt Holdings 11.6
Source of all data: Company, DBSV, Thomson Reuters, HKEX Le ung Moon La m 5.7
3m Avg. Da ily Va l. (US$m) 26.3
www.dbsvickers.com
ed-JS / sa- AL
Company Focus
China South City
INVESTMENT THESIS
Profile Rationale
China South City (CSC) is a leading developer and operator Strong exposure in Tier1 and 2 cities
of integrated logistics and trade centres in China in terms of CSC is a leading developer of mega trade centre projects
land bank size, project size and city exposure. Along with its which owns 29m sm land bank in 8 Tier 1 and 2 cities. It’s
core business, CSC has also extended to warehouses, outlet strong city exposure will facilitate its growth into the logistics
malls and e-Commerce sector since 2008/ 2011 & 2012 warehouse and e-Commerce sector.
respectively. CSC owns 29m sm land bank with 8 large scale
integrated trade centres, all located in Tier I/II cities. On top Building up logistics portfolio in existing projects
of that, it also has land bank of another 49m sm GFA under GFA of CSC’s logistics and warehouse facilities in operation
a framework agreement with local government that it can has reached 465k sm and management targets to grow it
acquire in the coming years. further to 1m sm in 2-3 years. Given management’s plan to
allocate 15% of its land bank for logistics and warehouse
facilities, we believe CSC has the potential to grow its
logistic portfolio quickly at reasonable land costs.
E-commerce platform on the right track.

We believe the development of CSC’s e-Commerce platform
is on the right track after its strategic cooperation with
Tencent. Going forward, CSC may further integrate its
e-platform to Tencent’s digital eco-system (ie: Wechat,
Wechat payment, Webank, JD.com) to broaden its logistics
and trading related services.
Valuation Risks
Our TP is based on SOTP valuation by applying: Macroeconomic risks. If China’s economy slows down faster
(1) 6.8x FY15/16 PE to its property sales segment, than expected and triggers a hard landing, the trade centre
benchmarked the average PE of mid-caps in the China market will be significantly affected.
property sector.
(2) 35% NAV discount to the warehouse investment Municipal risks. The take-up of its integrated trade centres
properties benchmarked the valuation of GLP (10% may depend on the relocation of existing wholesale malls by
NAV discount). Given GLP is the leading player in the local governments; a slower relocation pace may affect
warehouse sector, we believe CSC’s ramping up CSC’s property sales and occupancy.
warehouse portfolio would justify a wider discount.
(3) 55% NAV discount to other investment properties Earnings risks. Property development contributes the
benchmarked to the average of mid-cap Chinese majority of its revenue and earnings. As such, fluctuation in
developers. property sales may significantly affect earnings over the next
(4) 25x FY15E PE for e-Commerce segment, two years.
benchmarked to HK-listed e-Commerce player’s
27xPE.
Source: DBS Vickers
Page 69
China South City
SWOT Analysis
Strengths Weakness
 Leading developer of integrated trade centres in China  Acquisitions of new projects may depend on the
through replicating its CSC Shenzhen model to Tier 1/2 cities government’s plan on land development and
relocation
 CSC’s trade centre segment has received strong support  Sales and/or rentals of its trade centres may be
from the government to relocate old wholesale centres to adversely affected if the global economy slows and
well-integrated trade centres outside prime locations affects China’s trade surplus
 Has a low cost land bank in key Tier 1/2 cities (average:  It may take longer to cultivate new businesses before
Rmb293/sm). Further land supply in existing cities secured these can be spun off at good valuation
through framework agreements with local governments
 Strong growth of recurring income through e-commerce
related businesses.
 Building a ‘Physical + online + logistics’ trading platform that
has potential for spin off in the future to unlock intrinsic
value
 Strong support from Tencent as strategic partner to develop
its O2O platform
 Lower policy risks compared with residential developers
 Continue on its expansion plan to broaden national
exposure. Pipeline to build a CSC in Guangzhou  Sales outlook may be affected by slowing economic
growth in China as well as government’s delays in
 Further strengthened its B2B platform in 2014 by acquiring relocation of existing wholesale malls
19.05% of Markepolo Inc., which operates one of the
leading B2B procurement trading platforms in China  Possibility of rising land costs and SG&A may erode
margins
 Building up its warehouse portfolio and the logistic
information system , LIEP, to capture increasing logistic  Increasing the number of mega size projects in more
demand from urbanisation and e-commerce cities may pose higher risk on execution
 Diversified funding channels (eg: PRC domestic bond, Short
Term Notes and Medium Term Notes) at reasonable funding
costs to support expansion.
Source: DBS Vickers
Page 70
China South City
Corporate profile – Leading developer and operator of

integrated trade centres in China Revenue breakdown by segment
Leading developer in the sector with large land reserves in Tier %

I/II cities China South City (CSC) is a leading developer and H K $ m F Y 1 2 / 1 3 A F Y 1 3 / 1 4 A F Y 1 4 / 1 5 A ( F Y 1 4 / 1 5)
operator of integrated logistics and trade centres in China in Sales of 7,179 12,813 8,654 89%
properties
terms of land bank size, project size and city exposure. Its core
Rental income 214 305 574 6%
business segments, property sales and property rental,
Property 44 67 133 1%
contributes 89%/6% of revenue respectively in the latest management
financial year. Along with its core business, CSC has also serv ice income
extended to warehouses, outlet malls and e-Commerce sector E-commerce 0 189 202 2%
since 2008/ 2011 & 2012 respectively. As at June-15, CSC owns income
29m sm land bank with 8 large scale integrated trade centres, Outlets 24 69 92 1%
all located in Tier I/II cities. On top of that, it also has land bank Warehouse 9 25 96 1%
of another 49m sm GFA under a framework agreement with serv ices
local government that it can acquire in the coming years. Others 19 1 6 0%
Targeting to sell 30-50% of its each project to fund the T o t al 7 , 4 8 8 1 3 , 4 6 8 9 , 7 5 8
property development, CSC has managed to grow its property Source: Company, DBS Vickers
sales to HK$11.3bn in FY15 (FYE Mar), which represents 15%
CAGR over the past 3 years.
Built its brand name in Shenzhen, expanding national exposure
Comparison – HK listed trade centre developers Since the success in Shenzhen, CSC has strategically replicated
its integrated trade centre models to seven other key cities in
China Sout h Cit y Hy doo Wuz hou
China. As at Jun-15, CSC’s exposure has extended to cities
1668 HK 1396 HK 1369 HK
including Shenzhen, Zhengzhou, Xi’an, Harbin, Hefei, Nanning,
Land bank ('000 sm) 28,815 9,603 8,052
Nanchang and Chongqing. CSC has also signed a framework
No. of projects 8 12 39
agreement with the Guangzhou government to develop a new
No. of cities 8 12 28
integrated trade centre project.
Major focus Tier 1,2 Tier 3 Tier 2,3
Av g proj. size ('000 sm) 10,228 800 297
Strategic cooperation with Tencent to cultivate its O2O platform
Year commence business 2002 1995 2004
IPO 2009 2013 2013
In Jan-14, Tencent formed a strategic cooperation with CSC and
F irst project Shenzhen Ganzhou Wuxi
invested HK$1.5bn for a 9.9% stake. In Sept-14, Tencent
PE (X) 8.90 4.94 19.69
increased its stake in CSC to 11.55% through exercising its
PB (X) 0.77 0.83 1.27
share options in full. The strategic cooperation will focus on
Source: Bloomberg, Companies, DBS Vickers developing an O2O eco-system by connecting an online
* CSC’s land bank included GFA not yet acquired as at end-Mar platform to CSC’s physical trade centres and ancillary facilities.
2015 So far, CSC has launched the B2B e-commerce platform for trial
run in Zhengahou CSC, which has accumulated over 13,000
members and over 3,000 online shops. On the other hand, the
B2C platform which supports its outlet business is also on trial
in Shenzhen CSC and Nanning CSC. Revenue from e-commerce
has increased to HK$202m in FY15 from HK$189m in FY14. We
believe Tencent’s expertise in establishing online eco-systems
with its strategic partners (ie: JD.com, Wechat, TenPay,
dianping.com, WEBANK) will facilitate the development of
CSC’s O2O system in the coming years.
Fast growing logistics portfolio in Tier 1/2 cities
CSC’s logistics and warehouse facilities in operation has

increased to 465k sm by end-Mar-2014 from last year’s 68.2k
sm after the completion of logistics facilities in Nanchang,
Zhengzhou and Xi’an. And management targets to growth its
warehouse portfolio to 1m sm in 2-3 years. On top of that,
Page 71
China South City
there is another 4.4m sm either under construction or marked warehouse’s demand.CSC targets to utilize 15% of each project
for future development. The integrated trade centre business for logistics and warehouse. We expects its logistics portfolio to
model has made it easier for CSC to accumulate logistic continue to expand with its large landbank on the acquisition
properties than pure logistic developers. The strong base of pipeline.
existing SME occupants in CSC’s trade malls will also support
Corporate Structure
Founding Shareholders
C he ng Chung Le ung Moon M a Kai M a Wai M o S un Kai Lit

H ing La m Che ung Cliff
Chen’s Int’l
(Executive (Executive (Non-
Director & Co- Director & (Non- Executive (Non-
Directors Tencent^ Investment Public
Chairman) CEO) Executive Director) Executive Ltd.
Director & Co- Director)
30.6% 8.8% 1.7% 1.6% 1.6% 0.8% 11.6% 12.5% 30.8%

Alliance Shareholders
39.4%*
China South City Holdings Limited
* On 15 September 2013, Mr. Cheng Chung Hing, Mr. Cheng Tai Po and Mr. Leung Moon Lam, together with their respective associates, holding
approximately 39.43% in aggregate (or assuming all the share options held by Mr. Leung Moon Lam are fully exercised, approximately 40.30% in
aggregate) of the total number of shares in issued of the Company as at 31 March 2015, have entered into an alliance agreement that a written
approval from the other two alliance parties for any transfer of CSC shares. Certain first right of refusal and tag-along right are also granted to the
alliance parties in respect of such transfer
Page 72
China South City
CSC’s land bank
Strategically Positioned Projects
Source: Company
Notes:
1. Data as at 31 March 2015; otherwise specified
2. Construction underway as at 31 March 2015
3. Properties under development and to be completed in FY2015/16
4. Included a total planned GFA of approx. 3,017,000 sq.m. from the Nanchang E-commerce and Logistics project, which the Group signed
agreements with Honggutan New District Administrative Committee and Xinjian Country Government of Nanchang on 20 May 2014
5. MOU of Guangzhou project with estimated GFA of 10.0 mn sq. m. signed on 28 Mar 2014
Page 73
China South City
New Growth Drivers Development of logistic service platform, LIEP

Facing increasing demand for logistic services from its SME
Growing in Logistics and O2O territory
occupants, CSC has created a Logistic Information Exchange
Room for growth in the logistics and warehouse segment Platform (LIEP), through its subsidiary Qianlong Logistics Group
(乾龍物流), to match the long-distance, smaller batch logistic
Against the backdrop of growing e-commerce and
demand with Heavy Goods Vehicles (HGVs) carriers. As
unrbanisation, key cities in China is facing undersupply of
logistics needs for SMEs may be in small batches, it is costly and
warehouse spaces. According to GLP, the warehouse space per
time consuming for them to find suitable HVG carriers. After
capita in the US is 12x that in China. On the other hand, logistic
LIEP expands in terms of scale, SMEs will be able to source
costs in China is still above other developed cities. According to
logistic services using the platform and track their goods with
the China Purchasing Development Report 2014, the country’s
real time GPS data. LIEP could also batch small orders together
total social logistics costs exceeded Rmb10 trillion in 2013,
and utilise the empty truck loads of HGVs on return journeys
accounting for 18% of GDP as compared to 8.2% in the U.S.
and thereby increase logistics efficiency and lower logistic costs
and 13% in India. As such, we expect there still room for
for SMEs. In addition, the platform can also generate a cash
developers to grow in the logistic warehouse segment.
pool from fees collected for HGVs which they can use in
Entry barrier for developing warehouse projects operations or other value-add services along the value chain like
One of the challenges logistic developers are currently facing is SME micro-financing in the long run.
the difficulty in getting new projects. Due to the limited tax
Qianlong has rolled out LIEP system for full operations in CSC
generating ability of pure logistic projects, local governments
Shenzhen. It is also on trial operations in CSC Nanning and CSC
have been strict in pushing out new projects for warehouses.
Nanchang. CSC intend to set up LIEP for all CSC’s projects
However, CSC’s model to integrate tax-generating trade centres
eventually. Revenue generated by LIEP will mainly come from
with warehouse facilities should help it to grow its logistic
member fees (Rmb100-200/user), parking fees (c.Rmb30/day)
portfolio faster than pure logistic developers.
and admin charges for delivery guarantee services
CSC’s logistics and warehouse in operation has grown to (c.Rmb10/delivery). LIEP has minimal revenue contribution at
464.9k sm from last year’s 68.2k sm after the completion of this stage, but we expect its revenue to grow with the number
logistics facilities in Nanchang, Zhengzhou and Xi’an. On top of of SMEs in CSC’s portfolio as the company expand. To further
that, there is another 490k sm under construction and 3.9m sm strengthen the company’s logistic platform, CSC signed
under planning for future development. We believe CSC has a framework agreements to develop e-commerce and logistic
strong potential to grow its logistic portfolio in Tier 1/2 cities projects in Nanchang and Xi’an in May-14 and Nov-2014
given it has a strong acquisition pipeline with local governments respectively.
and it will allocate 15% GFA of each project for logistics
Expect 58% CAGR from logistic services revenue
facilities. Management targets to grow its warehouse portfolio
Average rents of warehouse in Shenzhen CSC is at c.Rmb20-
to 1m sm within 3 years.
25/sm/month, which represents 8-10% yield on costs. Revenue
contribution from warehousing services has increased by 286%
CSC’s logistics and warehouse portfolio y-o-y from the low base to HK$96m in FY14/15. Warehouse in
Lo g i s ti c s & Wa re h o u s i n g its first warehouse project in Shenzhen took 5-6 years to grow
Lo g i s ti c s La n d In Un d e r Un d e r gradually before it could contribute significant revenue. But
B a n k (s q . m.) O p e ra ti o n Co n s tru c ti o n Pl a n n i n g given the improved demand for warehouse (both from CSC’s
CSC Shenzhen 246,800 77,000 - own occupants and outside tenants) in the past two years, we
CSC Nanning 35,600 - 336,400 expect it would take 3-5 years to see significant pick up in
CSC Nanchang 28,200 16,300 597,500 revenue contribution from the newly added warehouses. As
CSC Zhengzhou 100,300 171,700 440,200 such, despite CSC’s warehouse portfolio in operation increased
CSC Xi'an 54,000 - 569,400 by 2.8x this year to 464.9k sm, we expect revenue from
CSC Harbin - 66,900 708,600 warehouse services to grow at a 58% CAGR to HK$240m by
CSC Hefei - 158,000 622,200 2017. Management may also consider spinning off the logistic
CSC Chongqing - - 639,300 segment in the long run.
To ta l 4 6 4 ,9 0 0 4 8 9 ,9 0 0 3 ,9 1 3 ,6 0 0
Page 74
China South City
The LIEP system
Page 75
China South City
Advancing its e-commerce platform with Tencent As at end of Mar-15, the number of registered online members
Since its strategic cooperation with Tencent last year, CSC has participating in the trial operations increased to over 13,000,
established an online platform to connect its B2C (outlets) and with > 3,000 launching their online shops on CSC86.com and
B2B (trade centres) physical businesses to the e-commerce another 7,000 registered users in the process of setting up their
market. Riding on Tencent’s expertise in internet and mobile online stores. The E-commerce segment has generated revenue
apps, CSC is well on the way to integrate with Tencent’s of HK$189m/HK$202m in FY14/15, mainly from the one-time
platforms including: (1) O2O Eco-system, (2) Financial Services, joining fees (Rmb25,000/user) and annual fees (Rmb6,250/year)
(3) Tencent Public Space, (4) E-commerce & logistics and (5) Wifi from the trial membership program in CSC Zhengzhou. As
Intelligent Solution System (see the details in the chart below) CSC’s E-commerce segment is still at its early stage of
development, we believe it will take time for earnings
Currently, CSC has linked its e-platform to Wechat and the
contribution to be significant, probably beyond FY16/17. We
Wechat payment system. It has also set up online stores at
JD.com to promote its outlet products. estimate CSC’s revenue from e-Commerce to grow at 18%
CAGR in the coming two years to reach HK$282m by 2017.
Strengthen cooperation with Tencent
The physical + online platform
Source: Company
The B2C and B2B platforms Source: Company, DBS Vickers

Regarding its B2C online platform, CSC has started trial
operations of its online mall, Aolaigo.com (奧萊購), in Mar- The APP and Outlet platform
2015, to connect its outlet malls on an online platform. The
number of registered online users reached 1.1m in FY15. CSC
has also set up an online store on JD.com to promote the
products of its outlets to a new clientele base outside
Aolaigo.com.
Enhance development of B2B platform with Makepolo

On the B2B front, in addition to helping its physical occupants
to set up online stores on CSC86.com (華南城網), CSC has
launched on a trial basis in 2014, a membership program in
CSC Zhengzhou to provide a full range of e-commerce services
to its occupants. To further strengthen its B2B platform, CSC
acquired a 19.05% stake in Makepolo (馬可波羅), which
operates one of the leading B2B procurement trading platform
in China serving 12m users and displaying over 500m products.
Makepolo has also started offering internet financing services
targeting SMEs since 2013 through making use ot its ‘Big Data’
System. We believe Makepolo’s strong B2B online expertise will
facilitate CSC’s development of B2B and internet financing
platforms.
Page 76
China South City
Trade centre business – unique business with lower policy attractiveness of its trade centres as the barrier to acquiring land
risks in Tier1/2 cities is high for smaller developers.
The trade centre market in China Expansion to more cities
Trade centres are wholesale markets in which merchants display Hi s to ri c a l Exp a n s i o n

and sell their goods. The traditional trade centres in China are 2003 Shenzhen
highly fragmented and loosely regulated in terms of size and 2009 Heyuan, Nanning and Nanchang
industry focus. Many traditional trade centres in China are 2011 Xi'an
specialised in only one industry like electronics, printing, metal 2012 Zhengzhou, Harbin and Hefei
products & hardware, leather & accessories and textile & 2014 Chongqing
clothing. Moreover, some trade centres are located in prime
urban areas, making it difficult to expand transportation Source: Company, DBS Vickers
infrastructure when trading activities grow.
Favorable operating environment Seeking new projects in Guangzhou
CSC entered into a Letter of Intent with the Guangzhou
Seeing the limitation of traditional wholesale centres, local Government in Mar-14 to develop a 10m sm integrated trade
governments are increasingly relocating existing single-industry, and logistics project. Management is working on the acquisition
less developed wholesale markets away from city core areas. At of new projects and Guangzhou will be the second Tier 1 city
the same time, the relocation also brings in more economic that CSC has a presence in, after Shenzhen. CSC’s strategy is to
activities, tax income and employment to the new districts. have a presence in Tier I & II cities only, and has enabled it to
maintain its dominant position in this sector given stable
CSC’s trade centres are large-scale, multi-industry and demand in these cities. We believe CSC’s extensive market
integrated with ancillary facilities like warehouse and logistic knowledge and its well integrated trade centres are key factors
support, which enjoy solid demand with less policy risk which allow it to secure more new projects in key Tier I/II cities
compared with residential developers. form local governments going forward.
What is the value add from integrated trade centres? Low cost land reserve. Although CSC’s projects located in Tier
1/2 cities, they are located in city outskirts and as all of its
T rad it io n al w h o lesales CSC' s in t eg rat ed t rad e projects are in large scale (average size 10.2m sm), the average
mark et s c en t ers land cost is lower than its peers. Also, as most of the land is
Located in downtown areas Located in suburban areas
earmarked for industrial or commercial use, which is cheaper
Temporary buildings and may not Modern buildings with saleable
than residential lands. The average land cost for its existing
hav e official land use right units
certificates for resale landbank is low at c.Rmb293/sm, which is low among peers.
Tenants face traffic problems as Better traffic supported by This gives CSC more financial flexibility given the low up-front
located in downtown surrounding transport investment and also enhances CSC’s competitiveness to
infrastructure maintain margins at 50% level which is above peers’ 35-45%.
Small market scattered through Centralized and categorized
the city trading platform
Land costs and margins comparison
Limited support of ancillary Integrated ancillary facilities
serv ices and facilities and serv ices (eg: warehouses,
A v g p ro j siz e L an d c o st s G P marg in
logistics serv ices, adv ertising,
O2O platform..etc) ' 0 0 0 sm R mb / sm F Y 13 F Y 14
CSC 4,118 293 49% 53%
Source: Company, DBS Vickers Wuzhou 297 944 44% 35%
Hy doo 800 300 62% 42%
High concentration in Tier 1/2 cities ensures competitiveness Source: Company, DBS Vickers
CSC has replicated its integrated centre models to Nanchang,

Nanning, Xi’an, Zhengzhou, Harbin, Hefei and Chongqing since
2009. Apart from its eight existing projects, CSC has signed a
framework agreement with the Guangzhou government in
Mar-14 and is working towards acquiring a first land parcel this
year. All projects within CSC’s land bank are located in Tier I &
II cities, which are regional transportation hubs for easy access
to transportation networks. This increases the value and
Page 77
China South City
‘One-Body-Two-Wings’ business model 20% residential, 15% for logistics & warehousing and 15% for
CSC is targeting towards a balanced growth profile for its trade other commercial facilities (eg: outlets, offices, convention &
centre business (‘one body’) and ancillary services (‘two wings’) exhibition and hotels). The development of CSC’s e-commerce
in order to establish a sustainable business. In the long run, CSC platform will further enhance growth of its ancillary services.
plans to have a portfolio with 50% exposure to trade centres,
One Body with Two Wings
Large scale projects support a continued pipeline of work sales dropped by 20% in FY15, missing its sales target for the
CSC is developing mega projects ranging from 2.6m sm to first time since listing. We believe the lower sales was mainly
17.5m sm (including GFA planned but not acquired yet), with due to slower than expected relocation progress of existing
an average project size of 10.2m sm. Due to the large scale of wholesale centres and government’s recent economic reforms
each project, CSC acquires land plots in phases. Out of its total which had caused buyers to delay their purchasing decisions.
planned GFA of 81.8m sm, land for 32.9m sm or 40% has been Management believes this situation may continue in the
acquired as at end-Jun. Its current project pipeline is equivalent medium term and has set its FY15/16 sales target at HK$11-
to over 8 years of development. 12bn, flat from FY14/15. Despite the cloudy medium term
outlook, we believe the trend of relocating existing wholesale
Selling properties in early phases to fund development.
malls to new integrated trade centres should remain in the
CSC plans to grow its recurring income by keeping 50%-70% longer term given the limited availability of land in core areas,
of each project for rental in the long run. But at the early stages which will limit the expansion of wholesale centres.
of development, CSC will sell the trade centres to fund property
development development. This reduces CSC’s funding needs Sales in 1QFY16 (quarter ended Jun-15) reached HK$2.5bn,
for project development, and allows it to speed up its expansion which was 3% higher q-o-q but 6% lower y-o-y. CSC has
pace. locked in 21-23% of its sales target (HK$11-12bn) which is in
line with last year’s 23%. ASP, on the other hand, was up by
Flat sales outlook in the medium term
24% q-o-q and 8% y-o-y. While we have yet seen improvement
CSC achieved contracted sales of HK$11.3bn in FY15, which in sales sentiment, we think sales in 1Q is on track to its sales
represents 40% CAGR during FY12-15. However, contracted
Page 78
China South City
target of HK$11-12bn. Amid a slower sales sentiment, we

expect CSC’s contracted sales and sales revenue to grow at CSC’s contracted sales grew at 40% CAGR in the past 3
4%/19% CAGR in coming two years. However, we expect GP year
margins of CSC’s residential and trade centres to maintain at FY11/12 FY12/13 FY13/14 FY14/15
35%/50% level respectively given its stable ASP. Sales (HK$ m) 7,101 8,206 14,106 11,321
Sales ('000 sm) 1,034 709 1,748 1,254
ASP (HK$ /sm) 6,870 11,573 8,071 9,028
Target (HK$ m) 7,000 8,000 14,000 18,000
Contracted sales breakdown by city
FY2014/15 FY2013/14
Shenzhen Nanchang
6% 8%
Nanning
8%
Hefei Nanning
Zhengzhou Chongqing 32% 6%
37% 8%
Shenzhen
Harbin 3%
9% Xian
Harbin 12%
9%
Xian Zhengzhou
9% 30%
Nanchang
12% Hefei
11%
Contracted sales breakdown by product type
FY2014/15 FY2013/14
Trade
Trade center Trade
center (Mall) center
Trade (Mall)
(Detached) 25% center Office
50% Office 16%
(Detached) 1%
2%
78%
Residential
property Residential
23% property
5%
Page 79
China South City
Potential spin-off of HOBA Furnishing on the NEEQ More outlets outside Shenzhen commence operations
In July-2013, CSC acquired 37.5% of HOBA Furnishing at CSC’s first outlet mall in CSC Shenzhen (c.64.8k sm GFA)
Rmb522.2m. HOBA Furnishing is a home furnishing chain store commenced operations in 2011. After the completion of outlet
in China which currently has 9 established stores in Shenzhen, malls in Xi’an, Nanning, Nanchang and Harbin in 2014 and
Zhuhai, Zhongshan, Fuzhou, Changshai and Nanning. It has 2015, GFA in operation has increased to 150k sm. Average
opened a store in CSC Nanning which currently running trial rents in CSC Shenzhen reached c.Rmb50/sm/month, while
operation. HOBA is also planning to open another store in CSC outlets in other cities are charging c.Rmb20-30/sm/month. This
Shenzhen towards the end of 2015. Since its consolidation into represents rental yield on costs of 10-12% for Shenzhen and 5-
CSC as a subsidiary, HOBA has contributed c.HK$220m to 6% for other cities. Revenue from the outlet has grown by
CSC’s rental income in FY14/15. CSC is preparing to list HOBA c.96% CAGR over the past two years to reach HK$93m in FY15.
Furnishing for potential quotation on the NEEQ (新三版) It would take time to grow rental income from the new outlet
currently. malls, so we expect its outlet revenue to grow at a moderate
5% CAGR in the coming two years to reach HK$102m by 2017.
Stable rental growth when more projects become more
matured
Outlet malls in operation
CSC has 5.5m sm completed properties which include mainly
'0 0 0 s m
trade centres with the rest consists of outlets, warehouse and
CSC Shenzhen 92
residential ancillary. Average rent of trade centres in CSC CSC Nanning 20
Shenzhen and other cities are at Rmb50/sm/month and CSC Nanchang 10
Rmb30/sm/month respectively, which represents 14%/7% yield CSC Xi'an 23
on cost. Rental income increased by 88% yoy in FY14/15 mainly CSC Harbin 5
due to the contribution from HOBA Furnishing. Excluding that, To ta l 150
rental income from CSC’s portfolio still grew by 16% mainly
from rental reversion in CSC Shenzhen as well as contributions Source: Company, DBS Vickers
from CSC Nanchang, Nanning and Xi’an which started to
mature from its trial operations since 2010-2012. Last year, CSC
Zhengzhou had also commenced their trial operations.
Although it normally takes 3-4 years time for CSC’s trade mall
to mature and contribute significant rental, we believe CSC’s
rental will see a stable 22% CAGR in the coming two years to
reach HK$852m by 2017 supported by increase in GFA under
full operation.
Page 80
China South City
Sustainable earnings growth through visible expansion Expect to maintain margins above peers
pipeline
CSC’s GP margin decreased from an average of 59% between
FY11-13, to 53% in FY14/15 due to the addition of sales from
Stable earnings growth in the next two years projects outside Shenzhen with lower GP margins. However,
ASP growth from its key projects, esp. in Nanning and
CSC recorded core earnings of HK$1.8bn in FY14/15 which was
Nanchang, had been stable in the past two years. Although
32% lower y-o-y due to the slower than expected contracted
sales sentiment had not yet picked up from last year, ASP
sales. Despite the moderate sales growth outlook in the short-
in1QFY16 has increased by 24% q-o-q and 8% y-o-y. We
term, we expect CSC’s earnings to grow steadily from
expect the stable ASP and low land costs will help CSC maintain
increasing contribution from trade centres in Zhengzhou, Hefei
margins at around 50% which is above its peers.
and Chongqing as these projects mature. CSC’s continual
expansion pipeline and growing recurring income base will
underpin earnings as well. We expect core earnings over the GP margins of peer trade centre developers
next two years to grow by 16% CAGR to HK$2.4bn.
F Y 13 F Y 14
Growing recurring income, but take time to reach significant CSC* 49% 53%
contribution to total revenue Wuzhou 44% 35%
Hy doo 62% 42%
CSC’s recurring income has increased by 89% CAGR over the
past 2 years to HK$1.1bn (11% of total revenue) in FY14/15
after the development of e-commerce, outlet and warehouse * CSC’s margin represents FY13/14 and FY14/15 figures
segments. We expect CSC’s recurring income to grow at a 2-
Year CAGR of 24% to reach c.HK$1.7bn (13% of total revenue)
High gearing likely to remain at support growth
in FY16/17, mainly from (1) maturing investment properties as
trade centres in Nanning, Nanchang, Xi’an and Zhengzhou have CSC’s net debt ratio increased to 65.3% as at end-FY15, which
been more matured, (2) growing fee income from e-commerce, is higher than its average of 25.5% in the past three years,
outlet and logistic services. mainly due to slower than expected sales. Given the recent
moderate sales trend in 1Q16 and the CAPEX need for business
Revenue breakdown by segment expansion, we believe CSC’s net debt ratio may maintain at a
higher level of 80% in the medium-term.
H K$ m FY1 2 /1 3 A FY1 3 /1 4 A FY1 4 /1 5 A Diversifying funding channels at reasonable costs

Sa le s of 7,179 12,813 8,654
Bank loans, senior notes and short-term & medium term notes
prope rtie s
Re nta l income 214 305 574 accounted for 62%, 16% and 22% of total loans respectively.
Prope rty 44 67 133 Out of the HK$25bn total debt, HK$9.6bn (or 38%) is due with
ma na ge me nt one year. It has HK$8.7bn cash on hand as at end-Jun. Thanks
se rvice to the diversified funding channels of domestic bank loans and
income PRC bond, CSC’s average funding costs decreased to 6.8%
E-comme rce 0 189 202 fromFY13/14’s 7.2% and FY12/13’s 8.1%. Funding costs of its
income on-shore loans, off-shore loans and senior notes are 6.4%/8%
Outle ts 24 69 92
and 8% respectively. Apart from bank loans and off-shore
Wa re house 9 25 96
senior notes, CSC also has exposure to the PRC MTN and Short-
se rvice s
term note market which will help CSC to meet its financial
Othe rs 19 1 6
needs. We expect CSC’s average funding costs should maintain
To t a l 7 ,4 8 8 1 3 ,4 6 8 9 ,7 5 8
at 7% level in coming two years unless it can increase the
Source: Company, DBS Vickers proportion of on-shore loans.
Page 81
China South City
BUY for attractive valuation and 24% potential upside Risk analysis
Macroeconomic risks. If China’s economy slows down faster
Pegging TP to SOTP valuation. than expected and triggers a hard landing, the trade centre
market will be significantly affected.
We derived CSC’s TP with SOTP valuation by applying PE
valuation for property sales and e-commerce segments, NAV Municipal risks. The take-up of its integrated trade centres may
method for property rental segment. depend on the relocation of existing wholesale malls by local
governments; a slower relocation pace may affect CSC’s
China developers’ property sales business are moving towards a property sales and occupancy.
quick asset turn model by launching standardised products to
drive sales volume. As this ‘production line’ type of business Earnings risks. Property development contributes the majority of
model is prevalent in the sector, we believe a PE valuation is its revenue and earnings. As such, fluctuation in property sales
more relevant for CSC’s property sales business verus the may significantly affect earnings over the next two years.
traditional NAV valuation. We apply 6.8x FY15/16 PE to its
property sales segment, benchmarked the average PE of mid- Execution risks. As CSC is actively expanding its integrated trade
caps in the China property sector. centres national-wide, future operations is highly dependent on
management’s execution and whether the trade mall models
On the other hand, rental income is recurring in nature and we can be replicated successfully in other cities. In addition, as
use the traditional NAV method to value its investment CSC’s projects are large and it usually acquires the land sites
properties. We apply a 35% NAV discount to the warehouse from local governments in phases, there is no guarantee that
investment properties benchmarked the valuation of GLP (10% they can acquire all the GFA required at a specified time.
NAV discount). Given GLP is the leading player in the
warehouse sector, we believe CSC’s ramping up warehouse TP HK$2.94, implying 24% upside
portfolio would justify a wider discount. For other investment
properties, including trade centres and outlets, we apply a 55% Segment M et hod olo t y
NAV discount benchmarked to the average of mid-cap Chinese Property sales segment 6.8x F Y15/16 PE 10,811
developers. For its e-Commerce segment, we apply a 25x FY15E Trade mall for rental 55% NAV discount 7,568
PE benchmarked to HK-listed e-Commerce player’s 27xPE. Warehouse for rental 35% NAV discount 1,250
e-Commerce 20x F Y15/16 PE 4,013
TP of HK$2.96 implied 24% upside T o t al 23,64 3
CSC has a large exposure in Tier 1/2 cities and with low land V alu e per share (HK $) 2 .9 6
cost as a percentage of ASP, CSC’s margins should stay at
c.50% which is above the sector average. Within the trade
centre sector, we believe CSC’s closest comparable is Wuzhou
Properties (1369.HK) and Hydoo (1396.HK) which are trading at
20x and 4.9x forward PE respectively. As CSC is the leading
player in the sector with projects located in key cities in China
so we believe its current valuation at 8.9x FY15/16F PE is
undemanding. We initiate coverage on CSC with BUY rating
with TP HK$2.96 based on SOTP valuation. Our TP implies 24%
upside from current share price level and offers 5.9% dividend
yield. CSC’s share price has dropped by 33% YTD and
underperformed the sector by 46%.
Price-to-Book (P/BV) ratio. P/BV is a good valuation reference

point when earnings estimate are uncertain. CSC is trading at
0.77x P/BV, which it lower than Wuzhou’s 1.3x and Hydoo’s
0.83x PB.
Page 82
China South City
NAV breakdown GAV breakdown by city
Pro p e rty I n ve s t me n t To t a l
dev p ro p G AV
Sh e nz h e n 2 ,0 9 3 4,50 9 6 ,6 0 3 15 %
Chongqing
Na n c h a n g 4 ,7 6 6 1,78 0 6 ,5 4 7 15 % Zhengzhou Hefei 7%
Na n n in g 5 ,9 0 7 1,27 5 7 ,1 8 2 17 % 13% 13%
Xi'a n 3 ,9 2 8 1,66 8 5 ,5 9 7 13 % Harbin
Ha rb in 1 ,6 0 1 1,28 3 2 ,8 8 4 7% 7%
Z h e ng z h ou 3 ,0 0 2 2,38 7 5 ,3 8 8 13 %
He fe i 4 ,9 1 0 84 9 5 ,7 5 9 13 % Xi'an
Ch o ng q in g 1 ,7 7 4 1,24 1 3 ,0 1 5 7% 13% Shenzhen
To t a l 2 7 ,9 8 2 1 4 ,9 9 3 4 2 ,9 7 5 15%
To ta l GAV (Rmb m) 4 2 ,9 7 5
To ta l GAV (HK$ m) 5 3 ,7 1 9 Nanning Nanchang
Ne t d e b t (HK$ m) (1 6 ,3 3 1 ) 17% 15%
N AV (H K $ m ) 3 7 ,3 8 8
N AV p s (H K $ ) 4 .6 8

Page 83
China South City
Appendix: Management profiles

M an ag emen t t eam Cu rren t
( ag e, y ear jo in ed ) p o sit io n B ac k g ro u n d
Mr. Cheng Chung Co-Chaiman * Co-founder of CSC and has been a Director since 2 A ugust 2002.
(鄭松興 ), and * Has more than 32 y ears of management experience in the manufacturing, wholesale and distribution
54, executiv e businesses.
2002 director * Chairman and non-executiv e director of Man Sang International Limited( 938.HK).
* Director of China Metro-Rural Holdings, formerly known as Man Sang International, (CNR.NY) until his
resignation effectiv e from 5 December 2013.
* Younger brother of Mr. Cheng Tai Po, a non-executiv e Director.
* Chairman of the Shenzhen Logistics and Supply Chain Management A ssociation
* Standing member of the 10th and 11th Guangxi Zhuang A utonomous Region Committee
* Member of the 3rd, the 4th and the 5th Shenzhen Committee of the Chinese People's Political
Consultativ e Conference V ice president of China F ederation of Logistics and Purchasing
Mr. Leung Moon Lam CEO& * Co-founder of CSC and has been a Director since 2 A ugust 2002.
(梁滿林 ), executiv e * Has more than 32 y ears of management experience in the garment manufacturing, wholesale and
59, director distribution businesses.
2002 * Member of the 2nd, 3rd and the 4th Shenzhen Committee of the Chinese People's Political Consultativ e
Conference
* Member of the Liaoning Committee of the Chinese People's Political Consultativ e Conference.
* Chairman of the 7th Shenzhen Textile Industry A ssociation Committee.
* Member of the National Committee of the Chinese People's Political Consultativ e Conference in
F ebruary 2013.
* Member of the Consultativ e Committee on Economic and Trade Cooperation between Hong Kong and
the Mainland
* V ice chairman of the J iangxi Chinese Ov erseas F riendship A ssociation
* Honorary chairman of the Shenzhen Longgang Charity A ssociation
* Honorary professor of Business of Hang Seng School of Commerce
* Ppresident of the F ederation of Hong Kong Shenzhen A ssociations
* Chairman of Wetter (China) Limited and Kings F aith International Limited.
Dr. Ma Kai Cheung Co-Chairman * Co-founder of CSC and has been a Director since 2 A ugust 2002.
(馬介璋 ), & non- * Primarily responsible for adv ising on the formulation of the CSC's general business models and
73, executiv e dev elopment strategies and the resolution of major issues.
2002 director * Has more than 43 y ears of management experience in garment distribution and manufacturing
businesses.
*Was awarded a Bronze Bauhinia Star (BBS) and a Silv er Bauhinia Star (SBS) by the Gov ernment of
HKSA R in 2003 and 2009 respectiv ely .
* Member of the 9th, 10th and 11th National Committee of the Chinese People's Political Consultativ e
Conference.
* Permanent honorary president of Shenzhen Ov erseasChinese International A ssociation
* Permanent honorary president of Hong Kong Chiu Chow Chamber of Commerce
* Chairman of F ederation of Hong Kong Guangdong Community Organizations
* Permanent honorary president of Hong Kong & Kowloon Chiu Chow Public A ssociation
* Permanent honorary chairman of F ederation of Hong Kong Chiu Chow Community Organizations
* Receiv ed an honorary doctoral degree in philosophy from the Morrison Univ ersity in the United States
in 2004.
* Receiv ed a fellowship from the A sian Knowledge Management A ssociation in 2008.
* Honorary Chairman of Carrianna Group Holdings Company Limited (formerly known as Tak Sing
A lliance Holdings Limited) (126.HK).
Page 84
China South City
Appendix: Management profiles (continues)

Mr. F ung Sing Hong CF O & * J oined CSC in J uly 2006, and is responible for the ov erall financial management of CSC, formulating
Stephen (馮星航 ), executiv e corporate financing and merger and acquisition strategy , and actuated the strategic coopertaion with
50, 2006 director Tencent.
* MBA , F CPA , HKICPA , A ICPA , CGMA and F HKIoD
* F ellow member of the Hong Kong Institute of Certified PublicA ccountants
* Member of the A merican Institute of Certified Public A ccountants and the Chartered Global
Management A ccountants.
* F ellow member of the Hong Kong Institute of Directors.
* Has more than 22 y ears of experience in financial management, mergers and acquisitions, capital
markets financing and corporate restructuring.
* Prior to joining our Group, Mr. F ung was an ED and CF O of Guangdong Inv estment Limited ("GDI")
(270.HK).
* F rom December 2002 to Nov ember 2004, Mr. F ung serv ed as an executiv e director and the chief
financial officer of Guangdong Land Holdings Limited (formerly known as Kingway Brewery Holdings
Limited) ("GDL") (124.HK).
* Key member of the Guangdong Enterprises (Holdings) Limited ("GDE") restructuring team and has been
extensiv ely inv olv ed in the US$5.3 billion debt restructuring of GDE.
Mr. Cheng Tai Po Non- * Has been a CSCH Director since 30 A pril 2010 and is primarily responsible for adv ising on the
(鄭大報 ), executiv e formulation of the CSCH's general business models, dev elopment strategies and the resolution of major
63, director issues.
2010 * Has ov er 32 y ears' experience in manufacturing, wholesale and distribution businesses.
* Elder brother of Mr. Cheng Chung Hing, the Co-Chairman and ED and the controlling shareholder of the
Company .
* Board member of the Zhanjiang Ocean Univ ersity , China, a general committee member of the Hong
Kong J ewelry Manufacturers' A ssociation
* Chairman of Hong Kong Ov erseas Puning Sheshan Clansmen A ssociation
* Executiv e director and deputy chairman of Man Sang International Limited
*Director and v ice-chairman of China Metro-Rural Holdings Limited (formerly known as Man Sang
International (B.V .I.) Limited) (CNR.NY)
Mr. Sun Kai Lit Cliff Non- * Co-founder of CSC and has been a Director since 2 A ugust 2002.
(孫啟烈 ), executiv e * Primarily responsible for adv ising on the formulation of the CSCH's general business models,
61 , director dev elopment strategies and the resolution of major issues.
2002 * A ssociate of the Institute of Industrial Engineers of Ohio and has ov er 35 y ears of management
experience in the businesses of wholesale distribution and manufacturing of kitchenware and other metal
and plastic products.
* A ppointed as J ustice of the Peace (J P) in 2003
* A warded a Bronze Bauhinia Star (BBS) by the Gov ernment of HKSA R in 2006
* Member of the 11th Zhejiang Committee of Chinese People's Political Consultativ e Conference.
* Honorary chairman of the F ederation of Hong Kong Industries, the honorary chairman of The Hong
Kong Exporters' A ssociation
* Honorary chairman of the Hong Kong Q Mark Council
* President of the Hong Kong Plastics Manufacturers A ssociation Limited
* Honorary founding president and the executiv e president of Shenzhen Ov erseas Chinese International
A ssociation
* ED of Kinox Enterprises Limited and Kin Hip Metal and Plastic F actory Limited.
* Independent non-executiv e director of Ming F ai International Holdings Limited (3828.HK) and Ka Shui
International Holdings Ltd., (822.HK)
Page 85
China South City
Appendix: Management profiles (continues)

Dr. Ma Wai Mo Non- * Co-founder of CSCH and has been a Director of the Company since 2 A ugust 2002
(馬偉武 ), executiv e * Primarily responsible for adv ising on the formulation of the CSCH's general business models,
70, director dev elopment strategies and the resolution of major issues.
2002 * Has more than 35 y ears of management experience in the printing and packaging, manufacturing,
wholesale and distribution businesses.
* Member of the 3rd and the 4th Shenzhen Committee of the Chinese People's Political Consultativ e
Conference
* Chairman of the 13th, 14th, 16th and 17th Hong Kong Corrugated Paper Manufacturers' A ssociation
* Member of the Committee of F oreign and Ov erseas Chinese A ffairs, the Standing Committee of
Shenzhen Municipal People's Congress
* Honorary chairman of the 2nd and 3rd Chaoy ang District Shantou City Committee of the Chinese
People's Political Consultativ e Conference
* V ice chairman of the 7th general committee of the China Packaging F ederation
* Honorary chairman of the 7th and 8th Shenzhen Packaging A ssociation
* V ice president of the 7th and the 8th Guangdong Printing A ssociation
* Executiv e v ice president of the Guangdong Ov erseas Chinese Enterprises A ssociation
* Honorary founding president and the executiv e v ice president of Shenzhen Ov erseas Chinese
International A ssociation
* Chairman of the Shenzhen Graphic Society and Shenzhen Longgang Cultural Industry A ssociation.
* Chairman of Luk Ka International Limited, a wholly owned subsidiary of Luk Ka Ov erseas Inv estments
Limited.
* A warded the World's Outstanding Chinese in 2005 and receiv ed anhonorary doctor of science degree
from A rmstrong Univ ersity in the same y ear.
* A warded the Bisheng Printing Outstanding A chiev ement A ward by the Printing Technology
A ssociation of China in 2013 and the Global Outstanding Chinese A ward by the Global Outstanding
Chinese A ssociation in 2014.
Mr. Lin Ching Hua Non- * Has been non-executiv e Director since 28 J une 2014.
(林璟驊 ), executiv e * Primarily responsible for adv ising on the formulation of the CSCH's general business models,
42, director dev elopment strategies and the resolution of major issues.
2014 * GM of Tencent Group since A pr 2013
* His responsibilities mainly to establish the strategic platform of Tencent, to formulate the business
dev elopment strategies of the Tencent Group, and to lead the research and dev elopment of v arious
business models in the Tencent Group and the business cooperation with external strategic partners who
the Tencent Group has equity inv estments.
* Has taken a crucial and leading role in promoting Tencent's recent strategic initiativ es, including Weixin
commercialization, important strategic inv estments and cooperations, and the business planning and
dev elopment in internet finance.
* Before joining Tencent, Mr. Lin was a partner at McKinsey & Company , Inc and General Manager of its
branch in Taiwan.
* Mainly serv ed clients and performed research in technology sector, including hi-tech manufacturing,
internet serv ice, telecommunication and media during his 12 y ears with McKinsey & Company , Inc. His
v arious research receiv ed wide cov erage in a number of Business and F inancial media in China.
* Before joining McKinsey , Mr. Lin worked at Deloitte Consulting Inc., Taiwan Office, as a consultant. He
receiv ed his MBA degree from Harv ard Business School in 2001.
Page 86
China South City
F Y M ar 2014A 2015A 2016F Pro p ert y T ier 1 T ier 2 F Y 15

Property price grow th 0% 0% 0% p ric e EPS
g ro w t h (HK $)
rat e
B ear c as e -10% -10% 0.24
B as e c ase 0% 0% 0.27
B u ll c as e 10% 10% 0.30
Source: DBS Vickers
Segmental Breakdown (HK$ m)
F Y M ar 2012A 2013A 2014A 2015A 2016F 2017F

R ev en u es
Sales of properties 3,011 6,899 12,535 8,191 10,567 11,516
F inance lease income 421 280 278 463 417 375
Rental income 166 214 305 574 697 852
Property management serv ice 42 44 67 133 179 227
income
E-commerce income - - 189 202 252 282
Other fee income 5 38 95 195 239 343
Income from hotel operations 27 13 - - - -
T o t al 3,671 7,488 13,468 9,758 12,351 13,595
Page 87
China South City
Income Statement (HK$ m) Margin Trends
F Y M ar 2012A 2013A 2014A 2015A 2016F 2017F

Turnov er 3,671 7,488 13,468 9,758 12,351 13,595
%
60
Cost of Goods Sold (1,435) (3,311) (6,921) (4,582) (6,273) (6,810)
50
G ro s s Pro f it 2,236 4,177 6,547 5,176 6,078 6,785
Other Opg (Exp)/Inc (538) (880) (1,679) (1,866) (1,520) (1,606) 40
O p erat in g Pro f it 1,698 3,296 4,868 3,309 4,558 5,179 30
Other Non Opg (Exp)/Inc 547 27 139 256 (0) (0) 20
A ssociates & J V Inc 1 1 (1) (7) 10
Net Interest (Exp)/Inc (59) (102) (104) (97) (242) (266)
0
Exceptional Gain/(Loss) 1,118 1,251 1,266 2,399
2012A
2013A
2014A
2015A
2016F
2017F
Pre- t ax Pro f it 3,306 4,473 6,169 5,859 4,316 4,913
Tax (1,258) (1,606) (2,472) (2,145) (2,202) (2,445)
M inority Interest 23 (117) (202) 13 (62) (65)
Operating margin
Preference Div idend
N et Pro f it 2,071 2,750 3,494 3,728 2,053 2,404 Net margin
Core net profit 822 1,832 2,616 1,790 2,053 2,404
EBITDA 3,388 4,603 6,343 6,064 4,666 5,287

Sales Gth (%) 64.3 104.0 79.9 (27.6) 26.6 10.1
EBITDA Gth (%) 34.5 35.9 37.8 (4.4) (23.1) 13.3
Opg Profit Gth (%) 73.5 94.1 47.7 (32.0) 37.7 13.6
Effectiv e Tax Rate (%) 38.1 35.9 40.1 36.6 51.0 49.8
Balance Sheet (HK$ m) Asset Breakdown
F Y M ar 2012A 2013A 2014A 2015A 2016F 2017F Invts in

Net F ixed A ssets 13,840 20,808 25,744 31,546 31,546 31,546 Assocs &
Inv ts in A ssocs & J V s 1 6 13 40 40 40 JVs
Other LT 0%
Other LT A ssets 3,580 3,103 4,161 7,404 9,918 10,882
Assets Cash &
Cash & ST Inv ts 3,832 6,265 11,303 8,673 8,394 8,522 10% ST Invts
Inv entory 7,908 9,381 13,455 22,970 26,168 28,555 12%
Debtors 1,392 1,580 3,535 654 654 654
Other Current A ssets 112 1,202 1,749 1,967 1,967 1,967
T o t al A s s et s 30,666 42,345 59,961 73,254 78,687 82,167 Net Fixed
Assets
43% Inventory
ST Debt 2,740 4,418 5,842 9,576 9,576 9,576
Other Current Liab 8,154 10,956 18,402 18,770 18,770 18,770 Other 31%
Current
LT Debt 3,878 7,435 11,677 15,427 19,927 21,927
AssetsDebtors
Other LT Liabilities 2,898 3,493 3,896 4,459 4,459 4,459 3% 1%
Shareholder's Equity 12,939 15,853 19,970 24,867 25,800 27,280
M inority Interests 57 190 175 155 155 155
T o t al Cap . & L iab . 30,666 42,345 59,961 73,254 78,687 82,167
Non-Cash Wkg. Cap (8,042) (9,754) (16,653) (16,802) (16,802) (16,802)

Net Cash/(Debt) (2,786) (5,589) (6,216) (16,331) (21,110) (22,981)
Page 88
China South City
Cash Flow Statement (HK$ m) Operating cashflow
F Y M ar 2012A 2013A 2014A 2015A 2016F 2017F

HK$m
Pre-Tax Profit 3,306 4,473 6,169 5,859 4,316 4,913
Dep. & A mort. 23 27 70 108 93 93 3,000
Tax Paid (160) (238) (838) (1,217) (2,202) (2,445) 2,500
(Pft)/ Loss on disposal of F A s 40 (4) - 0 - - 2,000
A ssoc. & J V Inc/(loss) (1) (1) 1 7 - - 1,500
Non-Cash Wkg. Cap. 3,248 (285) (2,231) 1,848 - - 1,000
Other Operating CF (5,520) (1,859) (467) (5,218) (2,956) (2,122)
500
N et O p erat in g CF 936 2,114 2,703 1,387 (748) 440
Capital Exp. (net) (2,327) (3,073) (3,170) (81) - - 0
Other Inv ts. (net) 0 - - (500)
Inv ts. in A ssoc. & J V 267 (268) 467 (134) - - (1,000)
2012A
2013A
2014A
2015A
2016F
2017F
Div from A ssoc. & J V 1 1 1 - - -
Other Inv esting CF 9 29 (27) (12,129) (2,467) (918)
N et In v es t in g CF (2,050) (3,312) (2,729) (12,344) (2,467) (918)
Div Paid (150) (454) (616) (1,086) (1,120) (924)
Chg in Gross Debt 267 4,785 5,056 5,234 2,500 -
Capital Issues - - 1,497 (151) - -
Other F inancing CF (259) (235) (755) 2,815 1,712 1,689
N et F in an c in g CF (142) 4,096 5,182 6,813 3,092 765
Net Cashflow (1,256) 2,898 5,157 (4,145) (124) 287
Page 89
China Fortune Land Dev.
Bloomberg: 600340 CH Equity | Reuters: 600340.SS Refer to important disclosures at the end of this report
BUY (Initiate coverage) EASY ACCESS TO LAND

Last Traded Price: RMB26.57 (CSI300 Index : 4,176) Integrated industrial city operator, also the largest beneficiary of
Price Target: RMB 31.60 (19% upside) Beijing-Tianjin-Hebei integration. Differentiating itself from other
developers, CFLD is building new industrial cities surrounding mega
Potential Catalyst: Strong sales growth and faster than expected cities like Beijing and Shanghai. It has multiple income sources and
cash collection from government benefits from both industrial development and housing demand from
Where we differ: Our EPS estimates are conservative vs consensus the migrant population. Since it is developing primary land, CFLD
should be able to quickly acquire more land if needed. Therefore, its
Analyst
Ken HE CFA +86 21 6888 3375 landbank is usually on a rolling one-year basis, which enables it to be
ken_he@hk.dbsvickers.com asset light and enjoy fast turnover. This could be evidenced by its high
Carol WU +852 2863 8841 ROE of >40% in the past five years. The China government has
carol_wu@hk.dbsvickers.com reiterated the integration of Beijing-Tianjin-Hebei belt several times
Danielle WANG CFA +852 2820 4915 since 2014, and is now tabled as a national strategy, which should
greatly benefit CFLD as c.88% of its sizeable portfolio is located in
Andy YEE CFA, +852 2971 1773
Pan-Beijing area.
Scaleable warehouse business. In 2014, CFLD signed a cooperation
Price Relative agreement with China’s largest e-retailer – JD.com (JD.US, BUY) - and
RMB Relative Index
introduced it to its Gu’an Park. The first logistic property for JD is
37.3
260k sm, with 180k sm completed in 2014 with the balance 80k sm
890
32.3 790
27.3 690 to be completed this year. Given CFLD’s easy access to land,
22.3
590
especially industrial lands, we believe such cooperation can be
490
17.3
390 replicated in other areas and with other players as well.
12.3
290
7.3 190 Proven execution with cheap valuation. Revenue/net profit has
2.3
90
Jul-15
registered CAGR of 57%/71% in FY10-14, and is projected to grow
China Fortune Land Development (LHS) at CAGR of 24%/30% in FY14-16F. Based on our estimate, 100% of
Relative SHSZ300 Index (RHS)
our property development revenue projection in FY15/16F is locked-in.
Forecasts and Valuation Valuation of 14.4x FY15F EPS is undemanding given its leadership in
F Y D ec ( R mb m) 2013A 2014A 2015F 2016F
this niche market and expected earnings CAGR growth of 30%.
Turnov er 21,060 26,886 34,167 41,354
EBITDA 3,762 5,217 6,880 8,187
Pre-tax Profit 3,586 5,060 6,744 8,028 Valuation:
Net Profit 2,715 3,538 4,768 5,968 Initiating coverage on CFLD with BUY and Rmb31.60 TP. Our SOTP-
Core Net Profit 2,707 3,516 4,768 5,968 based TP represents a 20% discount to our DCF-based NAV estimate
EPS (Rmb) 1.03 1.34 1.80 2.26 of Rmb39.58 or 17.8x FY15F PE. CFLD is trading at 14.7x FY15F PE,
EPS Gth (%) 52.2 30.3 34.8 25.2 compared to A-listed large developers’ average of 11.8x and A-listed
DPS (Rmb) 0.05 0.40 0.18 0.23
BV Per Share (Rmb) 2.51 3.70 5.10 7.18 industrial developers’ average of 36.7x.
PE (X) 25.9 19.9 14.7 11.8
EV /EBITDA (X) 21.5 17.7 13.5 11.5 Key Risks to Our View:
Net Div Yield (%) 0.2 1.5 0.7 0.8 Aggressive expansion could be potential risks. Diversifying into non-
P/Book V alue (X) 10.6 7.2 5.2 3.7 core areas might also hurt its cash flow.
Net Debt/Equity (X) 0.7 0.8 0.7 0.6 Government risks exist. Slower-than-expected cash collection from
ROA E (%) 49.5 43.0 40.9 36.7 local governments could present another risk.
EPS Rev (%) New New
Consensus EPS (HK$) 1.87 2.40 At A Glance
Other Broker Recs: B: 8 S: 0 H: 1 Issue d Ca pita l (m shrs) 2,646
ICB Industry: Industrials Mkt Ca p (RMBm/US$m) 70,298 / 11,324
ICB Sector: Construction & Materials Ma jor Sha re holde rs (%)
Principal Business: Industrial park development China Fortune La nd De v 68.9
Source of all data: Company, DBSV, Thomson Reuters Fre e Floa t (%) 31.1
3m Av g. Da ily Va l. (US$m) 186.2
www.dbsvickers.com
ed- JS / sa- AL
Company Focus
China Fortune Land Development
INVESTMENT THESIS
Profile Rationale
Founded in 1998, China Fortune Land Development (or CFLD) Unique business model
is a leading operator of new industrial cities. Leveraging on its Building new industrial towns surrounding mega cities
success in its first industrial park in Gu’an, Heibei, it has
Partner with local governments
penetrated into several county areas surrounding
metropolitan cities like Shanghai and Beijing. Teaming up Multiple income sources as benefiting from both industrial
with local governments, it engages in integrated industrial city development and migrant housing demand
development including developing primary land, industrial Fits in with government’s new urbanization plan
park and residential/commercial areas that are supplementary Easy access to land
to industrial parks. It was listed in A-share market in 2011, via
Responsible for planning and primary development
a backdoor listing.
Asset light model
Scalable warehouse business
The largest beneficiary of Beijing-Tianjin-Hebei integration
Owns a sizeable portfolio
c.88% of portfolio located in Great Beijing area
Residential business is not subject to home purchase
limitation
Valuation Risks
SOTP valuation. We apply a 10% discount to NAV for Expansion and execution risks
industrial park/properties, on par with the level for Value-added-tax reform may affect its revenue/margin.
Singapore-listed warehouse leader GLP (GLP SP, BUY), given Aggressive expansion and talent bottleneck could be
its leadership in a niche market and 11.8x PER for potential risks.
residential/commercial properties, benchmarking to A-listed
Government risks exist.
large residential plays’ average.
Source: DBS Vickers
Page 91
SWOT Analysis
Strengths Weakness
 Unique business model with huge growth potentials  Funding cost is relatively high
 Asset light model with fast asset turnover  Net profit relies on payment by local governments
 Multiple income sources from government, industries and  Gearing is relatively high, which would limit expansion
homebuyers
 Proven execution
 High revenue visibility
 Innovative management team
 Easy access to land, especially to industrial land
 Likely to benefit from Beijing-Tianjin-Hebei integration  Value-added-taxes (VAT) reform might affect its tax
expenses
 Likely to benefit from Beijing Capital’s second airport
 Talent bottleneck during expansion
 Providing more value-added services to industries including
industrial incubators, database support, financing and other  Any change in local tax/fiscal policies will likely affect
comprehensive industrial services government’s payment ability
 Leg in promising logistics property business
Source: DBS Vickers
Page 92
Company background
that are supplementary to industrial parks. It was listed in A-

Company Profile share market in 2011, via a backdoor listing.
Integrated industrial city operator. Founded in 1998, China Largest beneficiary of Beijing-Tianjin-Hebei integration. The
Fortune Land Development (or CFLD) is a leading operator of Chinese government has reiterated the integration of Beijing-
new industrial cities. Leveraging on its success in its first Tianjin-Hebei several times since 2014, raising it to a national
industrial park in Gu’an, Hebei, it has penetrated into several strategy level, which should greatly benefit CFLD as c.88% of its
county areas surrounding metropolitan cities like Shanghai and sizeable portfolio (land area of 1,947 sq km, details on page 6)
Beijing. Teaming up with local governments, it engages in is located in Pan-Beijing areas. It will also benefit from Beijing
integrated industrial city development including developing Capital’s second airport, which will enlarge the catchment area
primary land, industrial park and residential/commercial areas of Beijing.
CFLD’s milestone
Year Events
1998 Founded
2002 The first industrial park in Gu’an, Hebei
2007 The second industrial park in Dachang, Hebei
2011 Backdoor listing
2012 Expanded into Shenyang, Liaoning
2013 Expanded into Pan-Shanghai region
2014 Set up hi-tech incubator in the Silicon Valley in US
Penetrated into Fangshan, Beijing
Leg into warehouse sector and allied with e-commerce leader – JD.com (JD.US, BUY)
2015 Formed strategic cooperation with Sinodata (002657.CH) on Internet Finance
Corporate structure
Wang Wenxue
80% 100%
Beijing Dongfang Yinlian 55% 9% Langfang Fortune

Investment Management Investment
81% 26.5%
Dingji Capital Management China Fortune Land

Holdings
68.88%
0.78%
CFLD (600340.CH)
Page 93
Key management team
Manager Current appointment Profile

(Age)
Wang Wenxue Chairman Founder and owner
(48) Ownership in the company is 69.66%
Guo Shaozeng Director Holds an MBA
(52) Held various positions in CFLD and China Fortune Land Holdings
Hu Xuewen Director & Vice President Holds a Diploma
(56) Held various positions in CFLD
Meng Jing Director & President Holds a Bachelor
(48) Held various positions in CFLD including HR, General Manager etc
Wu Zhongbing Vice President & CFO Served as Financial Controller of Vanke
(38) Served as various positions in Wanda
Worked at Financial Street Holdings
Source: Company
CLFD’s footprint
Beijing region: 87.8% of total

Shanghai region: 6.1% of total
Other regions: 6.0% of total
Northeastern
Sujiatun, Shenyang, Liaoning
Tiexi, Shenyang, Liaoning
Beijing circle
Gu’an, Langfang, Hebei
Dachang, Langfang, Hebei
Xianghe, Langfang, Hebei
Yongqing, Langfang, Hebei
Bazhou, Langfang, Hebei
Wen’an, Langfang, Hebei
Renqiu, Cangzhou, Hebei
Baiyangdian, Baoding, Hebei
Changli, Qinhuangdao, Hebei
Luanping, Chengde, Hebei
Huailai, Zhangjiakou, Hebei
Zhuolu, Zhangjiakou, Hebei
Zhangfang, Fangshan, Beijing
Langfang urban, Hebei
Shanghai circle
Wuxi, Jiangsu
Zhenjiang, Jiangsu
Jiashan, Jiaxing, Zhejiang
Lishui, Nanjing, Jiangsu
Economic belt along Yangtze River Fengji, Jinshan, Shanghai
Renshou, Meishan, Sichuan
Page 94
CFLD’s portfolio: 88% located in Greater-Beijing area
County, City, Province Commencement Industry Clusters / Positioning Area (sq km)
Gu'an, Langfang, Hebei 2002 Biological, e-commerce, heavy machinery, autoparts, 151
aerospace, new energy
Dachang, Langfang, Hebei 2007 Intelligent equipment, new energy, energy equipment, 83
autoparts, digital printing, new media
Xianghe, Langfang, Hebei 2013 Intelligent robot, aviation, e-commerce, autoparts 41
Langfang urban, Hebei 2012 Aviation, hi-tech 9
Yongqing, Langfang, Hebei 2013 Eco-living, healthcare 18
Bazhou, Langfang, Hebei 2013 Hot spring and leisure 124
Wen'an, Langfang, Hebei 2011 Heavy machinery, environmental equipment 24
Renqiu, Cangzhou, Hebei 2014 Manufacturing 240
Baiyangdian, Baoding, Hebei 2014 New energy, heavy machinery, IT 300
Changli, Qinhuangdao, Hebei 2012 High-end manufacturing, manufacturing services 7
Luanping, Chengde, Hebei 2010 Culture, tourism 225
Huailai, Zhangjiakou, Hebei 2008 Aerospace, IT, new energy 122
Zhuolu, Zhangjiakou, Hebei 2014 Eco-living, healthcare 247
Zhangfang, Fangshan, Beijing 2014 Racing, culture, leisure, eco-living, healthcare & senior living 119
Sujiatun, Shenyang, Liaoning 2012 Autoparts, high-end manufacturing 35
Tiexi, Shenyang, Liaoning 2014 n.a. 32
Wuxi, Jiangsu 2012 Internet of things, wireless applications 4
Zhenjiang, Jiangsu 2012 Hign-end manufacturing 3
Jiashan, Jiaxing, Zhejiang 2013 Trading service, logistics & warehouses, IT 12
Lishui, Nanjing, Jiangsu 2013 High-end manufacturing, new material, IT, intelligent housing, 9
healthcare equipment
Fengjing, Jinshan, Shanghai 2015 n.a. 92
Renshou, Meishan, Sichuan 2015 n.a. 50
Total 1,947
Existing landbank for residential/commercial properties (000 sm, as of end-FY14)

Area Land site GFA Sellable Sellable Leaseable Leaseable
land area GFA land area GFA
Gu'an 2,487 4,125 2,127 3,645 361 480
Dachang 1,374 2,733 1,294 2,570 79 163
Shenyang 230 345 230 345 0 0
Shanghai-circle 364 639 275 462 89 177
Langfang 7 18 7 18 0 0
Fengtai 31 141 31 141 0 0
Total 4,493 8,001 3,965 7,180 529 821
Primary land development (000 sm, as of end-FY14)

Area Land site GFA
Gu'an 3,107 5,011
Dachang 1,169 2,339
Shenyang 898 1,347
Shanghai-circle 1,658 3,743
Langfang 37 93
Total 6,870 12,533
Page 95
1. Infrastructure development: Local governments have

Business Model outsourced infrastructure and primary development
to CFLD. The initial construction costs will be borne
Unique business model fits in with government’s new by CFLD, and local governments will pay 10-15% on
urbanisation plan. Differentiating itself from other developers, top of total development costs after
CFLD is building new industrial cities surrounding mega cities completion/transfer of the project.
like Beijing and Shanghai. Mega cities are facing increasing 2. Together with local governments, CFLD is responsible
population/traffic pressure, which is why the government has for the design and marketing of the industrial parks,
introduced a new urbanisation plan to control the population of as well as attracting investments and agglomeration.
mega cities while developing small cities and towns. In addition, Local governments will pay 45% of realised industrial
mega cities are moving industries out to peripheral areas. investments (“落地投資額”) (including land, factory,
Therefore, we believe building industrial new cities surrounding machinery and others) to CFLD on a yearly basis.
mega cities fits in with government’s plan to push forward 3. CFLD also develops residential properties inside
industry-oriented urbanisation and coordinate the development industrial parks. Apart from housing demand from
of metropolitan areas. migrant industrial population, the segment also sees
rising demand from the older population moving out
Multiple income sources. Other than being a pure industrial
of mega cities, as those new industrial cities usually
park developer, CFLD is also developing residential properties
have better living environment while properties prices
and supplementary retail areas inside the industrial parks, which
are much lower. Also, unlike tier I cities, there is no
enables it to benefit from both industrial development and
home purchase limitation.
migrant population’s housing demand. As such, it has multiple
income sources:
Development pace – it usually takes 3-5 years for an industrial park to be mature
Start-up stage Acceleration stage Mature stage
1-1.5 years 1.5-2 years 1-1.5 years
Planning, designing and Sales of land use rights by Industrial park is getting Government receives stable
positioning local government mature taxes from industries and
pays 45% of realised
The usual start-up area of 3- Government receives income Realised industrial industrial investments to
5 sq km from land sales and pays a investments enter into fast CFLD
10-15% mark up to costs to land
Land preparation and CFLD CFLD provides value-added
infrastructure construction Residential properties services to enterprises and
by CFLD Marketing of industrial (residential land inside property management
parks, attracting industrial industrial park usually services to residents inside
Initial costs borne by CFLD investment and acquired by CFLD) sales also the park
agglomeration speed up
Win-win strategy: government’s cashflow is always positive while CFLD’s cashflow usually turns positive in 3 years
Start-up stage: T0-T1 year Acceleration stage: T2-T4 year Mature stage: after T4/T5 year
Cash in: industrial & residential land Cash in: land sales, corporate tax, Cash in: corporate tax, employee
sales employee income tax, property income tax, property sales/LAT tax
Local Cash out: pay on infrastructure costs sales/LAT tax Cash out: pay on realised investment
government Net cash: positive Cash out: pay on infrastructure and Net cash: positive
realised investment
Net cash: positive
Cash in: government’s pay on Cash in: government’s pay on Cash in: government’s pay on realised
infrastructure costs infrastructure and realised investment, property sales, value-add
CFLD Cash out: infrastructure, marketing, investment, property sales services income
residential land acquisition Cash out: infrastructure, marketing, Cash out: infrastructure, marketing,
Net cash: negative development costs development costs
Net cash: turning positive Net cash: positive
Page 96
Multiple income sources
Segments Summary Income sources Paid by

Infrastructure Primary land development and 10-15% on top of total development Local governments
development infrastructure costs, settled on yearly basis
Residential property Development of residential properties Property sales and rental income from Home buyers and consumers
and operation of commercial properties commercial properties
More value-added services to residents Upcoming Home owners
in the park
Industrial park Attracting industrial investments into the 45% of realised industrial investments, Local governments
operation park settled on yearly basis
Providing one-stop services to Rental of warehouses and factory Enterprises
enterprises in the park areas, incubator and financing
supports
Revenue breakdown by segments (FY14) Gross profit breakdown (FY14, excluding others)
Others Infrastucture
3% and primary
land
10%
Infrastucture Residential
Residential
and primary development
development
land 54%
69% Industrial
15%
park
development
Industrial 36%
park
development
13%
Source: DBS Vickers Source: DBS Vickers
residential landbank of 8m sm, as compared to contracted

Capturing the entire value along the chain. CFLD aims to
GFA of 5.8m sm.
provide one-stop services to industries, by providing more
value-added services to attract industries and generate
Scaleable warehouse business. In Apr-14, CFLD signed a
additional income. In 2014, CFLD set up a hi-tech incubator
cooperation agreement with JD.com and introduced JD.com
in the Silicon Valley in US, and also signed a cooperation
into its Gu’an Park. The first logistics property for JD.com is
framework with the largest e-retailer in China – JD.com
260k sm, with 180k sm completed in 2014, with the balance
(JD.US, BUY) - relating to logistics parks. In 2015, it formed a
of 80k sm to be completed this year. Given its easy access to
strategic cooperation with Sinodata (002657.CH, not-rated)
land, especially industrial land, we believe such cooperation
on Internet Finance.
can be replicated in other areas and with other players.
Besides logistic properties, the cooperation with JD.com also
Easy access to land enables asset light model. Since it is
includes supply chain finance and distribution centers.
developing primary land, it can quickly acquire more land if
needed. Therefore, its landbank is usually on a rolling one-
year basis, which enables it to have an asset light model and
enjoy fast turnover. This could be evidenced by its high ROE
of >40% in the past five years. As of end-FY14, it has a
Page 97
Critical data points to watch
Key assumptions
Earnings Drivers
Breakdown of land
Strong sales benefiting from ongoing Beijing-Tianjin-Hebei Industrial land 40%
integration. Total sales CAGR was 47.7% in 2011-2014. In Residential/commercial land 40%
Infrastructure area 20%
2015, CFLD is looking at a sales target of Rmb61.5bn, or
20% y-o-y growth. We expect the company to beat this Infrastructure
target as it has in the past. In 1H15, total sales amounted to Development costs
Rmb30.1bn, up 24.4% y-o-y, locking in 49% of its full year Primary land (Rmb m/sq km) 100-150
target. Infrastructure (Rmb m/sq km) 100-150
Government's payments
High revenue locked-in for residential segment. As of end- Government's payments as % of development 110-115%
costs
FY14, advances from home buyers amounted to Rmb40.3bn,
Time period between infrastructure completion 1 year
which is usually lower than unbooked sales. Including 1H15
and government's payment
sales, total unbooked sales for residential segment should be
more than Rmb65.6bn, which is larger than the sum of our Industrial park
estimated development revenue in FY15 and FY16. Our Attracted investments
estimated development revenue of Rmb16.7bn (up 24.5% y- New sign-up investments (“簽約投資額”), >=1.5
o-y) in FY15 is based on its 2015 completion target of 3.8m industrial (Rmb m/mu)
sm (up 21.8% y-o-y). Ratio of sign-up investments transferring to 30%
realised investments (“落地投資額”)
Previous industrial parks gradually contributing. As mentioned Time period of sign-up investments transferring 1.5-2.0 years
to realised investments
earlier, industrial park development revenue is usually 45% of
Government's payments on realised investments
actual realised/completed industrial investments. Generally Government's payment as % of realised 45%
speaking, 30% of newly signed investments will translate into investments
realised investments and it usually takes 1.5-2.0 years for Time period between realised investments and 1 year
such transformation. We have also assumed that payments government's payment (payment is usually based
on the audited numbers of released investment
from the government will come in one year after the realised in the previous year)
industrial investments. We expect industrial development
revenue to grow 28% and 33% to Rmb4.6bn and Rmb6.1bn Source: DBS Vickers
in FY15 and FY16 respectively. Gross margin of this segment
is usually over 95%.
CFLD’s targets and actual achievements
2011 2012 2013 2014 2015

Target
Total sales (Rmb bn) n.a. 19.0 28.0 50.0 61.5
PUD (m sm) n.a. 7.1 12.0 22.2 20.2
Completion (m sm) n.a. 1.5 2.8 3.1 3.8
Actual (Rmb bn)

Cash collection from development 3.6 3.0 7.6 7.6
Residential inside industrial parks 10.4 14.5 23.6 35.5
Residential outside industrial parks 1.9 3.5 5.9 7.5
Rental and hotel 0.0 0.1 0.3 0.6
Total sales 15.9 21.1 37.4 51.3
as % of target n.a. 111% 134% 103%
Page 98
Historical new sign-up investments and revenue from industrial park development
Rmb bn 2011 2012 2013 2014 2015 2016

New sign-up investments, industrial 13.0 27.9 39.5 50.2 60.2 72.3
Industrial park development revenue 1.0 1.5 2.4 3.6 4.6 6.1
Historical property selling prices Margin trend
Rmb/sm
40%
10,000
35%
30%
9,000 25%
20%
8,000 15%
10%
5%
7,000
0%
2010A
2011A
2012A
2013A
2014A
2015F
2016F
6,000
2011A
2012A
2013A
2014A
Gross margin Net margin
Margin trend likely to stay around 30%. We expect gross Debt maturity profile likely to improve. Short term debt
margin to improve slightly to 30.5% in FY15F from 28.8% in accounted for 69% of total debt as of end-FY14, which is
FY14A, primarly due to (i) higher gross margin from property realtively high. The issue of corporate bond, if successful, should
development business to factor in high ASP achieved in extend and improve its debt maturity profile.
2013/2014, and (ii) slightly higher proportion of high-margin
industrial park development business. Dividend payout might not be stable. There was no fixed
dividend payout policy in the past four years; the payout ratio
Funding cost likely to trend down. CFLD’s funding cost was was 30% in FY14. Although management has not fixed this
9.6% in FY14, down from 12% in FY13. We expect its funding ratio, the accumulated cash dividend for the three consecutive
cost to trend down further after gradual retirement of trust years (FY15-FY17) should not be less than 30% of average
financing and current lower interest environment. In addition, it profits realised in those three years. Therefore, we have
has just announced to issue up to Rmb7.5bn onshore corporate assumed 10% dividend payout for each of the next three years.
bonds (7 years at an estimated cost of 4-5%). In addition, the
company also actively seeks for offshore bond opportunities. Valuation
To sum up, we expect revenue to grow 27%/21% to DCF-based NAV of Rmb39.58. We have computed the value
Rmb34.2bn/Rmb41.4bn and core net profit to grow 35%/25% of development property projects and industrial park business
to Rmb4.8bn/Rmb6.0bn in FY15/16F. based on discounted cash flow model and industrial/investment
properties using capitalisation rate method. We estimate CFLD’s
Balance Sheet: GAV at Rmb45.07 and NAV at Rmb39.58, based on the
following assumptions:
Net gearing is high after rapid growth. Net gearing was high at
83% as of end-FY14, after its rapid expansion in 2014. But, net (i) We have assumed property prices will remain flat. Our
gearing will likely go down after strong sales in 2015. estimate only includes residential land acquired.
Page 99
(ii) Key assumptions for industrial park can be found on the

table on the page before previous one. GAV/NAV estimate
(iii) 11% WACC in DCF projections for development properties. Rmb m

GAV 119,244
(iv) 9% cap rate for valuing commercial properties and 8% cap Net debt -14,513
NAV 104,731
rate for valuing warehouses / industrial properties.
no. of shares (mn) 2,646
GAV per share 45.07
Of the total GAV, 67.3%/31.2%/1.2%/0.4% is from industrial
NAV per share 39.58
park/residential properties/commercial properties/industrial
properties. By region, we estimate that about Current price 26.57
85.3%/10.2%/4.6% of GAV is from Beijing region, Shanghai Discount to NAV -33%
region and other regions, respectively. CFLD is currently trading PE 14.7
at a 33% discount to our NAV estimate. Source: DBS Vickers
NAV sensitivity analysis
Discount rate
(Rmb) 9% 10% 11% 12% 13%
7% 45.60 42.58 39.86 37.40 35.16
Cap 8% 45.44 42.43 39.70 37.24 35.01
rate 9% 45.32 42.31 39.58 37.12 34.89
10% 45.23 42.21 39.49 37.03 34.79
11% 45.15 42.14 39.41 36.95 34.72
Source: DBS Vickers
GAV breakdown by region GAV breakdown by property type
Others Industrial
5% Residential park
properties 68%
Shanghai 31%
region
10%
Industrial
properties
0%
Beijing
Commercial
region
properties
85%
1%
Page 100
SOTP-based TP of Rmb31.60. We apply a 10% discount to NAV

PE comparison
for industrial park/properties, on par with the level for
Singapore-listed warehouse leader GLP (GLP SP, BUY), given its Company Code FY15F PE
leadership in a niche market and 11.8x PER for Industrial Park
residential/commercial properties, benchmarking to A-listed Shanghai Jinqiao 600639.CH 36.2
large residential plays’ average. Shanghai Waigaoqiao FTZ 600648.CH 37.2
Suzhou New District Hi-Tech 600736.CH n.a.
Shanghai Zhangjiang Hi-Tech 600895.CH n.a.
SOTP valuation Average 36.7
Rmb m Residential Developer

Industrial parks/properties 59,512 Vanke-A* 000002.CH 10.2
Residential/commercial properties 24,087 China Merchants Property 000024.CH 16.0
Total 83,599 Poly Real Estate 600048.CH 8.0
no. of shares (mn) 2,646 Gemdale 600383.CH 12.8
Target price per share 31.60 Average 11.8
*DBS Vickers
Source: DBS Vickers Source: Thomson Reuters, closing price @July24, 2015
Share Price Drivers

Attractively trading at 14.7x FY15F PE. In the past, CFLD had
traded at a valuation similar to A-listed pure industrial park plays
and large residential plays (listed in the table below). It is Better-than-expected sales. Contracted sales in the counties
currently trading at 14.7x FY15F PE, slightly higher than large surrounding Beijing will likely accelerate, driven by the
residential plays’ average of 11.8x but much lower than pure government-led Beijing-Tianjin-Hebei Integration. Actually,
industrial park plays’ average of 36.7x, despite CFLD being the Gu’an, Hebei recorded 96% y-o-y increase in sales volume in
largest beneficiary of the ongoing Beijing-Tianjin-Hebei 1H15. In addition, the Beijing-Tianjin-Hebei integration will likely
integration. drive faster-than-expected investment in CFLD’s parks.
Key Risks:
Tax reform. Upcoming value-added-tax (VAT) reform will likely

affect local governments’ revenue as previous sales/business
taxes are 50:50 split by local governments and central
governments, while VAT is 25:75 split by local and central.
Page 101
F Y D ec 2015F 2016F Pro p ert y T ier F Y 15 F Y 15

K ey A ssu mp t io n s p ric e 2/3 EPS EPS
Property price growth 0% 0% g ro w t h (HK $) chg
Rental for logistics/industrial 4% 4% rat e
Rental for retail 4% 4% B ear c as e -5% 1.76 -2%
B as e c ase 0% 1.80 0%
B u ll c as e 5% 1.84 2%
Source: DBS Vickers
Segmental Breakdown (RMB m)
F Y D ec 2012A 2013A 2014A 2015F 2016F
R ev en u es
Industry park dev elopment 1,546 2,365 3,568 4,550 6,055
Infrastructure construction 990 1,432 842 922
Primary land dev elopment 2,060 2,053 2,632 3,366 3,686
Property dev elopment 8,310 15,427 18,537 24,663 29,909
Other 161 225 716 748 783
T o t al 12,077 21,060 26,886 34,167 41,354
G ro ss p ro f it s
Industry park dev elopment 1,478 2,307 3,457 4,399 5,876
Infrastructure construction - 211 553 77 84
Primary land dev elopment 524 595 377 306 335
Property dev elopment 2,758 4,013 5,145 7,984 9,121
Other (756) (1,419) (1,783) (2,344) (2,924)
T o t al 4,004 5,707 7,750 10,421 12,491
G ro ss p ro f it marg in s
Industry park dev elopment 95.6% 97.6% 96.9% 96.7% 97.1%
Infrastructure construction 21.3% 38.6% 9.1% 9.1%
Primary land dev elopment 25.5% 29.0% 14.3% 9.1% 9.1%
Property dev elopment 33.2% 26.0% 27.8% 32.4% 30.5%
Other -469.7% -630.9% -248.9% -313.5% -373.7%
T o t al 33.2% 27.1% 28.8% 30.5% 30.2%
Page 102
Income Statement (RMB m) Margin Trends
F Y D ec 2012A 2013A 2014A 2015F 2016F

%
25
Turnov er 12,077 21,060 26,886 34,167 41,354
20
Cost of Goods Sold (8,073) (15,352) (19,136) (23,746) (28,863)
G ro ss Pro f it 4,004 5,707 7,750 10,421 12,491 15
Other Opg (Exp)/Inc (1,507) (2,037) (2,748) (3,676) (4,450) 10
O p erat in g Pro f it 2,498 3,671 5,002 6,745 8,042 5
Other Non Opg (Exp)/Inc - 26 91 - -
0
A ssociates & J V Inc (1) (1) (0) - -
2012A
2013A
2014A
2015F
2016F
Net Interest (Exp)/Inc 18 (115) (28) (1) (14)
Exceptional Gain/(Loss) 5 5 (4) - -
Pre- t ax Pro f it 2,520 3,586 5,060 6,744 8,028 Operating margin
Tax (653) (900) (1,258) (1,686) (2,007) Net margin
Minority Interest (83) 29 (264) (290) (53)
N et Pro f it 1,784 2,715 3,538 4,768 5,968
EBITDA 46 65 125 134 145

Sales Gth (%) 55.0 74.4 27.7 27.1 21.0
EBITDA Gth (%) 54.7 42.7 91.0 7.5 7.7
Opg Profit Gth (%) 43.4 47.0 36.3 34.9 19.2
Balance Sheet (RMB m) Asset Breakdown
F Y D ec 2012A 2013A 2014A 2015F 2016F

Invts in
Assocs &
Net F ixed A ssets 999 2,450 3,576 4,070 4,554
JVs
Inv ts in A ssocs & J V s 18 18 17 17 17 0%
Other LT A ssets 253 2,278 2,699 3,261 3,551 Other LT
Assets
Cash & ST Inv ts 5,556 9,944 16,194 16,133 14,831 Other 3%
Other Current A ssets 36,367 59,405 91,478 98,700 109,453 Current
Assets Net Fixed
T o t al A sset s 43,193 74,094 113,964 122,182 132,407 Assets
80%
3%
ST Debt 2,598 9,802 21,218 21,218 21,218
Other Current Liab 29,350 44,613 63,565 67,783 72,464 Cash & ST
LT Debt 5,228 7,304 9,489 9,489 9,489 Invts
Other LT Liabilities 1,059 2,420 2,296 2,296 2,296 14%
Minority Interests 642 3,305 7,603 7,893 7,946
T o t al Cap . & L iab . 43,193 74,094 113,964 122,182 132,407
Non-Cash Wkg. Cap 7,017 14,791 27,913 30,917 36,989

Net Cash/(Debt) (2,270) (7,162) (14,513) (14,574) (15,875)
Page 103
Cash Flow Statement (RMB m) Operating cashflow
F Y D ec 2012A 2013A 2014A 2015F 2016F

RMBm
3,000
Pre-Tax Profit 2,520 3,586 5,060 6,744 8,028
2,000
Dep. & A mort. 28 35 94 104 114 1,000
Tax Paid (1,502) (2,561) (3,715) (1,686) (2,007) 0
A ssoc. & J V Inc/(loss) 1 1 0 - - (1,000)
Chg in Wkg. Cap. (847) (4,565) (6,424) (3,004) (6,072) (2,000)
Other Operating CF 17 31 31 31 31 (3,000)
N et O p erat in g CF 218 (3,474) (4,954) 2,189 94 (4,000)
Capital Exp. (net) (453) (714) (719) (629) (629) (5,000)
(6,000)
Other Inv ts. (net) (778) (868) (564) (563) (290)
2012A
2013A
2014A
2015F
2016F
Inv ts. in A ssoc. & J V - - - - -
Div from A ssoc. & J V - - - - -
Other Inv esting CF (1,409) (1,493) (1,444) - -
N et In v est in g CF (2,640) (3,076) (2,728) (1,191) (918)
Div Paid (678) (1,729) (2,787) (1,058) (477)
Chg in Gross Debt 5,158 9,659 13,624 - -
Capital Issues - - - - -
Other F inancing CF (320) 3,173 1,218 - -
N et F in an c in g CF 4,161 11,104 12,055 (1,058) (477)
Net Cashflow 1,738 4,554 4,373 (61) (1,302)
Page 104
This page has been left blank intentionally
Page 105
China / Hong Kong Company Guide
China Vanke
Edition 1 Version 1 |Bloomberg: 2202 HK Equity | 000002 CH Equity | Reuters: 2202.HK | 000002.SZ
Refer to important disclosures at the end of this report
H: BUY NEW COMER WITH A BIG AMIBITION

Targets 10m sm in three years. It is targeting to develop the logistics
Last Traded Price (H): HK$19.72 (HSI : 25,129)
property business into the second largest in China in 3-5 years, after
Price Target (H) : HK$ 23.69 (20% upside)
GLP. Vanke’s established ties with local governments will help when
A: BUY acquiring industrial land. The cooperation with Blackstone will provide
Last Traded Price (A): RMB15.41 (CSI300 Index : 4,176) funding support to grow the warehousing business and the alliance
Price Target (A): RMB 18.91 (23% upside) with China Railway Logistics Group will give Vanke a large customer
Potential Catalyst: Faster growth in new initiatives base.
Where we differ: Our FY15/16F EPS are below consensus Spinning off property management business could be a catalyst. The
Analyst
Ken HE CFA +86 21 6888 3375 property management business will see decent organic growth as well
ken_he@hk.dbsvickers.com as M&A opportunities. Vanke aims to manage over 50m sm of
Carol WU +852 2863 8841 residential community space that is not developed by them. Coupled
carol_wu@hk.dbsvickers.com with 103.4m sm of existing space under management at end-2014 and
Danielle WANG CFA +852 2820 4915 the expected delivery area of 16m sm, the total space managed but the
company would exceed 170m sm. There is potential for this segment to
Andy YEE, CFA +852 2971 1773
be spun-off to unlock value.
Decent sales growth and high earnings visibility. Vanke’s contracted
Price Relative sales reached Rmb110bn in 1H15, up 9% y-o-y. Sales are likely to
HK$ Relative Index RMB Relative Index
remain strong in July and August, given improving buying sentiment
24.0 15.9 222
209
202
and the low comparison base last year. Total unbooked revenue as of
22.0
20.0
189
13.9
182 end-1H15 is estimated to be Rmb267bn. In addition, funding cost is
18.0
169 11.9 162 expected to drop gradually because of access to more funding options.
149 142
9.9
16.0 129 122
14.0 7.9 Valuation:
109 102
12.0 89 5.9 82
Better risk-reward profiles. Our valuation for Vanke-A/-H is based on
Jun-14 Nov-14 Apr-15 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15
12.5x FY15 PE, on par with closest comparable COLI’s peak multiple
China Vanke - H (LHS) Relative HSI INDEX (RHS) China Vanke-A (LHS) Relative SHSZ300 Index (RHS) in 2012. Vanke-A/H shares are currently trading at 10.2x/10.5x FY15F
PE, with yields of 3.4%/3.4%. Vanke’s NAV is estimated at
Forecasts and Valuation (H Shares) Rmb18.22/HK$22.83 per share. The company recently announced its
FY D e c (R M B m) 2013A 2014A 2015F 2016F 2015 share buyback program (up to Rmb10bn at not more than
Turnove r 127,454 137,994 171,805 198,297
Rmb13.70/share). Maintain BUY rating for Vanke-A/H shares for its
EBITDA 27,783 29,111 32,978 38,313
Pre -ta x Profit 27,847 29,987 33,625 39,449 strong fundamentals and limited share price downside.
Ne t Profit 15,119 15,745 16,694 18,591
Core Ne t Profit 15,060 13,768 16,694 18,591 Key Risks to Our View:
EPS (RMB) 1.37 1.43 1.51 1.68 Key risks include: loss of key personnel and slower-than-expected
EPS (HK$) 1.71 1.78 1.89 2.10
EPS Gth (%) 20.3 4.1 5.8 11.4 growth of new businesses. VAT reform is a sector-wise risk that could
Dilute d EPS (HK$) 1.71 1.78 1.89 2.10 erode developers’ margins.
DPS (HK$) 0.51 0.62 0.66 0.74
BV Pe r Sha re (HK$) 8.71 9.97 11.23 12.67 At A Glance
PE (X) 11.5 11.1 10.5 9.4 Issued Capital - H shares (m shs) 1,315
EV/EBITDA (X) 6.7 5.5 5.2 4.9 - Non H shrs (m shs) 9,723
Ne t Div Yie ld (%) 2.6 3.2 3.4 3.7 H shs as a % of Total 12
P/Book Va lue (X) 2.3 2.0 1.8 1.6 Total M kt Cap (HK$m/US$m) 217,660 / 28,083
Major Shareholders (%)
Ne t De bt/Equity (X) 0.3 0.1 0.1 0.1
China Resources Co. Ltd. 14.94
ROAE (%) 21.5 19.1 17.8 17.6 F oresea Life Insurance 10.00
EPS Re v (%) Nil Nil Major H Shareholders (%)
Conse nsus EPS (RMB) 1.67 1.92 J PM organ Chase & Co. 15.19
Othe r Broke r Re cs: B: 13 S: 0 H: 4 F irst State Inv estment 9.74
Source of all data: Company, DBSV, Thomson Reuters, HKEX UBS A G 8.99
H Shares-F ree F loat (%) 66.08
3m A v g. Daily V al. (US$m) 33.7
ICB Industry : Financials / Real Estate (HK)
ASIAN INSIGHTS VICKERS SECURITIES

www.dbsvickers.com
ed-SGC/ sa- AL
Company Guide
China Vanke
Revenue
CRITICAL DATA POINTS TO WATCH RMB m
Earnings Drivers: 250,000
New growth drivers. Vanke wants to be the second largest
200,000
logistics player in China with a total of 10m sm of warehouse
space in three years. 150,000
It has announced two warehouse projects in Guiyang and
100,000
Wuhan with total GFA of 177k sm, and is negotiating for
another 3m sm GFA of warehouse projects across China. 50,000
Vanke’s established ties with local governments, alliance with 0
Blackstone and cooperation with 3rd party logistics providers 2012A 2013F 2014F 2015F 2016F
(China Railway Logistics Group) will give Vanke an advantage Gross Profit
in accessing land, funds and customers; these are the key RMB m %
hurdles normally faced by developers and warehouse operators. 60,000 35
50,000 30
25
Driven by its large sales/delivery scale, property management 40,000
20
30,000
income expanded at 32% CAGR over 2011-14. But segment 15
20,000
profits grew faster at 62% driven by wider margins as services 10,000
10
5
improved. Vanke is also targeting to grow the property 0 0
management business by introducing its management system
2012A
2013F
2014F
2015F
2016F
to projects developed by third parties. The scale of this
Gross Profit (LHS) Gross Margin (%) (RHS)
segment could exceed 170m sm.
Leverage & Asset Turnover (x)
Traditional residential business continues to see decent sales 0.90
0.4
0.4
and revenue growth. Cumulative sales reached Rmb110bn in 0.80
0.4
1H15, up 9% y-o-y. July and August should also see strong 0.70
0.3
sales growth, given improving buying sentiment after the 0.60
0.3
interest rate cut and the low base last year. More importantly, it 0.50 0.3
0.40
has accelerated land-banking activity, having spent Rmb7.0bn 0.30
0.3
0.3
(gross) to replenish its land bank (1.53m sm GFA). YTD 0.20 0.2
acquisitions are valued at Rmb26bn (+46% y-o-y) for a total of 0.10 0.2
6.7m sm GFA (+44% y-o-y). 0.00 0.2
2012A 2013A 2014A 2015F 2016F
Gross Debt to Equity (LHS) Asset Turnover (RHS)
Locked in large portion of revenues. As of end-FY14, Vanke had Capital Expenditure
Rmb195bn in unbooked sales (consolidation, or 17m sm). RM
4,500.0
Including Rmb110bn of contracted sales in 1H15 (assuming 4,000.0
80% consolidation), total unbooked revenue was Rmb267bn at 3,500.0
end-1H15, much higher than our estimated development 3,000.0

2,500.0
revenue of Rmb167bn for FY15F.Gross margin will continue to 2,000.0
slip ~1ppt this year. 1,500.0
1,000.0
500.0
Structural decline in funding costs. Currently, Vanke incurs 0.0
relatively higher funding costs than peers such as COLI and CR 2012A 2013A 2014A 2015F 2016F
Land. We expect funding cost to trend down as (i) trust finance Capital Expenditure (-)
at end-FY14 amounted to Rmb17bn with 7.5% carrying cost; ROE (%)

these will expire in 2015 and 2016; (ii) Vanke is one of few 20.0%
developers to successfully issue mid-term notes (MTN) in the

domestic interbank market; and (iii) it may increase exposure to 15.0%
offshore market funds to extend debt maturity and lower

funding costs. 10.0%
5.0%
As such, we expect FY15/16F core net profit to grow 21%/11%
to Rmb16.7bn/Rmb18.6bn.
0.0%
2012A 2013A 2014A 2015F 2016F

Page 107
Company Guide
China Vanke
Balance Sheet: GAV breakdown by region

Strong balance sheet provides flexibility. Net gearing was 21% at Other
end-1Q15, still the strongest among listed China property asset, Guangshen
Other 1.2% region,
developers. This implies room for land-banking and to support its 32.8%
region,
Rmb10bn share buyback program; the latter would lift net 2.6%
gearing to 33%, which is still manageable.
Chengdu
Valuation: region,
11.4%
Prefer P/E valuation. We applied the NAV discount method for
other warehouse players, but choose PE valuation metric for
Vanke because its core business is still quick-turn residential Beijing
development business. We value Vanke at 12.5x FY15F PE, on region, Shanghai
par with COLI’s peak valuation in 2012. Our TPs for Vanke-A/H 22.0% region,
30.0%
shares are Rmb18.91/HK$23.69. The share are trading at
attractive valuation currently, at 10.2x/10.5x FY15F PE, and offer GAV breakdown by tier
yields of 3.4%/3.4%. Other
asset, Tier I,
Vanke-A/H shares are trading at 15%/14% discount to NAV. We 1.2%
Other 30.7%
estimate Vanke’s NAV at Rmb18.22/HK$22.83, based on the
region,
following assumptions: (i) flat property prices in Tier I/II/III cities. 2.6%
(ii) 9.3% WACC in our DCF model for development properties,
and (iii) 7% cap rate for valuing investment and logistics Tier III,
9.8%
properties.
Share Price Drivers:

Spins off property management business. Vanke is considering Tier II,
this. If successful, we estimate that could enhance its market cap 55.7%
by 2-3% at 20-30x trailing PE.
Forward PE chart (x) – H share
Key Risks: x
Key risks include: loss of key personnel, slowdown in NAV- 12
accretive acquisitions or management fee-based projects, and 11 +1SD: 9.8x
new businesses failing to take off. 10
9 Avg: 8.9x
8
COMPANY BACKGROUND
7 -1SD: 8x
China Vanke Co., Ltd. (or “Vanke”) was founded in 1984. The
6
A-shares (Vanke-A, 000002.CH) were listed on the Shenzhen
Aug-14
Dec-14
May-15
Jun-14
Oct-14
Feb-15
Jul-15
Stock Exchange in 1991, followed by the listing of B-shares

(Vanke-B, 200002.CH) in 1993. Vanke has been growing its
property sales, which exceeded Rmb108bn in 2010 and Forward PB chart (x) – H share
Rmb215bn in 2014. This company is one of the largest x
developers in China in terms of sales. In 2014, Vanke completed 2.0
the B-to-H conversion and a successful launch on the Hong Kong 1.8
+1SD: 1.6x
Stock Exchange (Vanke-H, 2202.HK) in June. It is the only big 1.6 Avg: 1.5x
developer that is traded on both the A-share and H-share 1.4
platforms. It also has 75% stake in Vanke Property Overseas (or
1.2 -1SD: 1.4x
“Vanke Overseas”, 1036.HK), which is intended to be the
1.0
platform to grow its residential business in Hong Kong.
Aug-14
Jun-14
Feb-15
Jul-15
Dec-14
May-15
Oct-14
Source: Company, Thomson Reuters, DBS Vickers

Page 108
Company Guide
China Vanke
SWOT Analysis
Strengths Weakness
 Market leader with proven execution record  Large portion of fitted units raises possibility of
completion slippages
 Sufficient landbank to support growth for another 4-5 years
 Lower financial transparency in JV projects
 Undergoing transformation amid a maturing property
market  Fragmented shareholding structure
 Quick asset churn with mass-market focus  Business partnership program at project level could
drag landbanking pace because of constraints in its
 Asset-light strategy with decent ROE partners’ financial planning policies
 Strong balance sheet with sufficient war chest to leverage  Progress of JV projects may be impacted by partner’s
on growth opportunities financial positions
 Benefiting from ongoing market consolidation with M&A  Policy tightening

opportunities ahead
 VAT reform may raise its tax burden if land cost is not
 Business partnership program at project level will improve deductible
project efficiency
 Loss of key personnel to competition
 Higher management fees will lift revenues and margins
 Rising public awareness of environmental pollution,
 Better debt profile and lower funding costs ahead such as dust charge, could increase construction costs
 Pioneer of prefab buildings – an advantage in times of rising
labor costs
 Likely to benefit from sustained demand for logistics
properties
 More REIT products are likely in the domestic market.
 Potential cooperation with Wanda will ease concerns over
commercial areas when acquiring lands, and help Vanke to
penetrate more markets
Source: DBS Vickers

Page 109
Company Guide
China Vanke
Appendix: Vanke’s footprint
Landbank breakdown by region
Guangshen region 30%

Shanghai region 22%
Beijing region 29%
Chengdu region 19%
Total 100%
Landbank breakdown by city tiers
Tier I 14%
Tier II 66%
Tier III 19%
Total 100%
Appendix: Key management team

(Age, year joined)
Wang Shi ED & Chairman Served in various positions of Guangzhou Railway Bureau, the Foreign Trade and
(63, 1988) Economic Cooperation Committee of Guangdong Province and Shenzhen Special Region
Development Company
Served as GM of Shenzhen Exhibition Centre for Modern Science and Education
Equipment, the predecessor of Vanke
Graduated from Lanzhou Railway College
Qiao Shibo Non-ED & Vice Chairman Currently the general manager of China Resources National Corp. and served in various
(60, 2010) positions in China Resources Group
Served as a department head at the Ministry of Foreign Trade and Economic Cooperation
of the PRC
Graduated from Jilin University with a Bachelor's degree
Yu Liang ED & President Worked for Shenzhen Waimao Group before joining Vanke in 1990
(49, 1990) Bachelor's degree and Master's degree in Economics from Peking University
Wang Wenjin ED & EVP Worked for Anhui Optical Sophisticated Mechanic Research Centre of China Academy of
(48, 1993) Sciences before joining Vanke in 1993
Non-ED of Vanke Property (Overseas) Ltd. (1036.HK)
Non-practising member of CICPA
Graduated from Zhongnan University of Economics and Law with a Master's degree
Source: Company

Page 110
Company Guide
China Vanke
Appendix: Corporate structure
China Resources Foresea Life Insurance Ying’an Partnership GIC Value Partner
A share 14.97% 10.00% 4.48% 1.42% 0.83%

88.06% of total
56.36% 0.58% 1.18%
Other A shares Vanke

10.17%
H share
Other H shares 11.94% of total

Page 111
Company Guide
China Vanke
Key Assumption
FY De c 2015F 2016F
Ke y As s u mp ti o n s
Property price growth 0% 0%
Rental for office 5% 5%
Rental for retail 5% 5%
ADR growth for hotel 5% 5%
Source: DBS Vickers
Segmental Breakdown (RMBm)
FY D e c 2012A 2013A 2014A 2015F 2016F
R e ve n u e s
Sale s of prope rties 94,001 123,546 133,752 167,167 193,173
Construction contra cts 1,416 1,432 1,548 1,631 1,710
Prope rty ma nage ment 807 1,385 1,874 2,029 2,196
and re lated se rvice s
Othe rs 636 1,092 820 979 1,217
To ta l 9 6 ,8 6 0 1 2 7 ,4 5 4 1 3 7 ,9 9 4 1 7 1 ,8 0 5 1 9 8 ,2 9 7
Gro s s Pro fi ts
Sale s of prope rties 30,773 33,392 34,091 41,578 47,832
Construction contra cts 42 40 36 33 34
Prope rty ma nage ment 82 221 268 274 320
Othe rs 508 986 660 788 980
To ta l 3 1 ,4 0 6 3 4 ,6 3 9 3 5 ,0 5 5 4 2 ,6 7 3 4 9 ,1 6 6
Gro s s Pro fi t M a rg i n
Sale s of prope rties 32.7% 27.0% 25.5% 24.9% 24.8%
Construction contra cts 3.0% 2.8% 2.4% 2.0% 2.0%
Prope rty ma nage ment 10.2% 16.0% 14.3% 13.5% 14.6%
Othe rs 79.8% 90.3% 80.5% 80.5% 80.5%
To ta l 3 2 .4 % 2 7 .2 % 2 5 .4 % 2 4 .8 % 2 4 .8 %

Page 112
Company Guide
China Vanke
Income Statement (RMBm)
FY D e c 2012A 2013A 2014A 2015F 2016F
Turnove r 96,860 127,454 137,994 171,805 198,297

Gro s s Pro fi t 3 1 ,4 0 6 3 4 ,6 3 9 3 4 ,6 3 5 4 2 ,6 7 3 4 9 ,1 6 6
Othe r Opg (Exp)/Inc (6,067) (7,104) (8,609) (10,272) (11,459)
O p e ra ti n g P ro fi t 2 5 ,3 3 8 2 7 ,5 3 6 2 6 ,0 2 5 3 2 ,4 0 1 3 7 ,7 0 7
Othe r Non Opg (Exp)/Inc 228 68 2,536 - -
Associa tes & JV Inc 890 999 2,043 1,323 1,731
Net Intere st (Exp)/Inc (758) (756) (618) (100) 10
Exceptiona l Ga in/(Loss) - - - - -
Pre -ta x P ro fi t 2 5 ,6 9 8 2 7 ,8 4 7 2 9 ,9 8 7 3 3 ,6 2 5 3 9 ,4 4 9
Ta x (10,035) (9,550) (10,699) (11,509) (13,784)
Minority Intere st (3,111) (3,179) (3,542) (5,422) (7,074)
Profit a ttri. to PSCS - - - - -
Ne t P ro fi t 1 2 ,5 5 1 1 5 ,1 1 9 1 5 ,7 4 5 1 6 ,6 9 4 1 8 ,5 9 1
EBITDA 25,749 27,783 29,111 32,978 38,313

Sale s Gth (%) 43.1 31.6 8.3 24.5 15.4
EBITDA Gth (%) 32.5 7.9 4.8 13.3 16.2
Opg Profit Gth (%) 32.4 8.7 (5.5) 24.5 16.4
Effe ctive Ta x Ra te (%) 39.1 34.3 35.7 34.2 34.9
Balance Sheet (RMBm)
FY D e c 2012A 2013A 2014A 2015F 2016F
Net Fixe d Asse ts 3,334 3,739 5,560 5,984 6,379

Invts in Assocs & JVs 6,959 10,531 19,234 20,557 22,288
Other LT Assets 5,900 22,889 18,809 22,865 26,089
Ca sh & ST Invts 51,120 43,004 61,653 54,323 47,886
Other Current Assets 311,782 399,312 403,384 527,729 612,263
To ta l As s e ts 3 7 9 ,0 9 5 4 7 9 ,4 7 5 5 0 8 ,6 4 0 6 3 1 ,4 5 7 7 1 4 ,9 0 4
ST Debt 35,557 32,624 22,832 22,832 22,832

Other Current Lia b 224,276 296,298 322,822 429,042 492,675
LT De bt 36,036 44,082 46,149 46,149 46,149
Other LT Lia bilitie s 1,087 1,032 943 943 943
Sha reholde r's Equity 63,826 76,896 88,165 99,340 112,079
Minority Inte rests 18,313 28,543 27,729 33,151 40,225
To ta l Ca p . & Li a b . 3 7 9 ,0 9 5 4 7 9 ,4 7 5 5 0 8 ,6 4 0 6 3 1 ,4 5 7 7 1 4 ,9 0 4
Non-Ca sh Wkg. Cap 87,506 103,014 80,562 98,687 119,587

Net Ca sh/(Debt) (20,473) (33,702) (7,328) (14,658) (21,095)

Page 113
Company Guide
China Vanke
Cash Flow Statement (RMBm)
FY D e c 2012A 2013A 2014A 2015F 2016F
Pre -Ta x Profit 25,698 27,847 29,987 33,625 39,449

De p. & Amort. 183 179 549 576 605
Tax Pa id (4,685) (4,901) (12,554) (5,074) (5,808)
Assoc. & JV Inc/(loss) (890) (999) (2,043) (1,323) (1,731)
Chg in Wkg. Cap. (15,343) (19,971) 23,448 (22,180) (24,125)
Othe r Opera ting CF (1,236) (231) 2,339 (6,335) (7,986)
N e t O p e ra ti n g CF 3 ,7 2 6 1 ,9 2 4 4 1 ,7 2 5 (7 1 1 ) 404
Capita l Exp. (ne t) (2,698) (4,126) (2,611) (1,000) (1,000)
Othe r Invts. (net) 179 (1,094) (3,723) - -
Invts. in Assoc. & JV (488) (3,160) (2,280) - -
Div from Assoc. & JV - - - - -
Othe r Inve sting CF 554 425 563 1,071 1,181
N e t I n ve s ti n g CF (2 ,4 5 3 ) (7 ,9 5 4 ) (8 ,0 5 1 ) 71 181
Div Paid (1,429) (1,981) (4,516) (5,519) (5,851)
Chg in Gross De bt 20,613 3,514 (7,843) - -
Capita l Issue s - - -
Othe r Fina ncing CF (5,889) (6,774) (6,481) (1,171) (1,171)
N e t Fi n a n c i n g CF 1 3 ,2 9 4 (5 ,2 4 1 ) (1 8 ,8 4 0 ) (6 ,6 9 0 ) (7 ,0 2 2 )
Ne t Cashflow 14,567 (11,272) 14,833 (7,330) (6,437)

Page 114
Company Guide
China Vanke
H Share - Target Price & Ratings History
S.No . Da te Cl o s i n g Ta rg e t R a ti n g
HK$ Pri c e Pri c e
22.0 1: 23-Jun-15 HK$19.32 HK$23.69 Buy
21.0 1 2 2: 6-Jul-15 HK$18.62 HK$23.69 Buy
3 3: 8-Jul-15 HK$19.08 HK$23.69 Buy
20.0
19.0
18.0
17.0
16.0
15.0
14.0
13.0
Jul-14
Jul-15
Oct-14
Feb-15
May-15
Dec-14
Source: DBS Vickers
A Share - Target Price & Ratings History
S.No . Da te Cl o s i n g Ta rg e t R a ti n g
RMB Pri c e Pri c e
18.0 1: 23-Jun-15 RMB14.27 RMB18.91 Buy
1
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Jan-15
Mar-15
Apr-15
Sep-14
Jun-15
Jul-14
Aug-14
Dec-14
Jul-15
Nov-14
May-15
Oct-14
Feb-15
Source: DBS Vickers

Page 115
CMST Development Co Ltd-A
Bloomberg: 600787 CH Equity | Reuters: 600787.SS Refer to important disclosures at the end of this report
NOT RATED OLD WAREHOUSES WITH NEW INGREDIENTS

Last Traded Price: RMB13.36 (CSI300 Index : 4,176)
Price Target: n.a. Beneficiary of land revaluation, but positives priced in. CMSTD is a
Potential Catalyst: Faster-than-expected cooperation with GLP traditional logistics SOE that owns warehouses and storage space
Where we differ: The market assumes higher land values and faster across China. Currently, they operate 2.1m sm of warehouses
pace of upgrading of aged warehouses (1.5m sm owned, 0.6m sm leased from parentco and 3rd parties)
and 4.4m sm of open depots (3m sm owned and 1.4m sm leased).
Analyst
They will benefit from land revaluation as some aged warehouses
Ken HE CFA +86 21 6888 3375
ken_he@hk.dbsvickers.com are now located in city centres and may see urban renewal
Carol WU +852 2863 8841 opportunities. We estimate the land (assuming all 6.5m sm are
carol_wu@hk.dbsvickers.com self-owned) would be worth Rmb16.5bn at current market value,
Danielle WANG CFA +852 2820 4915 only 66% of its current market cap.
GLP to inject new life into company. In Aug 2014, the company
Andy YEE CFA, +852 2971 1773
announced an ownership reform by bringing in GLP (GLP.SP, BUY)
as a strategic investor. GLP will own a 15.34% stake in CMSTD
after the share placement. This move will improve management’s
Price Relative
RMB Relative Index
execution and pave the way for the introduction of management
224
incentives. More importantly, CMSTD will work with GLP (JV
18.6
16.6 204 platform, CMSTD:GLP 51:49) to develop modern warehouses,
14.6 184
164
leveraging on CMSTD’s advantage in land acquisitions and GLP’s
12.6
10.6 144 strong financing and operating capabilities.
8.6 124
6.6 104 Expect rising warehouse income, but shrinking trading business.
4.6 84
CMSTD is adjusting/upgrading outdated warehouses, to turn
2.6 64
Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 them into consumer-oriented warehouses from production-
CMST Development Co Ltd-A (LHS)
Relative SHSZ300 Index (RHS) oriented previously. This should improve warehouse income and
profitability. But, their trading business (mainly raw materials
Forecasts and Valuation
F Y D ec ( R mb m) 2013A 2014A 2015F 2016F related to steel) will continue to see shrinking revenues and
Turnov er 27,859 21,477 20,857 20,313 margins because of a slowing economy and rising environmental
EBITDA 653 903 587 635 awareness. Overall, we expect bottomline to grow by 10%/13%
Pre-tax Profit 449 737 274 310 in FY15/16F.
Net Profit 336 546 201 228
Core Net Profit 224 183 201 228
EPS (RMB) 0.18 0.29 0.11 0.12 Valuation:
EPS Gth (%) (23.9) 61.4 (63.2) 13.3
The stock is now trading at c.104x FY15 PE, which suggests the
Diluted EPS (HK$) 0.18 0.29 0.11 0.12
DPS (HK$) 0.03 0.12 0.03 0.03 positives have been priced.
BV Per Share (HK$) 3.01 3.27 3.35 3.44
PE (X) 73.4 45.5 123.5 109.0 Key Risks:
EV /EBITDA (X) 51.2 37.0 57.2 52.5 Only time will tell if GLP fits into the current management culture
Net Div Yield (%) 0.2 0.9 0.2 0.2
of a traditional SOE and the cooperation with GLP will be
P/Book V alue (X) 4.4 4.1 4.0 3.9
successful.
ROA E (%) 6.7 9.4 3.3 3.6
At A Glance
Consensus EPS (Rmb) 0.31 0.30
Other Broker Recs: B:3 H:0 S:1 Issue d Ca pita l (m shrs) 1,860
Mkt Ca p (RMBm/US$m) 24,847 / 4,002
ICB Industry: Industrials Ma jor Sha re holde rs (%)
ICB Sector: Industrial Transportation China Na tiona l Ma te ria ls 51.1
Principal Business: Logistics and warehouse Fre e Floa t (%) 48.9
Source of all data: Company, DBSV, Thomson Reuters, HKEX 3m Av g. Da ily Va l. (US$m) 173.0
Page 4
www.dbsvickers.com
ed-SGC/ sa- AL
DBSV's discussion of the issuer in this report will not be continuously followed. Accordingly, this report is being provided as a stand-alone analysis and recipients of this report should not expect
additional reports relating to this issuer, unless so decided by DBSV
SWOT Analysis
Strengths Weakness
 Traditional logistics SOE with nationwide presence  Traditional business run at a low efficiency
 Well-established network  Outdated warehouses
 Strong parentage  Trading and logistics related to raw materials will
 Strong balance sheet continue to suffer from economic slowdown
 Funding costs is low at 6% given its SOE background
 Likely to benefit from urban renewal and land  Value-added-taxes (VAT) reform might affect its tax
redevelopment expenses
 Upgrading warehouses from production-oriented ones to  Loss of personnel
consumer-based ones
 Mixed ownership via share placement to GLP, which will
likely improve management’s execution and incentives
 JV platform with GLP
Source: DBS Vickers
Page 117
warehouses (1.5m sm owned, 0.6m sm leased from parentco

Company background and 3rd parties) and 4.4m sm of open depots (3m sm owned
and 1.4m sm leased).
CMST Development Co., Ltd. (CMSTD, 600787.CH) is the listco
of China National Materials Storage and Transportation Corp. In Aug 2014, CMSTD announced they would place out 168.5m
(or CMST), which was established in the early 1960s. CMSTD shares to GLP at Rmb11.82/share. When completed, GLP will
was listed on the Shanghai Stock Exchange in Jan 1997. It has own 15.34% of the enlarged share base. The mixed ownership
grown into an integrated warehouse logistics provider with a reform will improve management’s execution and could pave
nationwide presence. Currently, they operate 2.1m sm of the way for management incentive programs.
CMSTD’s footprint (including logistic distribution centres, warehouses, open depots, trading offices and others)
Existing
Planning
Page 118
Corporate structure
SASAC
100%
China Chengtong Hldg.

Group Ltd. (CCT)
100%
China National Materials

Storage and Transportation
Corp. (CMST)
51.09%
15.34%
CMSTD (600787.CH) GLP (GLP.SP)
Key management team

(Age, year joined)
Han Tielin Chairman Mar1999-Dec2004, Director and GM of CMSTD
(56, 1999) Dec2004 till now, GM of CMST (parentco of CMSTD), Chairman of CMSTD
Apr2007-May2013, Director of Pacific Securities
Wang Xueming Vice Chairman Nov1992-Dec2007, various positions of CMST
(55, 1992) Dec2001 till now, Director of CMSTD
Aug2011 till now Vice Chairman of CMSTD
Xie Jingfu Director & Deputy GM Jan1997-Jun2006, various positions of CMSTD
(50, 1997) Jun2006-Sep2009, GM and Director of CMSTD
Sep2009 till now, deputy GM and Director of CMSTD
Dec2010 till now, Director of CMSTD Tianjin Binhai logistics Co., Ltd.
Source: Company
Page 119
Estimated Land Revaluation
Subsidiaries City Stake Site area Valuation Estimated Estimated

base avg value land value
k sm Rmb/sm Rmb m
CMSTD Nancang Branch Tianjin 100% 660 Commercial 8,580 5,663
CMSTD Tianjin Logistics Centre Tianjin 100% 72 Industrial 450 30
CMSTD Tianjin Tangjiakou Branch Tianjin 100% 62 Commercial 2,597 161
CMSTD Tianjin Xingang Branch Tianjin 100% 183 Industrial 450 82
CMSTD Tianjin Tanggu Branch Tianjin 100% 87 Industrial 450 39
CMSTD Langfang Branch Langfang 100% 250 Industrial 400 100
CMSTD Shanghai Wusong Branch Shanghai 100% 125 Industrial 2,500 314
CMSTD Shanghai Dachang Branch Shanghai 100% 280 Industrial 2,500 700
Shanghai CMSTD Lingang Fengxian Shanghai 100% 218 Industrial 1,500 327
Shanghai CMSTD Lingang Heqing Shanghai 100% 53 Industrial 1,500 80
CMSTD Shenyang Shenbei Branch Shenyang 100% 140 Industrial 600 84
CMSTD Dalian Branch Dalian 100% 583 Industrial 600 350
CMSTD Shenyang Tiexi Branch Shenyang 100% 60 Industrial 600 36
CMSTD Shenyang Logistics Shenyang 100% 493 Industrial 600 296
CMSTD Zhengzhou Nanyangzhai Branch Zhengzhou 100% 200 Industrial 550 110
CMSTD Pingdingshan Branch Pingdingshan 100% 428 Industrial 400 171
CMSTD Xi'an Dongxing Branch Xi'an 100% 43 Industrial 300 13
CMSTD Xi'an Branch Xi'an 100% 340 Commercial 5,403 1,837
CMSTD Xianyang Logistics Centre Xianyang 100% 140 Industrial 250 35
CMSTD Hanyang Branch Hengyang 100% 250 Industrial 250 63
CMSTD Hankou Branch Wuhan 100% 360 Industrial 300 108
CMSTD Nanjing Binjiang Logistics Centre Nanjing 100% 267 Commercial 18,285 4,876
CMSTD Chengdu Tianyi Branch Chengdu 100% 80 Industrial 300 24
CMSTD Wuxi Logistics Centre Wuxi 100% 310 Industrial 300 93
Qingzhou CMSTD Logistics Co. Qingzhou 100% 170 Industrial 250 43
Tianjin Baosteel Tianjin 100% 90 Industrial 450 41
CMSTD Chengdu Tian'er Branch Chengdu 100% 100 Industrial 300 30
Wuxi CMSTD Logistics Co. Wuxi 95% 180 Commercial 4,097 737
CMSTD Qingdao Branch Qingdao 100% 110 Industrial 250 28
6,335 2,600 16,469
Logistics property and open depots breakdown by region
Tianjin
22%
Shanghai
11%
Others
29%
Liaoning
20%
Shanxi Henan
8% 10%
Page 120
Earnings Drivers and 1.4% in FY16F. However, given lower proportion of trading
business, we expect blended gross margin to edge up from
Asset upgrade. Some of the company’s aged warehouses are 3.8% in FY14 to 4.0% in FY15F and 4.2% in FY16F.
now located in city centres, which creates urban
renewal/redevelopment opportunities. Depending on the Overall, we expect FY15/16F revenues to decline by 3% each
outcome of negotiations with local governments, they could year. Core net profit is expected to grow by 10%/13% in
either develop commercial/residential projects at current FY15/16F.
locations, or be compensated with land elsewhere (perhaps in
suburbs) for modern warehouses. Balance Sheet
In 2013, CMSTD started their first property development project Room to gear up for expansion. Net gearing was low at <0.3x
in Nanjing, located on their previous steel storage/market place. at end-2014, which means ample headroom for expansion,
Phase I was completed and disposed in 2014, recording a given their SOE background. The private placement to GLP will
disposal gain of Rmb362m. Phase II is currently under expand the equity base, and GLP may bring in other investors at
development and scheduled to be completed in 2018. project level.
In 2014, they received a relocation compensation of Rmb79m Near-term liquidity is healthy. Short term debt accounted for
from the Nanjing government. They will continue to benefit 17% of total debt and 36% of cash on hand as of end-FY14,
from land revaluation, but the pace of relocation might not be which is healthy.
up to CMSTD. In addition, the positives have been priced in at
current levels. We estimate the current market value of their Low funding costs supported by parentco. Given its SOE
land (assuming all 6.5m sm are owned) is Rmb16.5bn (details background, it usually enjoys a low borrowing costs of 6-7%.
on the next page), only half of its current market cap.
Valuation
The company currently operates 2.1m sm of warehouses that
are generating rents of Rmb0.7-1.2/sm/day. They are upgrading Positives are in the price. The nearest comparable could be
older warehouses to cater to rising sales from e-retailers. This Chiwan (Blogis) as both are logistics SOEs with similar size of
will lift future rents as well as profitability. warehouse portfolios. However, its market cap is nearly five
times of Chiwan (Blogis)’s. Therefore, we prefer Chiwan (Blogis)
JV with GLP. After the share placement to GLP, CMSTD will set
over CMSTD. The stock is now trading at c.104x FY15 PE, which
up a JV with GLP to develop logistics properties, leveraging on
also suggests the positives have been priced.
CMSTD’s advantage in land replenishment and GLP’s strong
financing/operating capabilities. CMSTD will hold 51% stake in
Share Price Drivers
The JV, which will have a registered capital of Rmb3bn. We
have not factored this into our model.
These include faster-than-expected asset transformation and
Weaker outlook for trading business. CMSTD is also involved in cooperation with GLP. The re-rating catalysts include faster-
the trading business (mainly raw materials such as steel and than-expected land redevelopment, and better-than-expected
coal), which has been seeing shrinking revenues and margins in synergies with GLP. However, these could also be a double-
the past few years. This trend is likely to continue as (i) domestic edge sword which could swing the share price either way.
economy and investments have been trending down, (ii) the
government continues to eliminate older production capacity, Key Risks
and (iii) steel makers are registering low profitability, which is
affecting the whole value chain. The logistics and trading businesses involving raw materials will
continue to suffer from a slower economy and the
Margin likely to edge up. We expect gross margin of logistics government’s plan to retire older production capacity.
segment (including warehouse, delivery, forwarding and other
related businesses) to stay at 16%. Trading business has been Only time will tell if GLP fits into the current management
trending down from 1.9% in FY12 to 1.6% in FY14. We expect culture of a traditional SOE and the cooperation with GLP will
the segement gross margin to keep declining to 1.5% in FY15F be successful.
Page 121
Key Assumption
FY De c 2014A 2015F 2016F

Ke y As s u mp ti o n s
Rental for logistics property 4% 4%
Growth for trading business -10% -10%
Source: DBS Vickers
Segmental Breakdown (RMB m)
FY De c 2012A 2013A 2014A 2015F 2016F
R e ve n u e s
Logistics 2,740 2,637 2,925 3,218 3,539
Trading 24,033 25,196 18,397 17,477 16,603
Others 9 26 155 163 171
To ta l 2 6 ,7 8 2 2 7 ,8 5 9 2 1 ,4 7 7 2 0 ,8 5 7 2 0 ,3 1 3
Gro s s p ro fi ts
Logistics 617.136 467.311 467.632 514.395 565.835
Trading 464.804 417.457 300.3 267.808 237.815
Others 7.639 24.54 79.929 83.9255 88.1217
To ta l 1 ,0 9 0 909 848 866 892
Gro s s p ro fi t ma rg i n s
Logistics 22.5% 17.7% 16.0% 16.0% 16.0%
Trading 1.9% 1.7% 1.6% 1.5% 1.4%
Others 85.7% 95.9% 51.5% 51.5% 51.5%
To ta l 4 .1 % 3 .3 % 3 .9 % 4 .2 % 4 .4 %
Page 122
Income Statement (RMB m) Margin Trends
FY De c 2012A 2013A 2014A 2015F 2016F

%
3.00
Turnover 26,782 27,859 21,477 20,857 20,313
2.50
2.00
Gro s s Pro fi t 1 ,0 1 0 863 816 835 861
Other Opg (Exp)/Inc (599) (486) (520) (457) (445) 1.50
O p e ra ti n g Pro fi t 410 377 296 378 416 1.00
Other Non Opg (Exp)/Inc 80 99 408 0.50
Associates & JV Inc 1 (1) (0) 0.00
2015F
2016F
2012A
2013A
2014A
Exceptional Gain/(Loss) 181 51 141 - -
Pre -ta x Pro fi t 557 449 737 274 310
Operating margin
Tax (146) (103) (179) (68) (78)
Minority Interest (9) (10) (11) (4) (5) Net margin
Profit attri. to PSCS
Ne t Pro fi t 402 336 546 201 228
EBITDA 644 653 903 587 635

Sales Gth (%) 14.4 4.0 (22.9) (2.9) (2.6)
EBITDA Gth (%) (11.8) 1.3 38.3 (35.0) 8.3
Opg Profit Gth (%) (12.7) (8.2) (21.5) 27.7 10.2
Effective Tax Rate (%) 26.2 22.9 24.3 25.0 25.0
Balance Sheet (RMB m) Asset Breakdown
FY D e c 2012A 2013A 2014A 2015F 2016F Other

Current
Net Fixed Assets 2,866 4,055 4,073 4,164 4,245 Assets
Invts in Assocs & JVs 312 219 217 217 217 53%
Other LT Assets 874 497 1,052 1,052 1,052
Cash & ST Invts 1,519 1,783 1,446 1,345 1,514 Net Fixed
Other Current Assets 6,263 7,324 5,850 6,106 5,937 Assets
To ta l As s e ts 1 1 ,8 3 4 1 3 ,8 7 7 1 2 ,6 3 9 1 2 ,8 8 4 1 2 ,9 6 5 29%
ST Debt 354 1,402 524 524 524 Invts in

Other Current Liab 4,738 4,668 3,222 3,318 3,222 Assocs &
JVs
LT Debt 2,087 2,036 2,591 2,591 2,591 Cash & ST Other LT 1%
Other LT Liabilities 127 112 150 150 150 Invts Assets
Shareholder's Equity 4,477 5,599 6,087 6,233 6,405 13% 4%
To ta l Ca p . & Li a b . 1 1 ,8 3 4 1 3 ,8 7 7 1 2 ,6 3 9 1 2 ,8 8 4 1 2 ,9 6 5
Non-Cash Wkg. Cap 1,526 2,656 2,628 2,788 2,715

Net Cash/(Debt) (923) (1,656) (1,668) (1,769) (1,600)
Page 123
Cash Flow Statement (RMB m) Operating cashflow
FY De c 2012A 2013A 2014A 2015F 2016F

RMBm
1,600
Pre-Tax Profit 557 449 737 274 310
1,400
Dep. & Amort. 154 177 199 209 219 1,200
Tax Paid - - - - - 1,000
Assoc. & JV Inc/(loss) (1) 1 0 - - 800
Chg in Wkg. Cap. 181 (818) 623 (160) 73 600
Other Operating CF (158) (25) (199) (97) (104) 400
200
Ne t O p e ra ti n g CF 734 (2 1 6 ) 1 ,3 6 0 226 498
0
Capital Exp. (net) (809) (384) 116 (300) (300) (200)
Other Invts. (net) 98 115 (65) - - (400)
2015F
2016F
2012A
2013A
2014A
Invts. in Assoc. & JV - - - - -
Div from Assoc. & JV - - - - -
Other Investing CF - - - 29 27
Ne t I n ve s ti n g CF (7 1 2 ) (2 6 9 ) 51 (2 7 1 ) (2 7 3 )
Div Paid (182) (178) (167) (56) (56)
Chg in Gross Debt 184 1,000 (326)
Capital Issues - - - - -
Other Financing CF 93 (69) (1,247) - -
Ne t Fi n a n c i n g CF 95 753 (1 ,7 4 0 ) (5 6 ) (5 6 )
Net Cashflow 118 268 (330) (101) 169
Page 124
Page 125
Wuzhou International
Bloomberg: 1369 HK Equity | Reuters: 1369.HK Refer to important disclosures at the end of this report
NOT RATED TRANSFORMING WITH ASSET LIGHT MODEL

Last Traded Price: HK$1.38 (HSI : 25,129)
Expanding into logistics sector with strategic partners
Price Target : n.a.
Wuzhou is a trade centre developer which plans to grow its logistics
service platform. To better utilize its financial resources, Wuzhou plans
Potential Catalyst: Better han expected sales in 2H15
to invest in new projects with strategic partners in an asset light
Where we differ: Our earnings estimates are more conservative than
approach. While Wuzhou plans to acquire both trade centre and
consensus
logistics projects with Ping An & PAG, its cooperation with GLP will
Analyst focus solely on logistics projects. On the other hand, Wuzhou will
Andy YEE CFA, +852 2971 1773 cooperate with Qingdao Haier to develop a national network of
andy_yee@hk.dbsvickers.com logistics facilities. We believe investors will likely focus on whether
Danielle WANG CFA +852 2820 4915 Wuzhou can acquire quality logistics projects with the partners this year.
Enriching the service platform with SME financing
Carol WU +852 2863 8841
carol_wu@hk.dbsvickers.com With Wuzhou acting as supervisor of the mortgage, Huaxia Bank will
Ken HE CFA +86 21 6888 3375 utilities the goods in the warehouse as collateral and provide mortgage
ken_he@hk.dbsvickers.com loans to Wuzhou’s tenants. Wuzhou has advantage in SME financing
Price Relative given its SME tenant base, but it may take time to grow its warehouse
HK$ Relative Index portfolio in order to scale this business.
2.4
211
2.2
191
Moderate sales growth outlook for trade centre segment
2.0
171 Despite the headwinds from slowing economic growth last year,
1.8
1.6
151
Wuzhou was able to grow sales by 28% to Rmb6.6bn. Wuzhou
outperformed peers China South City (CSC) and Hydoo which saw
131
1.4 111
1.2 91 sales dropped by 20%/58% y-o-y. We believe this is due to Wuzhou’s
1.0
Jun-13 Dec-13 Jun-14 Dec-14 Jun-15
71 preference on sales volume over margins in some projects. After the
fast sales growth (46% CAGR) in the past three years, management
targets a moderate sales growth of 5-10% in the coming two years.
Wuzhou International (LHS) Relative HSI INDEX (RHS)
Forecasts and Valuation Wuzhou recorded a c.Rmb43m loss in core earnings in FY14. Expecting
F Y Dec ( HK $ m) 2013A 2014A 2015F 2016F destocking impact to normalise, we forecast core earnings to pick up to
Turnov er 4,050 4,308 5,531 6,391 HK$245m and HK$309m in FY15 and FY16 respectively. However, it
EBITDA 1,883 907 1,155 1,359 will take time to grow earnings contribution from the new businesses.
Pre-tax Profit 1,789 843 958 1,129
Net Profit 1,020 253 245 309 Valuation:
Core Profit 354 (43) 245 309 The shares are trading at 20x FY15 PE and 1.3x P/BV, which are higher
EPS (HK$) 0.34 0.07 0.07 0.09 than CSC and Hydoo’s 8.9/4.9x PE and 0.77/0.83x PB. We believe its
Core EPS (HK$) 0.12 (0.01) 0.07 0.09 current valuation looks rich.
Core EPS Gth (%) 11.9 (110.7) (648.0) 26.2
DPS (HK$) 0.048 - 0.024 0.031 Key Risks to Our View:
BV Per Share (HK$) 1.04 1.09 1.21 1.27 If China’s economy decelerate worse than expected, the sales and
PE (X) 4.0 18.4 19.7 15.6 operations of its trade centres and multi-functional commercial
Net Div Yield (%) 3.5 - 1.8 2.2
complex may be affected.
P/Book V alue (X) 1.3 1.3 1.1 1.1
ROAE (%) 42.3 7.1 6.1 6.9
At A Glance
Consensus EPS (HK$) 0.06 0.10 Issue d Ca pita l (m shrs) 4,990
Other Broker Recs: B: 1 S: 0 H: 0
Mkt Ca p (HK$m/US$m) 6,887 / 889
ICB Industry: Financials Ma jor Sha re holde rs (%)
ICB Sector: Real Estate Mr. Shu Ce che ng a nd Mr. Shu Ce wa n 69.7
Principal Business: Trade centres and warehouses Ping An Insura nce 5.6
Source of all data: Company, DBSV, Thomson Reuters, HKEX 3m Avg. Da ily Va l. (US$m) 5.0
Page 4
www.dbsvickers.com
ed-TH / sa- AL
DBSV's discussion of the issuer in this report will not be continuously followed. Accordingly, this report is being provided as a stand-alone analysis and recipients of this report should not expect
additional reports relating to this issuer, unless so decided by DBSV
SWOT Analysis
Strengths Weakness
 Strategic investment from Ping An Real Estate and PAG will  Limited track record as a listed company (since 2013)
enhance the company’s financial resources and corporate for investors to see a consistent earnings and dividend
governance growth.
 Diversified exposure in key tier 2/3 cities should give it
 Sales or rental of its logistics trade centres may be
advantage to expand its logistics portfolio
adversely affected if the global economy slows
 Strategic partnerships with GLP will provide expertise in
building and operating of logistics properties, and further  Relatively high funding costs compared with peers
facilitate the growth in the logistics segment
 Building an O2O ecosystem by integrating the e-commerce  Rising land costs and SG&A may affect its margin
platform “Wuzhouhui” with its physical logistics trade outlook
centres
 Fast expansion may cause higher pressure on gearing
 Potential to list its e-commerce segment on the National and financial strength. Company may need to extend
Equities Exchange and Quotations System (the “NEEQ”) to its financing channels to strengthen balance sheet
unlock value
 Management and execution risks may increase as
 Chattel mortgage services (動產融資), with the support of Wuzhou expands into more new cities
Huaxia Bank, may bring new business opportunities in the
financial services sector
 Creating an integrated logistics services platform with strong

strategic partners
 Strategic cooperation with Qingdao Haier to develop a

logistics and commercial facilities network will facilitate the
development of a logistics service platform. The
development will initially be implemented in Zhengzhou and
the parties intend to further extend the cooperation network
to Nanjing, Chongqing, Hangzhou, Guangzhou, Xuzhou,
Xi’an and Jinan.
Source: DBS Vickers
Page 127
Corporate profile –Trade logistics centre developer and Wuzhou’s land bank by development stages
operator
Listed on the HKEx in Jun-2013, Wuzhou has over 10 years

of experience in developing and operating trade centres
under the brand of “Wuzhou International” and Completed
projects
“Columbus”. While Wuzhou started its first project in Wuxi
16%
in 2004 and initially focused on the Eastern China regions, it
has expanded to central and western China since 2010. As at Projects
planned for Projects
end-2014, Wuzhou owned a 8m-sm land bank in 27 cities under
future
and 11 provinces. Out of the 20 trade centres and 16 multi- development development
functional commercial complexes in its portfolio, 23 projects 57% 26%
spanning 610k sm are currently completed for rental.
Wuzhou’s land bank
Diversified exposure in 11 provinces, focus on tier 2 and key

tier 3 cities. Wuzhou owns a diversified land bank of 36
projects in 27 cities with an average project size of 297k sm
which is smaller compared with its peers. The Company
concentrated its expansion on Tier 2 and Tier 3 cities where
management sees solid demand for merchandising and
logistics services and will extend its reach further in central
and western China. The medium-sized projects enable
Wuzhou to diversify its sales and inventory risks compared
with large-project developers. However, we believe the
successful replication of its business model to the new cities
is the key for the company’s long-term profitability.

Comparison – HK listed trade centre developers
Wuzhou’s land bank by regions
China Sout h Cit y Hy doo Wuz hou
1668 HK 1396 HK 1369 HK
Zhejiang Land bank ('000 sm) 28,815 9,603 8,052
Shandong 3%
Hubei No. of projects 8 12 39
10%
7% Heilongjiang No. of cities 8 12 28
4% Major focus Tier 1,2 Tier 3 Tier 2,3
Av g proj. size ('000 sm) 10,228 800 297
Yunnan
16% Year commence business 2002 1995 2004
Henan
11% IPO 2009 2013 2013
Jilin
4% F irst project Shenzhen Ganzhou Wuxi
Liaoning PE (X) 8.90 4.94 21.74
3% PB (X) 0.77 0.83 1.40
Jiangsu Chongqing
37% 4% Source: Company, DBS Vickers
Inner * CSC’s land bank included GFA not yet acquired as at end-Mar
Monoglia
1%
Page 128
New growth drivers – Expanding to logistics sector with

an asset-light model Members of the strategic committee
Shifting to an asset-light business model. Since 2014,

Wuzhou has started to shift its business focus towards the Management
three directions: (1) warehouses and logistics services, (2) B2B Mr. Shu Cecheng Chairman of Wuzhou
e-commerce platform, and (3) SME financial services. Mr. Shu Cewan CEO of Wuzhou
Wuzhou will invest in the new directions with an asset light Ms. Wu Xiaowu ED of Wuzhou
model by investing the new projects with GLP, Ping An Real
Mr. Zhao Lidong ED of Wuzhou
Estate, PAG, Qingdao Haier and Huaxia Bank. We believe an
asset light model will help Wuzhou to expand with limited Mr. Wang Wei Managing Director and GM of Ping An
financial resources, but we believe it will take some time Mr. Addy Chen GM of Ping An
before the new businesses can have significant contribution Mr. Eddie Hui Managing partner of PAG
to earnings. Its core business, sales of trade centres and Source: Company, DBS Vickers
multi-functional commercial complexes, contributed 95% of
FY14 revenue. We believe this revenue pattern will continue Developing a logistics service platform with Qingdao Haier.
in the coming two years. Qingdo Haier is a subsidiary of Haier Group which is mainly
responsible for the expansion and integration of Haier
Building the integrated logistics platform with strategic Group’s in-house industrial and logistics facilities. The
partners. To facilitate the development of its integrated strategic cooperation will focus on the development of a
merchandising and logistics platform, Wuzhou has been logistics and commercial facility network which will be
forming strategic cooperation with Global Logistic Properties integrated into Wuzhou’s warehouse and logistics facilities
(GLP), Ping An Real Estate, Pacific Alliance (PAG) and into a one-stop service platform. We believe Qingdao Haier’s
Qingdao Haier since 2014. While Wuzhou plans to acquire expertise in logistics, esp. in last mile delivery services, will
both trade centre and logistics projects with Ping An & PAG, support the development of such a platform. The initial stage
its cooperation with GLP will focus solely on logistics projects. of the development will be implemented in Zhengzhou and
On the other hand, Wuzhou will cooperate with Qingdao will be extended to Nanjing, Chongqing, Hangzhou,
Haier to develop a national network of logistics facilities. We Guangzhou, Xuzhou, Xi’an and Jinan in subsequent stages.
believe the strategic partners will support Wuzhou with
expertise and financial resources on the development of its
logistics service platform. Last year, Wuzhou formed its first
JV with GLP to develop the Zhengzhou International Logistics
Park. GLP has a 80% stake in the JV and will be responsible
for the construction, development and asset management.
Management expects the acquisition of the first project in
Zhengzhou will be finalised in 2H15. Apart from that,
Wuzhou’s Xuzhou Logistics Hub project, which is planned to
be developed into a regional integrated logistics service
centre, will be completed by end-2015 to serve the Huaihai
Economic Zone.
Strategic cooperation with Ping An and PAG. In Jun-2014,

Ping An Real Estate and PAG formed strategic cooperation
with Wuzhou in which the parties intend to invest Rmb1.5bn
with Wuzhou within five years. An investment committee has
been formed with senior management from all the three
parties and targets to drive the investment strategy regarding
its merchandising and logistics platform. Ping An and PAG
are also the holder of Wuzhou’s US$100m CB. We believe
the formation of the strategic committee will take the
strategic cooperation to the project level which will facilitate
the growth of Wuzhou’s logistics portfolio.
Page 129
Rmb7bn. The target should be achievable, given that it has

Exploring the chattel mortgage services (動產融資) with
achieved 47% in 1H15 and there will be more planned new
Huaxia Bank. Unlike mortgages which use real estate assets
launches in 2H than in 1H to support sales. After the fast
as collateral, chattel mortgages are loan arrangements that
expansion in the past few years, management is comfortable
are collateralised with movable personal assets. This financing
with the current sales scale and targets a moderate growth
channel is value adding for SME wholesalers as (1) SMEs may
of 5-10% in the medium term. Under the weaker sales
have limited real estate for mortgage, and (2) a considerable
sentiment last year, Wuzhou’s sales growth (+28%) was
proportion of their financial resources are locked-up as
better than CSC and Hydoo (whose sales dropped by
outstanding warehouse inventory. Banks had been cautious
20%/58% yoy) mainly due to its preference on sales volume
on offering chattel mortgage services as it is difficult for them
over margins in some projects. This approach may lower
to perform due diligence investigations and secure collaterals
Wuzhou’s sales risk but at the expense of its future margins.
in case of default. However, Wuzhou, as the owner and
operator of the warehouse, is in a good position to be the
supervisor of chattel mortgages, given that (1) it has better Recognized sales breakdown by product type
clarity on the operations, inventory turnover and financial
situation of the SMEs who occupy its warehouses, (2) it can 100%
act as a gatekeeper to secure and freeze the collaterals in
case of default. Wuzhou has tied up with Hauxia Bank which 37%
80% 43%
will provide the chattel mortgage financing. At this stage,
Huaxia Bank has prepared Rmb1bn of credit facilities for
short-term working capital loans to Wuzhou’s SME tenants. 60%
However, given Wuzhou’s financial service business is still in
its early stage, we expect it to have minimal earnings 40%
contribution in the coming two years. 63% 57%
20%
The chattel mortgage services
0%
Bank loan agreement 2013 2014
Shops Auziliary properties
Financing
provider
Supervisor Borrower Source: Company, DBS Vickers
Credit Goods
facilities Supervision
Gross margins of Shops and auxiliary properties
Warehouse of Quality tenants
Bank
Wuzhou in Wuzhou's
(Huaxia Bank) 60%
Business trading centers
48%
50% 46%
Source: Company, DBS Vickers 39%
40%
Building B2B e-commerce platform to go O2O. Wuzhou is 30%

developing an e-Commerce platform which consists of
Wuzhouhui.cn (五洲匯) and Wuzhouhui mobile app. The 20% 15%
platform will serve as a B2B online portal for its occupants to
extend their physical business to online (i.e. O2O). The 10%
Wuzhouhui platform was started in 2014 and has registered
0%
over 5,000 online users from the 20,000 offline tenants. The 2013 2014
idea of the O2O platform is similar to that of CSC, but at this
stage, Wuzhou’s platform is smaller in scale and we believe Shops Auziliary properties
would take a longer time to grow.
CRITICAL DATA POINTS TO WATCH
Earnings improvement on normalized destocking impact.
Stable contracted sales growth in medium term. With its Core earnings in FY14 have been dragged down significantly
strategy to sell 70-80% of its properties, Wuzhou has by the fall in gross margin to 35% from 44% last year. Due
increased its sales at a 45.6% CAGR between 2011 and to destocking, the GP margin of its auxiliary properties (i.e.
2014. Company targets to grow its sales by 6% in FY15 to
Page 130
car parks, SOHO and offices) has dropped to 15% from the Share price drivers
25% normal level. Auxiliary property sales also accounted for
a higher proportion of 43% compared with its normal level Potential positive from new logistics projects with GLP and
of 30-35%, adding on to the fall of the blended margins. other strategic partners
However, trade logistics centres and multi-functional Wuzhou is working on acquiring new projects with GLP as
complexes saw a 2-ppt GP margin improvement to 48%. As well as Ping An and PAG. We believe company valuation will
such, we expect the earnings impact from destocking to be driven by whether it can acquire quality projects with the
normalise this year and estimate that margins should stabilise strategic partners.
at 35-40% (vs 45% average margins in FY11-FY14) in the
medium term. Wuzhou recorded a Rmb43m loss in core Applying to list its e-commerce platform on the NEEQ (新三
profit in FY15. On a moderate sales growth outlook, we 版) to unlock value
expect core earnings to pick up to HK$245m and HK$309m
in FY15 and FY16 respectively. We also expect Wuzhou’s In Jun-2015, Wuzhou applied to list the shares of Wuzhouhui
new businesses will take time to grow and will contribute to (五洲匯) on the National Equities Exchange and Quotations
earnings beyond 2018. System (the “NEEQ”). Although the application is still in its
initial stage, we believe a successful quotation on the NEEQ
Balance Sheet will be the first step for Wuzhou to unlock the value of its e-
commerce business in the long run.
Gearing up for growth

Valuation
Wuzhou’s net gearing ratio has increased to 86% in FY14 (vs
FY13’s 60%) mainly due to the higher construction capex The shares are trading at 20x FY15 PE and 1.3x P/BV, which
(Rmb4.3bn) for the new projects acquired in 2013. are higher than CSC and Hydoo’s 8.9/4.9x PE and 0.77/0.83x
Management budgeted a Rmb5bn construction capex this PB. We believe its current valuation looks rich.
year which planned be covered with Rmb5bn cash collection
from sales. Amid the fast expansion since 2013, we believe Risk analysis
its gearing should remain at the 80-90% level in the medium
term. Wuzhou has Rmb1.8bn cash on hand which could just Macroeconomic risks. If China’s economy slows down faster
cover its short-term debt. Since June-2015, Wuzhou has than expected and triggers a hard landing, the sales and
strengthened its financials by raising HK$460m through operation of the logistics and wholesale centres will be
share placement and also issued US$100m senior note. substantially affected.
Average funding costs in FY14 decreased to 10.1% from
FY13’s 11% mainly due to refinancing of trust loans at lower Earnings risks. Property development contributes the majority
costs. Currently, there is c.Rmb700m trust loan outstanding of its revenue and earnings. As such, fluctuation of property
with costs ranged between 11-12%. We believe a broader sales may significantly affect earnings over the next two years.
financing channel is needed for the company to fuel its Rising land costs from market competition may also lower
expansion without raising its funding costs. the margins of its new projects.
Execution risks. Wuzhou’s expansion to central and western

China may increase management and execution risks when
the company’s operations extend to outside its core cities.
Future operations will be highly dependent on management’s
execution and whether they can successfully replicate the
logistics trade centre model to different cities.
Page 131
Wuzhou Internatinal
Corporate Structure
Shu Cecheng Shu Cewan
60% 40%
Public Senior
Boom Win
shareholders Management SPV
29.59% 69.68% 0.73%
Wu zhou
I n ternational
Ho ldings Limited
(1 369-HK)
100% 100% 100% 100% 100% 100% 100% 100%
Wuzhou
Wuzhou Wuzhou Wuzhou Zhouji Taishun Long An Wuzhou
International
Enterprise Limited Commercial International International International Company
Investment
100% 100% 100% 51% 100%
Hong Kong
Hong Kong Hong Kong Hong Kong Hong Kong
Wuzhou
Zhouji Taishun Long An Wuzhou
Lisheng
Offshore
Onshore 100% 100% 100% 100% 100% 100% 100% 100% 100%
Wuxi
Jiangsu Yixing Changchun Longtai
Hangzhou Mudanjiang Wuxi Wuzhou
Tongrun JiangSu Hotel Wuzhou Zhongnan Marketing
Longan Wuzhou Longguang Ornament
Property Lisheng Property Development
City
Over 50
Yixing subsidiaries
Liulongcheng and project
companies
Page132
Management profile
M a n a g e me n t t e a m Cu r r e n t
(a g e , ye a r j o i n e d ) p o s i t i o n B a c kg ro u n d
Mr. Shu Cecheng (舒策 Chairman * A ppointed as Wuzhou's Director on 22 J une 2010 and was re-designated as an executiv e Director
城 ), 46, 2004 on 14 Nov ember 2012.
* The brother of Mr. Shu Cewan(CEO), Mr. Shu Cey uan (ED) and Mr. Shu Cezhang (head of
operations)
* Established the business of Wuzhou in December 2004 and has been primarily responsible for the
ov erall business, financial and strategic planning of the Group.
* A lso responsible for ov erall dev elopment of the Group's strategic direction and corporate policies
and play s an activ e role in the dev elopment, maintenance and strengthening of client relations.
* Has ov er ten y ears of experience in the real estate dev elopment industry
* Chairman of the Council of China SCMA LL A cademy in October 2009
* Executiv e v ice president of Wuxi Wenzhou Chamber of Commerce since Nov ember 2011.
* Committee member of the Wuxi Committee of the Chinese People's Political Consultativ e
Conference since J une 2012
* Executiv e director of the fourth Wuxi Charity F ederation since May 2011.
* Chairman of the Sixth Council of Wuxi Market A ssociation
* Member of the Elev enth executiv e committee of Wuxi A ssociation of Industry and Commerc
* V ice chairman of Wuxi Chamber of Commerce, v ice chairman of the China Economic and Trade
Promotion A ssociation
* V ice chairman of the F ederation of Priv ate Enterprises of the Chinese Economy
* Chairman of Hong Kong Taishun F raternity A ssociation
Mr. Shu Cewan (舒策丸 ), CEO * Was appointed as Wuzhou's Director on 14 Nov ember 2012.
45, 2004 * The brother of Shu Cecheng (chairman), Mr. Shu Cey uan(ED) and Mr. Shu Cezhang (head of
operations).
* Mr. Shu is closely inv olv ed in operations and ov ersees all the key aspects of the operations and
business, including the planning and implementation of different projects.
* Has ov er nine y ears of experience in the real estate dev elopment industry , and he has been with
Wuzhou since December 2004.
* Since 2011, Mr. Shu has been v ice chairman of Wuxi Wenzhou Chamber of Commerce.
* V ice chairman of the F ederation of Chinese Priv ate Enterprises
* Member of the Chong A n District Committee (Wuxi) of the Chinese People's Political Consultativ e
Conference
* Council member of the Chong A n District Industrial and Commercial F ederation in Wuxi.
Mr. Shu Cey uan (舒策 Executiv e * Was appointed as the executiv e Director on 14 Nov ember 2012
員 ), 41, 2004 director * The brother of Shu Cecheng, the chairman, Mr. Shu Cewan, chief executiv e officer and Mr. Shu
Cezhang, head of operations.
* Has ov er ten y ears of experience in the real estate dev elopment industry .
* Mr. Shu is familiar with the area of property construction and play s a v ital role in the planning and
controlling processes for the construction works.
* Has been with the Wuzhou since March 2004 and has been the v ice president of certain of the
Group companies, primarily in charge of its planning and design center, project management center
and costcontrol
center.
Ms. Wu Xiaowu (吳曉 Executiv e * Was appointed as the Wuzhou's executiv e director on Nov ember 2012.
武 ), 48, 2009 director, * Has ov er 26 y ears of experience in financial management
CF O *J oined the group in 2009 and was appointed as the chief financial office in 2010, mainly
responsible for ov erseeing the Wuzhou's financial matters, such as management reporting, group
budgeting and forcasting as well as internal control and risk management.
* Prior to joining the Group, Ms. Wu was the director and CF O of Wuxi Huadong Cocoa F ood Co.
Ltd. from 2007 to 2009.
* Between 2001 and 2007, Ms. Wu serv ed as the CF O of Wuxi Taian A utomation Co., Ltd. and was
in charge of ov erall financial management of the company .
* F rom 1988 to 2001, Ms. Wu was the head of the financial department of Wuxi Zhongy a Wool
Spinning and Printing Co., Ltd.
Source: Company
Page 133
Management profile (continued)
M a n a g e me n t t e a m Cu r r e n t
(a g e , ye a r j o i n e d ) p o s i t i o n B a c kg ro u n d
Mr. Zhao Lidong (趙立 Executiv e * Was appointed as the Wuzhou's executiv e director on 14 Nov ember 2012.
東 ),45, 2011 director * Has ov er 15 y ears of experience in the property dev elopment Industry . * He is familiar with the
area of property construction and superv ises the executiv e director, Mr. Shu Cey uan, in the planning
and controlling for the construction of the project.
* He joined the Group in Nov ember 2011 and was responsible in ov erseeing the planning design
center, project management center, cost- contril center, human resources centre, administrativ e
information centre and the group's commerical managemetn subsidiaries.
* Betweem 2003 and 2011, he held v arious positions in Dallan Wanda Group Co., Ltd including
serv ing as the engineer of Dallan Wanda Group Commercial Property Management CO., Ltd. and
Tianjin Wanda Plaza Commercial Managment Co., Ltd. and as the general manager of the property
management department, construction department and preparatory department of Wanda
Commercial Management CO, Ltd.
* His scope of responsibilities included project management and operational management.
* F rom 1999 to 2003, Mr. Zhao was the project director of Dalian Commercial Construction
Superv ision Company , responsible for ov erseeing different construction projects.
Mr. Wang Wei (王威 ), 45, Non- * Was appointed as the Wuzhou's non-excutiv e director on 26 September 2014.
2014 ececutiv e * Has ov er 20 y ears of experience in International capital markets.
director * Since early 2013, Mr Wang has been the general manager of Ping A n Real Estate F und manager.
(NED) * F rom late 2009 to early 2013, he was managing director of F orum Partners Inv estment
managment, a United Stated real estate dev elper in second and third-tier Chinese cities.
* F rom 2005 to 2007, he has been the managing director, member of the China management
committee, and co-head of China fixed income ar UBS.
* Between 1994 and 2005, he held v arious positions in fixed income and equity capital market
div isions at J .P. Morgan, in New York, Singapore and Hong Kong.
Source: Company
Page 134
Segmental Breakdown (HK$m)
F Y Dec 2012A 2013A 2014A 2015F 2016F

Rev enues
Sale of properties 2,126 3,880 4,075 5,300 6,146
Rental income 31 44 54 65 71
Commercial management serv ice income 68 92 92 92 92
Property consulting serv ice income - - 47 52 57
Property management serv ice income 11 9 12 13 14
Commissions from concessionaire sale 6 10 9 9 10
Others 11 14 20
T ot al 2,253 4,050 4,308 5,531 6,391
Income Statement (HK$m) Margin Trends
F Y D ec 2012A 2013A 2014A 2015F 2016F

Turnov er 2,253 4,050 4,308 5,531 6,391
%
35
30
G ro s s Pro f it 1,201 1,769 1,499 2,093 2,409
25
Other Opg (Exp)/Inc (499) (776) (924) (963) (1,079)
20
O p erat in g Pro f it 702 993 574 1,130 1,330
15
Other Non Opg (Exp)/Inc (17) (23) (29) (0)
10
A ssociates & J V Inc 5 (3) (8) (3) 2
5
0
Exceptional Gain/(Loss) 577 891 342
2012A
2013A
2014A
2015F
2016F
Pre- t ax Pro f it 1,263 1,789 843 958 1,129
Tax (509) (669) (449) (573) (669)
M inority Interest (54) (100) (141) (140) (150)
Operating margin
Preference Div idend
N et Pro f it 700 1,020 253 245 309 Net margin
Core net profit 264 354 (43) 245 309
EBITDA 1,293 1,883 907 1,155 1,359

Sales Gth (%) 48.7 79.7 6.4 28.4 15.5
EBITDA Gth (%) 93.7 45.7 (51.8) 27.3 17.7
Opg Profit Gth (%) 62.1 41.4 (42.1) 96.7 17.7
Page 135
Balance Sheet (HK$m) Asset Breakdown
F Y D ec 2012A 2013A 2014A 2015F 2016F Invts in

Net F ixed A ssets 13,840 20,808 25,744 7,442 7,722 Assocs &
Inv ts in A ssocs & J V s 1 6 13 36 36 JVs
Other LT A ssets 3,580 3,103 4,161 329 329 Other LT 0%
Assets Cash &
Cash & ST Inv ts 3,832 6,265 11,303 2,252 2,208 ST Invts
7%
Inv entory 7,908 9,381 13,455 3,819 3,819 19%
Debtors 1,392 1,580 3,535 815 815
Other Current A ssets 112 1,202 1,749 6,964 7,764
T o t al A s s et s 30,666 42,345 59,961 21,657 22,693 Net Fixed
Assets
43% Inventory
ST Debt 2,740 4,418 5,842 1,787 1,787 22%
Other Current Liab 8,154 10,956 18,402 9,744 10,244 Other
Current
LT Debt 3,878 7,435 11,677 4,724 5,024
Assets Debtors
Other LT Liabilities 2,898 3,493 3,896 486 486 3% 6%
M inority Interests 57 190 175 544 544
T o t al Cap . & L iab . 30,666 42,345 59,961 21,657 22,693
Non-Cash Wkg. Cap (8,042) (9,754) (16,653) (2,779) (2,479)

Net Cash/(Debt) (2,786) (5,589) (6,216) (4,259) (4,603)
Page 136
Cash Flow Statement (HK$m) Operating cashflow
F Y D ec 2012A 2013A 2014A 2015F 2016F

HK$m
Pre-Tax Profit 3,306 4,473 6,169 958 1,129
Dep. & A mort. 23 27 70 27 27 3,000
Tax Paid (160) (238) (838) (573) (669) 2,500
(Pft)/ Loss on disposal of F A s 40 (4) - - - 2,000
A ssoc. & J V Inc/(loss) (1) (1) 1 - - 1,500
Non-Cash Wkg. Cap. 3,248 (285) (2,231) 500 500 1,000
Other Operating CF (5,520) (1,859) (467) (1,787) (1,020) 500
N et O p erat in g CF 936 2,114 2,703 (876) (34) 0
Capital Exp. (net) (2,327) (3,073) (3,170) (235) (280) (500)
Other Inv ts. (net) - - (1,000)
Inv ts. in A ssoc. & J V 267 (268) 467 - - (1,500)
2012A
2013A
2014A
2015F
2016F
Div from A ssoc. & J V 1 1 1 - -
Other Inv esting CF 9 29 (27) 20 43
N et In v es t in g CF (2,050) (3,312) (2,729) (215) (237)
Div Paid (150) (454) (616) - (73)
Chg in Gross Debt 267 4,785 5,056 1,080 300
Capital Issues - - 1,497 460 -
Other F inancing CF (259) (235) (755) - -
N et F in an c in g CF (142) 4,096 5,182 1,540 227
Net Cashflow (1,256) 2,898 5,157 450 (44)
Page 137
Singapore Company Guide
Global Logistic Properties
Edition 1 Version 1 | Bloomberg: GLP SP | Reuters: GLPL.SI Refer to important disclosures at the end of this report
BUY A LEADER IN ITS FIELD

Last Traded Price: S$2.54 (STI : 3,353)
Price Target: S$3.17 (25% upside) Leverage into China’s rapidly growing e-commerce sector. We
maintain BUY on Global logistics Properties (GLP) with TP of
Potential Catalyst: Commencement of new developments /new funds S$3.17, pegged at 10% discount to RNAV. With the largest
Where we differ: More conserative assumptions; no gains factored in portfolio of modern logistics warehouses in China, GLP
our numbers remains on the front seat to benefit from China’s rising
consumerism and thriving e-commerce outlook.
Analyst
China/Hong Kong Research Team · (852) 2820 4844 ·
hkresearch@hk.dbsvickers.com Robust development pipeline in FY16 and beyond
The group is targeting US$3.4bn in development starts in 2016,
which is 30% higher y-o-y. The group is also expecting
Price Relative US$2.3bn of development completions, which is almost 92%
S$ Relative Index higher y-o-y. For development starts, c.64% will be in be
3.4
3.2
220
China, 28% in Japan and the remainder in Brazil. In total, the
200
3.0
2.8 180
group has a development pipeline of US$6.5bn (GLP’s share:
2.6
2.4
160 US$2.9bn) to drive earnings over the next 3 years.
2.2 140
2.0 120
1.8
1.6
100 AUM of fund management platform rose to S$20bn
1.4
80
Jul-15
As of end Mar-15, total AUM rose to US$20bn, and the group
Global Logistic Properties (LHS) Relative STI INDEX (RHS)
has another US$3.5bn of uncalled capital to be deployed.
Given that this business is a highly scalable and ROE enhancing
Forecasts and Valuation business arm of the group, management is focusing on driving
FY Mar (US$ m) 2014A 2015A 2016F 2017F
returns and operational scale through establishing new funds.
Revenue 625 708 751 816
EBITDA 949 913 501 559 In the immediate term, GLP has recently launched a new
Pre-tax Profit 867 862 415 463 US$7bn China development fund (CLF II) primarily looking at
Net Profit 652 453 241 264 development opportunities in China. This will further entrench
Net Pft (Pre Ex.) 652 453 241 264
EPS (S cts) 18.8 12.8 6.8 7.5 its market leader position within the logistics warehouse space
EPS Pre Ex. (S cts) 18.8 12.8 6.8 7.5 in China.
EPS Gth (%) 0 (32) (47) 9
EPS Gth Pre Ex (%) 91 (32) (47) 9 Valuation:
Diluted EPS (S cts) 18.8 12.8 6.8 7.5 We maintain our BUY call, with target price maintained at
Net DPS (S cts) 5.0 5.7 3.4 3.7
BV Per Share (S cts) 234.7 231.5 233.7 238.7 S$3.17 as we roll forward valuations, pegged at a 10%
PE (X) 13.5 19.8 37.3 34.1 discount to RNAV.
PE Pre Ex. (X) 13.5 19.8 37.3 34.1
P/Cash Flow (X) 30.3 20.2 69.8 19.4 Key Risks to Our View:
EV/EBITDA (X) 12.6 16.4 31.4 28.5
Net Div Yield (%) 2.0 2.2 1.3 1.5 A faster than expected ramp up in competing supply on the
P/Book Value (X) 1.1 1.1 1.1 1.1 back of a slowdown retail sector in China, impacting on
Net Debt/Equity (X) 0.1 0.1 0.2 0.2 demand for logistics warehouses.
ROAE (%) 8.2 5.5 2.9 3.2
Earnings Rev (%): 0 0 At A Glance
Consensus EPS (S cts): 9.4 10.7 Issued Capital (m shrs) 4,844
Other Broker Recs: B: 18 S: 0 H: 1 Mkt. Cap (S$m/US$m) 12,304 / 8,989
Major Shareholders
Source of all data: Company, DBS Bank, Bloomberg Finance L.P
Govt of Singapore (%) 36.4
Lone Pine Capital (%) 10.0
Free Float (%) 53.7
3m Avg. Daily Val (US$m) 40.2
ICB Industry : Real Estate / Real Estate

www.dbsvickers.com
ed: JS / sa: JC
Company Guide
Topline and EBIT (US’m)

CRITICAL DATA POINTS TO WATCH 900.0
US$'m Revenues Operating Profit (before revals)
800.0
Earnings Drivers: 700.0
Riding on the growing demand from e-commerce 600.0
players for logistics space. Riding on the tailwinds of 500.0
China’s rising consumerism and thriving e-commerce sector,
400.0
Global Logistics Properties (GLP) remains on the front seat to
300.0
take advantage of China’s rapidly changing retail landscape.
200.0
With an extensive portfolio of warehouses (11.8m sqm of
space) in 35 cities in China, the group is one of the leading 100.0
providers of modern logistics solutions to end users. GLP’s 0.0

14A 15A 16F 17F
network of warehouses enables customers to expand; this
has been positively received by JD.com which has scaled up Revenue Breakdown by segment (US$’m)
900.0
over the past four years at an annual rate of 137%, from US $'m Others Japan China
800.0
27,000 sqm in one city in FY12 to 358,000 sqm in ten cities.
Going forward, we expect an increasing number of new 700.0
leases to come from existing tenants as they ramp up 600.0

operations (currently 61% of new leases are from existing 500.0
customers). 400.0
300.0
Strong operational momentum across markets to
200.0
continue. FY15 ended strongly and we expect the strong
leasing momentum to continue ahead. In China, we expect 100.0
the group to deliver strong growth on the back of (i) high -

2014A 2015A 2016F 2017F
lease ratios in excess of 91% with same-property rents rising
EBIT Margins (%)
by 5-6%. In addition, we expect firm occupancies for GLP’s
62.0
properties in Japan (99%) and Brazil (97%) to continue with
61.0
rental increases remaining stable at 1-3%. The US portfolio’s
60.0
occupancy is likely to hit 94% in FY15 with projected positive
59.0
rental reversions.
58.0
57.0
Fund management platform delivers superior returns at
56.0
lower risk. Management fees increased 50% to US$150m in
55.0
FY15 and and this segment is expected to potentially earn
54.0
US$400m in the medium term. As of end Mar-15, total AUM
53.0 EBIT Margins (%)
rose to US$20bn, excluding another US$3.5bn of uncalled
52.0
capital to be deployed. We expect the fund management 14A 15A 16F 17F
business to continue growing through new funds due to its Source: Company, DBS Bank
scalable nature, boosting returns and ROEs for the group.
Going forward, the group is looking to potentially launch a
new China fund with equity capital of c.US$3bn to increase
its reach in China.
Development completions worth US$8bn over FY16-18F;

a boost to earnings in the medium term. We expect
US$8bn in development completions to be spread over FY16-
18F,in line with what management anticipates. Of the total,
GLP’s share is expected to amount to US$3.6bn (45% of
US$8bn). The group has the option to fund the growth in this
area either through cash on the balance sheet (US$1.5bn as
at end Mar-15), asset recycling initiatives, debt and potentially
tapping on third party equity from new GLP-led funds under
its fund management platform.

Page 139
Company Guide
Leverage & Asset Turnover (x)

Balance Sheet: 0.45 0.1
Low leverage ratio. Total debt to asset ratio recorded in 0.40 0.1
1Q2016 was low at 16.3%. As such, this provides GLP with 0.35 0.1
0.1
additional debt headroom for future debt funded acquisitions. 0.30
0.1
0.25
Currently, the group has 63% of its debt on a fixed rate with 0.20
0.1
a weighted average cost of debt of 3.4% and a long debt 0.15

0.0
0.0
maturity of 3.8 years. 0.10 0.0
0.05 0.0
0.00 0.0
2013A 2014A 2015A 2016F 2017F
Share Price Drivers: Gross Debt to Equity (LHS) Asset Turnover (RHS)
Robust outlook for e-commerce in China. GLP has a large Capital Expenditure
(11.8m sqm in completed properties) portfolio in China that is US$
1,800.0
positioned strategically to benefit from growth in e- 1,600.0
commerce through its modern logistics space, and it has 1,400.0

1,200.0
another US$5.3bn slated for completion in FY16-19. We 1,000.0
expect the group’s assets to hit higher occupancies and 800.0
pricier leases, if e-commerce increases in scale (growing at 8- 600.0

400.0
year CAGR of 80%) on the back of strong consumer demand 200.0
(11-year CAGR of 63%, expected to double over the next 3 0.0
2013A 2014A 2015A 2016F 2017F
years). Incremental earnings contribution from China would
Capital Expenditure (-)
be a share price catalyst. ROE (%)
8.0%
Deployment of new CLF II. GLP recently launched China
7.0%
Logistics Fund (CLF II), a US$7bn fund aimed at development
6.0%
opportunities in China. GLP has a 56% stake in CLF II and will
5.0%
be the manager of the fund. We are positive on this 4.0%
development as it will enable the group to leverage on 3rd 3.0%
party capital and scale up its operations over a shorter span of 2.0%
time. At the same time, GLP is expected to extract higher 1.0%
ROEs through additional fees ( management and 0.0%

2013A 2014A 2015A 2016F 2017F
performance fees) once the fund exits in the medium term.
Forward PE Band (x)
(x)
Key Risks: 42.9
Slowdown in Chinese economy 37.9 +2sd: 38.3x
If a slowdown in the Chinese economy leads to a reduced 32.9
appetite for logistics warehouse space, there could be 27.9

+1sd: 29.5x
slower-than-projected revenue growth. 22.9

Avg: 20.8x
17.9
Foreign currency risks 12.9

‐1sd: 12x
7.9
Exposure to various currencies (CNY, JPY, BRL) could lead to
2.9 ‐2sd: 3.3x
volatility in the group's USD earnings. Jul-11 Jul-12 Jul-13 Jul-14
PB Band (x)
COMPANY BACKGROUND (x)
Global Logistics Properties (GLP) is a leading provider of 1.6
+2sd: 1.52x
modern logistics facilities in China, Japan, Brazil and the USA. 1.4
+1sd: 1.36x
The group develops, owns and manages c.41m sqm GFA, of
logistics properties, catering to growing domestic 1.2 Avg: 1.2x
consumption. 1.0
‐1sd: 1.04x
‐2sd: 0.89x
0.8
0.6
Source: Company, DBS Bank

Page 140
Company Guide
Key Assumptions
FY Mar 2013A 2014A 2015A 2016F 2017F
China Occupancy (%) 93% 93%
China Rental Growth (%) 3% 3%
Japan Occupancy (%) 98% 98%
Japan Rental Growth (%) 2% 2%
Segmental Breakdown
FY Mar 2013A 2014A 2015A 2016F 2017F
Revenues (US$ m)
China 252 386 444 518 617
Japan 388 232 207 169 134
Others (Brazil/US – Mgmt 2 7 57 65 65
Fee income )
Income Statement (US$ m)

FY Mar 2013A 2014A 2015A 2016F 2017F
Revenue 642 625 708 751 816
Gross Profit 418 511 569 618 653
Other Opng (Exp)/Inc 69 (129) (165) (195) (199)
Operating Profit 487 382 405 423 454
Other Non Opg (Exp)/Inc 9 438 434 11 24
Associates & JV Inc 165 126 71 64 78
Topline driven mainly from
development completions
Exceptional Gain/(Loss) 310 0 0 0 0
in China, supported by
Pre-tax Profit 842 867 862 415 463 stable occupancy rates in
Tax (126) (142) (194) (42) (48) Japan.
Preference Dividend (33) (33) (33) (33) (33) In addition, topline is driven
Net Profit 651 652 453 241 264 from increased fund
Net Profit before Except. 342 652 453 241 264 management fees in Brazil
EBITDA 668 949 913 501 559 and USA.
Growth
Revenue Gth (%) 13.5 (2.7) 13.3 6.1 8.6
EBITDA Gth (%) 22.9 42.1 (3.7) (45.2) 11.6
Opg Profit Gth (%) 13.6 (21.6) 6.0 4.5 7.4
Net Profit Gth (Pre-ex) (%) 2.4 91.0 (30.5) (46.9) 9.4
Margins & Ratio
Gross Margins (%) 65.1 81.7 80.4 82.2 80.0
Opg Profit Margin (%) 75.9 61.1 57.2 56.3 55.7
Net Profit Margin (%) 101.4 104.4 64.1 32.1 32.3
ROAE (%) 8.7 8.2 5.5 2.9 3.2
ROA (%) 4.9 4.7 2.9 1.4 1.4
ROCE (%) 3.2 2.4 2.1 2.3 2.3
Div Payout Ratio (%) 23.5 26.7 44.1 50.0 50.0
Net Interest Cover (x) 3.8 4.8 8.4 5.1 4.9

Page 141
Company Guide
Quarterly / Interim Income Statement (US$ m)

FY Mar 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015
Revenue 150 169 193 179 167

Gross Profit 122 138 157 144 130
Other Oper. (Exp)/Inc (47) (41) (98) (42) (47)
Operating Profit 74 98 60 102 83
Other Non Opg (Exp)/Inc 0 1 1 2 0
Associates & JV Inc 6 29 19 22 1
Net Interest (Exp)/Inc (20) (21) (26) (10) 14
Pre-tax Profit 188 247 174 213 228
Tax (23) (42) (52) (47) (53)
Net Profit 152 179 89 112 105
Net profit bef Except. 25 38 (31) 16 (25)
EBITDA 77 100 62 105 86
Growth
Revenue Gth (%) (15.4) 12.5 14.0 (7.2) (6.9)
EBITDA Gth (%) (33.0) 30.5 (37.7) 68.2 (17.9)
Opg Profit Gth (%) (34.0) 31.3 (38.8) 71.2 (18.4)
Net Profit Gth (Pre-ex) (%) (72.3) 50.4 (180.4) (150.8) (260.7)
Margins
Gross Margins (%) 80.9 81.6 81.5 80.4 78.0
Opg Profit Margins (%) 49.4 57.6 30.9 57.1 50.0
Net Profit Margins (%) 101.0 106.0 46.4 62.8 62.9
Balance Sheet (US$ m)

FY Mar 2013A 2014A 2015A 2016F 2017F
Net Fixed Assets 14 58 52 52 52

Invts in Associates & JVs 1,201 1,164 1,544 1,958 2,261
Invt & Devt Properties 8,722 10,165 11,332 11,568 11,772
Other LT Assets 992 1,045 1,147 1,147 1,147
Cash & ST Invts 1,957 1,501 1,446 1,086 1,298
Dev Props held for sale 0 0 1,467 1,467 1,467
Inventory 0 0 0 0 0
Debtors 304 406 475 626 680
Other Current Assets 57 3 0 0 0
Total Assets 13,248 14,341 17,462 17,905 18,678
ST Debt 95 158 371 371 371

Creditor 529 645 811 755 925
Other Current Liab 52 22 22 44 50
LT Debt 2,787 2,504 2,476 2,776 3,076
Other LT Liabilities 737 890 1,019 1,019 1,019
Shareholder’s Equity 8,398 8,758 8,780 8,857 9,036
Minority Interests 648 1,366 3,983 4,081 4,200
Total Cap. & Liab. 13,248 14,341 17,462 17,905 18,678
Non-Cash Wkg. Capital (220) (257) 1,109 1,293 1,171

Gearing (D/E) to
Net Cash/(Debt) (925) (1,161) (1,402) (2,062) (2,150)
remain conservative at
Debtors Turn (avg days) 148.9 207.4 227.0 267.4 292.1 0.2x
Creditors Turn (avg days) 831.5 1,919.6 1,959.7 2,187.0 1,914.6
Inventory Turn (avg days) N/A N/A N/A N/A N/A
Asset Turnover (x) 0.0 0.0 0.0 0.0 0.0
Current Ratio (x) 3.4 2.3 2.8 2.7 2.6
Quick Ratio (x) 3.3 2.3 1.6 1.5 1.5
Net Debt/Equity (X) 0.1 0.1 0.1 0.2 0.2
Net Debt/Equity ex MI (X) 0.1 0.1 0.2 0.2 0.2
Capex to Debt (%) (57.4) 27.8 53.5 7.5 5.9
Z-Score (X) 1.9 1.9 1.8 1.6 1.5

Page 142
Company Guide
Cash Flow Statement (US$ m)

FY Mar 2013A 2014A 2015A 2016F 2017F
Pre-Tax Profit 842 867 862 415 463

Dep. & Amort. 7 3 4 5 5
Tax Paid (36) (14) (28) (20) (42)
Assoc. & JV Inc/(loss) (165) (126) (71) (64) (78)
Chg in Wkg.Cap. 8 (95) 46 (207) 116
Other Operating CF (244) (343) (366) 0 0
Net Operating CF 411 291 445 129 463
Capital Exp.(net) 1,653 (741) (1,523) (237) (204)
Other Invts.(net) 0 0 (1,467) 0 0
Invts in Assoc. & JV (492) (83) (422) (350) (225)
Div from Assoc & JV 0 32 13 0 0
Other Investing CF (186) (32) (10) 0 0
Net Investing CF 976 (824) (3,409) (587) (429)
Div Paid (108) (153) (174) (200) (120)
Chg in Gross Debt (1,118) (167) 687 300 300
Capital Issues 332 0 159 0 0
Other Financing CF (111) 403 2,246 0 0
Net Financing CF (1,005) 83 2,918 100 180
Currency Adjustments 0 1 2 3 3
Chg in Cash 381 (449) (44) (355) 217
Opg CFPS (US cts.) 8.5 8.1 8.3 6.9 7.2
Free CFPS (US cts.) 43.4 (9.5) (22.3) (2.2) 5.4
Target Price & Ratings History
3.08
S$
Cl o s i n g Ta rg e t
2.98 S.No . Da te R a ti n g
Pri c e Pri c e
1: 06 Aug 14 2.71 3.42 Buy
2.88 2: 05 Nov 14 2.69 3.42 Buy
3: 09 Dec 14 2.57 3.42 Buy
2.78
2 4: 06 Feb 15 2.49 2.98 Buy
5: 15 May 15 2.69 3.17 Buy
2.68
1 5
2.58
4
3
2.48
2.38
2.28
Jul-14 Nov-14 Mar-15 Jul-15
Not e : Share price and Target price are adjusted for corporate actions.
Source: DBS Bank

Page 143
Singapore Company Guide
Mapletree Logistics Trust
Edition 1 Version 2 | Bloomberg: MLT SP | Reuters: MAPL.SI Refer to important disclosures at the end of this report
BUY SURPRISING ON ACQUISITIONS

Last Traded Price: S$1.13 (STI : 3,353) Beating our acquisition estimates, maintain BUY. We maintain
Price Target: 12-Month S$ 1.31 (16% upside) our BUY and DCF-based TP of S$1.31. Recent acquisitions have
placed the trust back on a growth path with more to follow.
Potential Catalyst: Acquisitions Yields are attractive at >6.5%, with upside of 16%.
Where we differ: Our estimates are conservative and 5% below
consensus Australia, China are key markets for the trust MLT has beat our
initial S$100m acquisition estimates for FY16F through sealing
Analyst c.S$300m worth of deals YTD. The latest being a A$253m
China/Hong Kong Research Team · (852) 2820 4844 · (S$261.5m) cold warehouse in Sydney, its first foray into
hkresearch@hk.dbsvickers.com
Australia. Looking ahead, we see further expansion opportunties
in the medium term through its sponsor pipeline, which are
mainly under development at this point. Of interest is close to
Price Relative 1.6m sqm of land under various stages of development in China
S$ Relative Index
and Hong Kong will significantly grow its exposure to the robust
1.5 outlook for demand for logistics properties there.
1.4 208
1.3 188
1.2 168
Asset reconstitution strategy in place. MLT has demostrated the
1.1
148
ability to sell well in the past and is looking to divest certain
1.0
0.9
128 lower yield properties in Singapore and Japan where valuations
0.8 108 have increased due to compressed cap rates. Proceeds from
0.7
88
Jul-15
these divestments can be redeployed to higher yielding and
acquisitions with brighter growth prospects.
Mapletree Logistics Trust (LHS) Relative STI INDEX (RHS)
Forecasts and Valuation Valuation:

FY Mar (S$ m) 2014A 2015A 2016F 2017F Our target price of S$1.31 is based on the discounted cash flow
Gross Revenue 311 330 340 359 (DCF) method. At its current price, MLT offers investors
Net Property Inc 268 277 294 312 dividend yields of 6.6-6.9% for FY16-17F.
Total Return 293 241 182 189
Distribution Inc 180 185 185 192 Key Risks to Our View:
EPU (S cts) 7.7 6.4 7.4 7.7
Acquisitions ramp up faster than expected. A faster-than-
EPU Gth (%) 2 (17) 15 4
DPU (S cts) 7.3 7.5 7.5 7.8 projected ramp-up in acquisitions or a better-than-expected
DPU Gth (%) 7 2 0 4 outlook for Singapore warehouse market will mean positive
NAV per shr (S cts) 97.3 102.6 102.5 102.4 surprises to earnings estimates and re-rate the stock higher.
PE (X) 14.8 17.7 15.4 14.8
Distribution Yield (%) 6.5 6.6 6.6 6.9
P/NAV (x) 1.2 1.1 1.1 1.1
At A Glance
Aggregate Leverage (%) 33.1 34.1 38.6 39.5
ROAE (%) 8.1 6.4 7.2 7.5 Issued Capital (m shrs) 2,476
Mkt. Cap (S$m/US$m) 2,798 / 2,040
Major Shareholders
Distn. Inc Chng (%): 0 0
Consensus DPU (S cts): 7.8 7.9 Temasek Holdings (%) 44.4
Other Broker Recs: B: 4 S: 1 H: 12 Columbia Wanger Asset Mgmt 6.4
Alliance Global Properties (%) 5.7
Source of all data: Company, DBS Bank, Bloomberg Finance L.P Free Float (%) 43.5
3m Avg. Daily Val (US$m) 3.2
ICB Industry : Real Estate / Real Estate Investment Trust

www.dbsvickers.com
ed: TH / sa: JC
Company Guide
Net Property Income and Margins (%)

CRITICAL DATA POINTS TO WATCH
400 S$ m
350 93.8%
Earnings Drivers: 300 91.8%
MLT beats our acquisition estimates for FY16F with new 250 89.8%
Australian foray. MLT continues to deliver on the 200 87.8%
acquisition growth front. The REIT has acquired six accretive 150 85.8%
properties in China, Singapore, Malaysia and Korea with 100 83.8%
50 81.8%
projected NPI yields ranging from 6.5% to 8.4% in 2015,
0 79.8%
which will contribute positively come FY16. The REIT started 2013A 2014A 2015A 2016F 2017F
FY16 strongly, delivering close to S$300m @ weighted Net Property Income Net Property Income Margin %
average yield of 6.1% in acquisitions in Vietnam, Korea and

most recently, Australia. MLT reported the acquisition of a
A$253m (S$261.5m) premium cold warehouse located in Quarterly Net Property Income and Margins (%)
Eastern Creek, Sydney from BGAI Pty Ltd, a 50%-50% JV 50
45
88%
87%
between Brickworks Limited and Goodman Australia 40
86%
Industrial Fund. The property is acquired at an initial yield of 35
85%
30
5.6% and leased on long term tenure of 19 years to Coles 25 84%
Group Limited with rental escalations. Upside will come from 20 83%
15
a potential expansion potential of 7,000 sqm which we have 10
82%
81%
yet priced in. 5
0 80%
3Q2013
4Q2013
1Q2014
2Q2014
3Q2014
4Q2014
1Q2015
2Q2015
3Q2015
4Q2015
We are positive on MLT’s rising acquisition growth
momentum which would diversify its earnings base while Net Property Income Net Property Income Margin %
scaling up its presence in target growth markets in China,

Korea and Australia which will compensate for the expected
dip in rentals from its Singapore operations in the interim. ROE (%)
8.0%
7.0%
Sizeable portfolio of assets to be injected from the
6.0%
sponsor in the longer term. In addition, there is a sizeable
5.0%
and growing pipeline of development properties from the
4.0%
Sponsor, Mapletree Investments that is available for MLT to
3.0%
acquire in the medium term. Potential assets for acquisitions
2.0%
are mainly in the development stages across Asia, especially
1.0%
in China, Japan, HK and Vietnam, where demand for logistics
0.0%
warehouses remains robust. China remains a key growth area, 2013A 2014A 2015A 2016F 2017F
where the proliferation of e-commerce will drive demand for

more logistic space.
Interest Cover (x)
Conversions of single-user facilities to multi-tenanted (x)
10.00
properties to result in earnings downside over FY16-17F. 9.00
MLT's historical performance has been stable, complemented 8.00
by a balance between positive rental reversions, stable 7.00
6.00
portfolio occupancies and acquisitions. The REIT has a
5.00
weighted average lease to expiry (WALE) of 4.5 years (by 4.00
NLA), which offers strong income visibility for the trust. 3.00
Looking ahead, MLT has 24%/21% of its revenues up for 2.00

1.00
renewal in FY16/17F. A majority of the leases are from 0.00
Singapore of which we expect a number of warehouses that 2013A 2014A 2015A 2016F 2017F
are leased to single-users (SUA) are expected to be converted

into multi-tenanted properties (MTB). Given underlying Source: Company, DBS Bank
vacancies for these properties, we expect downside to
earnings in the nearer term when leases from these SUAs
come up for renewal in the coming two years.

Page 145
Company Guide
Aggregate Leverage (%)

Balance Sheet:
Gearing of c.38.6% remains within management's
38.0%
comfortable range. With the latest acquisitions priced in,
gearing is expected to rise marginally to 38.6% but still 33.0%
within management's comfortable level of 40-45%. In our 28.0%
forecasts, we estimate gearing to increase marginally to

23.0%
c.39% by the end of FY16, mainly due to c.S$120m of capex
invested to development of a new ramp-up warehouse at Toh 18.0%
Guan, Singapore. 13.0%

2013A 2014A 2015A 2016F 2017F
Well-staggered debt maturity profile; interest costs

remain stable. Interest rates remain stable at 2.1% and
given that a majority of its debts are in JPY/HKD and RMB, it Distribution Paid / Net Operating CF
is expected to remain low as rates there continue to fall. To 1.1
(x)
hedge against currency volatility, the manager typically takes 1.0
on local-denominated loans (pegged to maximum of asset 0.9
values in each overseas market). 0.8
0.7
MLT has a long debt-to-maturity of 3.6 years in 4QFY14/15 0.6
0.5
and proactively renew its loans ahead of time. Over the next
0.4
two financial years, only c. 23% of its total debt will be rolled
0.3
over, meaning that interest cost will remain stable. 2013A 2014A 2015A 2016F 2017F
Net Asset Value (NAV) per unit grew by 6.2%. NAV per
unit rose from S$0.97 to S$1.03, driven by cap rate
compression, higher rents and gains on revaluation on Distribution Yield (%)
(%)
completion of various asset enhancement and development
projects. 9.4
+2sd: 9%
8.4
+1sd: 8%
Share Price Drivers:
7.4
Ability to drive growth through acquisitions. We remain Avg: 6.9%
optimistic about the ability for to drive growth through 6.4
‐1sd: 5.9%
acquisitions. With a first foray in Australia, we see the trust 5.4
further deepening its exposure through strategic purchases ‐2sd: 4.9%

4.4
over the medium term. The manager is also looking to divest 2011 2012 2013 2014
low yielding assets in Singapore, Japan and re-cycle into other

higher yielding assets. We see value after recent price
correction, Upgrade to BUY, TP S$1.31 as we priced in the P/Bk NAV (x)
latest acquisition. 1.7
(x)
1.6
Key Risks: 1.5
Rise in interest rates is detrimental for MLT. The 1.4

+2sd: 1.37x
1.3
manager has edged in a majority of its debt into fixed rates 1.2
+1sd: 1.25x
but is expected to see increased cost of funds when these 1.1

Avg: 1.13x
loans are rolled over in the coming year. 1.0 ‐1sd: 1.02x

0.9 ‐2sd: 0.9x
0.8
COMPANY BACKGROUND 0.7
MapleTree Logistics is a real estate investment trust which Jul-11 Jul-12 Jul-13 Jul-14
invests in logistics warehouses in the Asia Pacific region. It

currently owns warehouses in Singapore, Japan, China, South Source: Company, DBS Bank
Korea, Vietnam and Hong Kong.

Page 146
Company Guide
Income Statement (S$ m)

FY Mar 2013A 2014A 2015A 2016F 2017F
Gross revenue 308 311 330 340 359
Property expenses (40) (43) (53) (47) (47)
Net Property Income 268 268 277 294 312
Other Operating expenses (37) (18) (24) (43) (42)
Other Non Opg (Exp)/Inc 23 3 (15) 0 0
Net Income 216 224 205 215 224
Tax (14) (17) (29) (14) (16)
Minority Interest (1) (1) (1) 0 0
Preference Dividend (19) (19) (19) (19) (19)
Net Income After Tax 182 187 157 182 189
Total Return 203 293 241 182 189
Non-tax deductible Items (36) (113) (56) 3 3
Net Inc available for Dist. 166 180 185 185 192 Growth mainly driven by
acquisitions, offsetting
Growth & Ratio
higher vacancy rates from
Revenue Gth (%) (9.4) 0.9 6.2 3.1 5.4 its Singapore portfolio
N Property Inc Gth (%) (8.7) (0.2) 3.7 6.0 6.1
Net Inc Gth (%) (11.6) 2.7 (16.2) 15.9 4.0
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0 Interest cost to remain fairly
Net Prop Inc Margins (%) 87.1 86.1 84.0 86.3 87.0 stable, given a majority of
Net Income Margins (%) 59.3 60.3 47.6 53.4 52.8 loans are denominated in
Dist to revenue (%) 54.0 57.8 56.0 54.3 53.6 JPY where rates remain low
Operating expenses (%) 12.0 5.9 7.4 12.5 11.7
ROAE (%) 8.3 8.1 6.4 7.2 7.5
ROA (%) 4.3 4.3 3.4 3.7 3.7
ROCE (%) 5.3 5.5 4.9 4.9 5.1
Int. Cover (x) 6.1 8.7 7.8 6.9 5.8

Page 147
Company Guide
Quarterly / Interim Income Statement (S$ m)

FY Mar 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015
Gross revenue 80 81 82 78 85
Property expenses (12) (12) (13) (11) (14)
Net Property Income 68 69 69 67 70
Other Operating expenses (6) (8) (5) (6) (9)
Other Non Opg (Exp)/Inc 1 (8) 3 0 (10)
Net Income 56 45 59 54 43
Tax (8) (3) (3) (4) (20)
Minority Interest 0 0 0 0 0 Step-up growth on a q-o-q
Net Income after Tax 43 38 51 46 18 basis driven by (i) annual
Total Return 148 38 51 46 102 escalations for its long leases
Non-tax deductible Items (102) 9 (5) (1) (56) and, (ii) contribution from
completed acquisitions
Net Inc available for Dist. 46 47 46 45 46
Growth & Ratio
Revenue Gth (%) 3 1 1 (4) 8
N Property Inc Gth (%) 1 1 0 (2) 4
Net Inc Gth (%) (6) (13) 36 (11) (61)
Net Prop Inc Margin (%) 85.3 85.1 84.2 86.3 83.1
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0
Balance Sheet (S$ m)

FY Mar 2013A 2014A 2015A 2016F 2017F
Investment Properties 4,050 4,235 4,631 4,953 5,037

Other LT Assets 0 0 0 0 0
Cash & ST Invts 150 114 107 76 80
Inventory 0 0 0 0 0
Debtors 12 16 21 9 9
Other Current Assets 24 31 29 29 29
Total Assets 4,237 4,397 4,788 5,067 5,155
ST Debt 289 149 57 57 57

Creditor 159 140 164 113 120
Other Current Liab 12 11 24 34 36
LT Debt 1,145 1,307 1,575 1,897 1,981
Other LT Liabilities 50 59 80 80 80
Unit holders’ funds 2,576 2,726 2,882 2,879 2,876
Total Funds & Liabilities 4,237 4,397 4,788 5,067 5,155
Non-Cash Wkg. Capital (135) (103) (138) (110) (117)

Net Cash/(Debt) (1,283) (1,341) (1,525) (1,878) (1,958) Gearing to remain
Ratio stable at 38-39.5%,
Current Ratio (x) 0.4 0.5 0.6 0.6 0.6 Increase is mainly due
Quick Ratio (x) 0.4 0.4 0.5 0.4 0.4 to debt-funded
Aggregate Leverage (%) 33.8 33.1 34.1 38.6 39.5 acquisitions and
development projects
Z-Score (X) 1.2 1.2 1.1 1.1 1.0

Page 148
Company Guide
Cash Flow Statement (S$ m)

FY Mar 2013A 2014A 2015A 2016F 2017F
Pre-Tax Income 216 224 205 215 224

Dep. & Amort. 0 0 0 0 0
Tax Paid (3) (3) (4) (4) (14)
Associates &JV Inc/(Loss) 0 0 0 0 0
Chg in Wkg.Cap. 25 (25) (1) (39) 6
Other Operating CF 20 14 35 0 0
Net Operating CF 258 210 236 173 215
Net Invt in Properties (197) (101) (247) (322) (84)
Other Invts (net) 0 0 0 0 0
Invts in Assoc. & JV 0 0 0 0 0
Div from Assoc. & JVs 0 0 0 0 0
Other Investing CF 1 1 1 0 0
Net Investing CF (197) (100) (246) (322) (84)
Distribution Paid (179) (177) (177) (185) (192)
Chg in Gross Debt 132 74 207 322 84
New units issued 0 0 0 0 0 Mainly for
Other Financing CF (37) (27) (30) (19) (19) development works at
Net Financing CF (85) (130) 0 118 (128) Toh Guan Warehouse
Currency Adjustments (9) 0 3 0 0 and assumed S$100m
Chg in Cash (33) (21) (7) (31) 4 in acquisitions over
FY16-17F
Operating CFPS (S cts) 9.6 9.6 9.6 8.5 8.5
Free CFPS (S cts) 2.5 4.5 (0.5) (6.0) 5.3
Target Price & Ratings History
S$
1.30 Cl o s i n g Ta rg e t
S.No . Da te R a ti n g
Pri c e Pri c e
8
6 1: 31 Jul 14 1.18 1.24 Buy
1.25 2: 09 Oct 14 1.17 1.25 Buy
3: 23 Oct 14 1.20 1.25 Buy
7 4: 10 Nov 14 1.18 1.25 Buy
1.20 4
2 5: 24 Nov 14 1.18 1.25 Buy
3 9 6: 21 Jan 15 1.24 1.27 Hold
1.15 1 5 7: 02 Apr 15 1.24 1.27 Hold
10
8: 22 Apr 15 1.26 1.29 Hold
9: 26 May 15 1.20 1.29 Hold
1.10 10: 02 Jul 15 1.13 1.31 Buy
1.05
Jul-14 Nov-14 Mar-15
Not e : Share price and Target price are adjusted for corporate actions.
Source: DBS Bank

Page 149
Industry Focus
Page 150
Industry Focus
DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Vickers (Hong Kong) Limited (“DBSVHK”), a direct wholly-owned subsidiary of DBS Vickers Securities Holdings Pte
Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated
in any form or by any means or (ii) redistributed without the prior written consent of DBSVHK.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to
DBSVHK and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are
subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not
have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the
information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate
independent legal or financial advice. DBSVHK accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any
claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this
document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned
subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests
in the securities mentioned in this document. DBSVHK, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in,
and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other
banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it
may not contain all material information concerning the company (or companies) referred to in this report.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by DBSVHK and/or DBSVH (and/or any persons associated with the aforesaid entities), that:
a. such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
b. there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.
DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered broker-dealer, does not have its own investment banking or research department,
nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months.
ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies
and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation
was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is
published, the analyst and his / her spouse and/or relatives and/or associate who are financially dependent on the analyst, do not hold interests in
the securities recommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions).
Page 151
Industry Focus
COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBSVHK and its subsidiaries do not have a proprietary position in the securities recommended in this report as of the date the report is
published.
2. DBSVHK, DBSVUSA, DBS Bank Ltd and/or other affiliates may beneficially own a total of 1% or more of any class of common equity
securities of the subject companies mentioned in this document as of the latest available date of the updated information.
3. Compensation for investment banking services:
DBSVHK, DBSVUSA, DBS Bank Ltd and/or other affiliates may have received compensation, within the past 12 months, and within the
next 3 months may receive or intends to seek compensation for investment banking services from the subject companies mentioned in
this document.
DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking
transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including
any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact
DBSVUSA exclusively.
RESTRICTIONS ON DISTRIBUTION
General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or
located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be
contrary to law or regulation.
Australia This document is being distributed in Australia by DBSVHK, which is exempted from the requirement to hold an Australian
Financial Services Licence under the Corporation Act 2001 [“CA”] in respect of financial services provided to the
recipients. DBSVHK is regulated by the Securities and Futures Commission under the laws of Hong KONG, which differ from
Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.
Hong Kong This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the
Hong Kong Securities and Futures Commission.
Indonesia This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia.
Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from
ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this
report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that
ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and
associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of
them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to
perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have
received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other
services from the subject companies.
Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No.
198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the
Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign
entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial
Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert
Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons
only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from,
or in connection with the report.
Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only
intended for institutional clients only and no other person may act upon it.
United This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of
Kingdom the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is
intended only for institutional clients.
Dubai This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch)
rd
having its office at PO Box 506538, 3 Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC),
Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research
report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.
United States Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in
compliance with any applicable U.S. laws and regulations. It is being distributed in the United States by DBSV US, which
accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities
referred to herein should contact DBS Vickers Securities (USA) Inc (“DBSVUSA”) directly and not its affiliate.
Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified,
jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
DBS Vickers (Hong Kong) Limited

th
18 Floor Man Yee building, 68 Des Voeux Road Central, Central, Hong Kong
Tel: (852) 2820-4888, Fax: (852) 2868-1523
Page 152

Insights Treasures in China Warehouse Sector

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Insights Treasures in China Warehouse Sector

Uploaded by

Copyright:

Available Formats

China / Hong Kong Industry Focus

China Warehouse Sector

DBS Group Research . Equity 28 July 2015

Emerging strong players HSI: 25,129

Beijing Properties (925 HK) 54

China South City (1668 HK) 68

China Fortune Land (600340 CH) 90

China Vanke (2202 HK/000002 CH) 106

CMST Development (600787 CH) 116

Wuzhou International (1369 HK) 126

Global Logistic Properties (GLP SP) 138

Mapletree Logistic Trust (MLT SP) 144

Demand is still ahead of supply

Source: GLP; DBS Vickers

Comparison of modern and old logistics facilities

Source: GLP; DBS Vickers

Best Express (百世匯通)

YTO Express (圓通速遞)

Total Logistics Expenses (LHS) % of GDP (RHS)

Source: China Warehousing Industry Bluebook 2015

Source: CBRE; DBS Vickers

China lacks a matured logistics industry. Unlike many other

Source: The World Bank; DBS Vickers

E-commerce: the key demand driver

E-commerce will see continued rapid growth. The number of 600

Online Retail Sales GMV (LHS) Growth rate (RHS)

Source: iResearch; DBS Vickers

Source: iResearch, DBS Vickers

believe c.230m online shoppers have made their first online

Source: CEIC, CNNIC, iResearch, Aliresearch, DBSV

Top 10 provinces in growth of online order quantities, 2013

Top10 Provinces by Compound Growth Rate of Online Shopping

Accumulated Compound Growth Accumulated

The growth of B2C segment drives logistics demand. China’s

related to e-commerce. Given the busy order flow, online

China B2C market share

Logistics model for e-commerce operators

Place an Process the Pick the Pack the Sorting Delivery

According to government data and estimates by Global

Warehouse space per online shopper between China

Source: Government websites, GLP, CEIC

3PL: another growth driver Leading 3PL players

Selected recent leases signed by Deppon

D at e G F A ( SM ) Pro jec t N ame Pro v in c e Cit y D ev elo p er

Cold chain warehouse per capita

Source: China Warehouse Industry Bluebook 2015

Cap rate compression to continue

will lead to stronger demand for modern logistic facilities.

Source: DBS Vickers; E-house

Source: DBS Vickers; E-house

Land supply for tier 2 cities, 2010 to 2H15

Falling land supply and strong acquisition interest led to strong

Date Investor Amount Investee

Fast growth of leading players JV/partnership between key warehouse plays

Key logistic property plays in China

Company Stock code Profile

Several big new comers are growing fast. Several e-commerce

Alibaba adopts the asset-light approach. China Smart Logistics

Best Express (百世匯通)

YTO Express (圓通速遞)

Logistics options for e-commerce players

Source: CBRE; DBS Vickers

completed warehouses as yet. Although CMSTD claims to have