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Produced and issued by: ABN AMRO Bank NV Hong Kong Branch+
Equity | Real Estate | China

21 October 2009

Property Radar China

Two cities, same complaint (2009#13)
During our visit to Shanghai we noted expensive housing is as challenging there
as it is in HK. While Shanghai may have more grounds to support solid price
growth in the medium term than HK, near-term policy risks are also higher, in our
view. Poor performance of recent IPOs may be a drag on the overall sector.

Sector performance Major Shanghai projects with highest the ASP

Area Developer Fitting cost Asking ASP
900 120 (Rmb k per sq m) Total GFA Room size (Rmb k per
800 Units (k sq m) (sq m) sq m)
100
700
600 80 Peninsula Residence* Bund side SPG Land na 39 15 275-435 200
500 Arch* Lujiazui SHKP na n/a 61 370-560 200
60
400
Tomsom Riveria Lujiazui Tomsom 10 220 142 433-1200+ 120
300 40
200 Bundfield North Bund Pengxin na 130 81 128-482 110
20
100 Casa Lakeville Luwan SHUI 10 474 140 89-427 100
0 -
Hysun Luwan Greenland 10 63 n/a 240-600+ 100
Jan 05

Jan 06

Jan 07

Jan 08

Jan 09

Huashan Residence Huashan Road Dinggu na 52 25 327-1202 95

Shimao Riveria Lujiazui SHIM 8 414 100 92-586 90
RBS Property Index (LHS)
Shanghai Bay #2 Xuhui Glorious na 55 n/a 520-560 90
MSCI China (RHS)
Central Residences Huashan Road KERR 4 60 n/a 240-483 90
Note: * yet to be launched, estimated ASP
Market price movement Source: Soufun, ABN AMRO
List co MCap 1 week
Price (bn) change Rating Market view – transaction volume rebounded in the second week of October
COLI 17.96 147 4.1% Buy
CRLN 19.22 97 9.0% Buy Transaction volume in Beijing, Shanghai, Guangzhou and Shenzhen rebounded 16%, 56%,
CGAR 3.21 53 7.0% Hold
GR&F 15.96 51 12.2% Hold 79% and 46% wow after a poor performance during ‘Golden Week’. However, we believe the
SHIM 15.20 54 8.1% Buy overall volume trend will remain weak in the coming weeks, as our site visits indicated a low
SOHO 4.42 23 2.6% Hold
AGIL 10.44 37 10.4% Hold motivation to boost sales volume at many projects.
SINO 8.22 39 15.1% Buy
SHUI 4.91 25 7.9% Hold
FRAN 2.46 23 7.4% Buy Policy view – criticism of heated property market toned down
HOPS 15.10 24 8.2% Sell
KWGP 5.89 17 11.8% Hold
GREE 12.62 21 14.1% Hold
Media reports about excessive property price growth (30-40% in Shanghai this year) and
CCLN 4.51 12 5.1% Sell developers' profits seem milder now than two years ago when the market peaked. With the
FORT 2.48 6 6.4% Hold
Note: central government aiming to strike a balance between maintaining real estate investment
COLI: China Overseas Land & Investment Ltd
CRLN: China Resources Land Ltd momentum and curbing price growth in 2010, we may see a clearer policy direction after 3Q
CGAR: Country Garden Holdings Co
GR&F: Guangzhou R&F Properties Co Ltd economic figures are announced on Thursday, 22 October.
SHIM: Shimao Property Holdings Ltd
SOHO: SOHO China Ltd
AGIL: Agile Property Holdings Ltd
SINO: Sino-Ocean Land Holdings Ltd Company news – two-thirds of new property stocks have fallen below their IPO price
SHUI : Shui On Land Ltd
FRAN: Franshion Properties China Ltd By the end of mid-November, nine new China property companies will have listed this year.
HOPS: Hopson Development Holdings Ltd
KWGP: KWG Property Holding Ltd Poor performances post-IPO so far (China South City down 27%, Glorious down 18%,
GREE: Greentown China Holdings Ltd
CCLN: C C Land Holdings Ltd Powerlong up 3%) bode poorly for the valuations of the next five to list: Yuzhou (2
FORT: Shanghai Forte Land Co
Prices as of 20 Oct 09 November), Excellence (3 November), MingFa (3 November), Evergrande (5 November) and
Source: Bloomberg, ABN AMRO
Analysts Fantasia (10 November). The Hong Kong Economic Times has reported a 2010 PE range of
4.7x to 11.4x, lower than the median PE of existing China property stocks of 13x.
David K C Ng, CFA
Hong Kong
+852 2700 5369 Actionable ideas – stick to blue-chips
david.k.c.ng@rbs.com
Despite the 5% sector rebound in the past two days (which has been largely flat since 7
Frank Miao
Hong Kong September) for no specific reason, we continue to recommend taking profits on high-beta
+86 21 2893 9727 China property stocks and switching to blue-chip defensive SOEs such as COLI, CRLN and
frank.miao@rbs.com
FRAN. We also see Hong Kong property stocks as being more defensive due to lower policy
38/F Cheung Kong Center, 2 Queen's risks. We see no near-term upside triggers for the China property sector.
Road Central, Hong Kong
Important disclosures can be found in the Disclosures Appendix.
+
http://www.abnamroresearch.com ABN AMRO group companies are subsidiary undertakings of The Royal Bank of Scotland Group plc.
 Views on news

Important: Land costs to moderate – Nanfang Daily (19 October)

Chart 1: Confidence index
Land costs have started to show signs of moderating after overheating in 2Q and 3Q this year.
130 Greentown acquired a CBD land site in Hangzhou on 10 October for Rmb20k per sq m, lower
Consumer expectation than market expectations of Rmb25k and an earlier auctioned comparable site for Rmb24k per sq
120
m. Shenzhen tendered four land sites in Futian CBD to four financial institutions at a low average
cost of Rmb8k per sq m, much less than the surrounding office ASP of Rmb25k. Conditions for
110
these sites are that a minimum of 60% is for self-use and the remaining 40% is leasable only to
Aug 09: 101
financial institutions. Guangzhou Poly won an urban redevelopment project (GFA of 1.04m sq m)
100
in the Haizhu District of Guangzhou at a floor price of Rmb142m but must also budget relocation
costs of Rmb4.5bn. We believe the aggressive bidding wars for land this year have both drawn
90
down developers’ cash reserves and filled their current development needs. Given slower sales
Aug 09: 89 and greater land supply since September, we expect land costs to moderate for the rest of 2009.
80
Business cycle

70
Important: Third quarterly real estate report – National Bureau of Statistics (15 October)
Jan 07 Dec 07 Nov 08
According to the National Bureau of Statistics, growth in property sales, real estate investment,
Source: National Bureau of Statistics (NBS) developer borrowing and mortgage lending continued to accelerate in September. Real estate
investment was Rmb2.5tn in the first nine months of 2009, up 17.7% yoy, 3ppt higher than in ytd
Chart 2 : FAI and retail sales August. GFA under construction, GFA newly commenced and GFA completion was 2.8bn sq m
growth (yoy) (up 15.4% yoy), 732m sq m (down 0.4% yoy), and 334m sq m (up 24.7% yoy), respectively. GFA
sold over the period reached 583m sq m (up 44.8% yoy, 1.9ppt higher than ytd August), or
40% FAI growth (LHS) 24%
Rmb2.7trn (up 73.4% yoy, 3.5ppt higher than ytd August). ASP in 70 cities increased 2.8% yoy or
Aug 09: 33.6%
0.7% mom in September, of which overall residential ASP was up 3% yoy and that for small-size
22%
35% units was up 4.9% yoy. Total funding for real estate developers was up 38.8% yoy to Rmb3.9trn.
20% Of this, internally generated funds accounted for Rmb1.3trn (up 14.5% yoy), presale proceeds
30%
accounted for Rmb1trn (up 52% yoy) and personal mortgages accounted for Rmb535bn (up
18%
108% yoy). In contrast to this data, Soufun data for eight major cities suggests that volume has
16%
fallen for four consecutive months since June 2009, with September down 10% mom. Transaction
25%
volume in Beijing and Shanghai dropped 25% and 11% mom in the first 18 days of October while
14% Shenzhen and Guangzhou saw increases of 73% and 39% mom. We believe transaction volume
20% will continue to fall for the rest of this year but that ASP will remain high as developers have no
Aug 09:15.4% 12%
reason to cut prices, especially given their strong cash positions and achieved sales.
Retail sales growth (RHS)
15% 10%
Feb 07 Oct 07 Jun 08 Feb 09 Important: Policy risk on the rise – China Land Surveying and Planning Institute (9 October)

Source: NBS The China Land Surveying and Planning Institute, the official think-tank of the Ministry of Land and
Resources of the PRC issued a report on 9 September warning of the risk of a sharp ASP
Chart 3 : Enterprise revenue increase on the back of falling volumes. The report went on to detail possible measures, including
and profit growth (yoy) limiting land supply for luxury projects and prohibiting land hoarding to cool the property market.
Mr Qiji, the Deputy Minister of the Ministry of Housing and Urban-Rural Development (MOHURD),
40%
August Quarterly revenue growth
was widely quoted in the press (28 September) saying that the MOHURD does not support high
30% 6% property prices, and he urged local governments to increase low-cost housing. This is reportedly
20% MOHURN’s first stance on rising property prices this year. Our site visits to some of the major
Chinese cities confirm that mortgage tightening is real and implementation has been firm.
10%
Secondary market transactions are now also being closely monitored to ensure transactions are
0% properly taxed. We believe rapidly rising ASPs have sparked central government concern. While
-10% we do not expect any new policies for the rest of this year, verbal warnings, reiteration of prior
-20%
policies and any withdrawal of prior stimulus packages should be enough to hurt market sentiment.

-30%
Relevant: Accumulative housing fund loans for housing projects – MOHURD (16 October)
August Quarterly
-40%
profit growth MOHURD and six other ministries jointly released a notice on 14 October allowing the idle
-50% 7%
accumulative housing fund to be loaned out for the development of low-income housing. The 36
Feb-08 Aug-08 Feb-09 May-09 Aug-09
cities to launch pilot programmes can take no more than 50% of the balance after minimum
Source: NBS deposits are reserved. The interest rate should be 10% higher than the five-year public housing
fund borrowing rate (currently 3.87%). We believe the immediate effect will be limited to increasing
housing supply, as the estimated available funds (Rmb300bn) represent only a fraction of total
funding for the real estate sector (Rmb2.5trn in 3Q09).

Property Radar China | News Highlights | 21 October 2009 2

 Views on stocks – IPO review

Three China property companies were listed in Hong Kong over the past three weeks.
Another four have passed the listing hearing and will likely be listed in 4Q09. Poor stock
performances post-IPO, however, should be a drag on the sector’s overall performance.

BBMG (2009 HK), a Beijing-based construction material manufacturer and property developer,
raised HK$6.85bn at HK$6.38 per share. China South City (1668 HK), a developer and operator
of a mega trade centre in Shenzhen, raised HK$3.15bn at HK$2.1 per share. Glorious Property
(845 HK), a developer focusing on Shanghai, Beijing and Tianjin with landbank of 13.6m sq m,
raised HK$9.9bn at HK$4.4 per share; the company forecasts it will achieve 2009 net earnings of
Rmb2bn (including a revaluation gain of Rmb600m). Powerlong (1238 HK), a developer and
operator of shopping centres in tier-2 cities with a landbank of 7m sq m, raised HK$2.75bn at
HK2.75 per share; the company forecasts it will achieve 2009 net earnings of Rmb3bn (including a
revaluation gain of Rmb1.8bn).

Chart 4 : Post IPO performance – Chart 5 : Post IPO performance – Chart 6 : Post IPO performance –
China South City Glorious Property Powerlong

0% 0% 3% Up 3% from IPO Price

-5% 2%
-5%
1%
-10%

-10% 0%
-15%
-1%
-20% -15%
-18% from IPO price -2%

-25% -27% from IPO price

-3%
-20%

-30% -4%

-25%
-35% -5%
29 Sep 06 Oct 13 Oct 20 Oct 13 Oct 15 Oct 17 Oct 19 Oct

-30%
01 Oct 06 Oct 11 Oct 16 Oct

Source: Bloomberg Source: Bloomberg Source: Bloomberg

Price as of 20 October 2009 Price as of 20 October 2009 Price as of 20 October 2009

Table 1 : Valuation of Four other China property companies have passed the listing hearing (Fantasia IPO
developers soon be listed delayed to 10 November)
IPO Price 10F PE Evergrande (3333 HK), a developer focusing on mega residential projects mainly in second- and
(HK$) (x)
third-tier cities with a landbank of more than 50m sq m, plans to raise no more than HK$6bn at
Evergrande 3.0 – 4.0 4.7 - 6.3
HK$3-4 per share. (Hong Kong Economic Times)
Yuzhou 2.7 - 3.7 5.2 - 7.1
Excellence 2.1 - 2.6 9.2 - 11.4
Yuzhou Group (1628 HK), a Xiamen-focused regional developer with a landbank of 3.5m sq m
MingFa 3.03 - 3.79 5.8 - 7.2
GFA (1.6 m sq m in Xiamen), plans to raise no more than HK$2.22bn at HK$2.7-3 per share. The
Source: Hong Kong Economic Times
company forecasts it will achieve 2009 net profit of Rmb1.1bn (including a revaluation gain of
Rmb699m). (Hong Kong Economic Times)

Excellence Group (1028 HK), a Shenzhen-based high-end residential/commercial developer with

landbank of 12m sq m GFA, plans to raise HK7.8bn at HK$2.1-2.6 per share. Excellence’s Victoria
Harbour project was the top-selling project in Shenzhen in 2008. (Hong Kong Economic Times)

MingFa Group (846 HK), an urban complex developer focusing on Xiamen and Jiangsu, plans to
raise no more than HK$3.4bn at HK$3.03-3.79 per share. The company forecasts it will achieve
2009 net profit of Rmb861.5m (including a revaluation gain of Rmb358m). (Hong Kong Economic
Times)

Property Radar China | Macro Dynamics | 21 October 2009 3

 Views on the market

We visited 16 projects in Shanghai last week with a focus on remote, mass-market

Chart 7 : CPI and PPI
residential projects on the first day and high-end luxury apartments on the second. Our site
visits confirm our belief that volumes are dropping amid rising ASPs.
10%

In general, property prices have risen 30-40% since the market bottomed a year ago. However,
compared with other cities, Shanghai has not corrected as much. For many projects in the primary
5%
market, prices are 20% or more above previous peak levels in 2007. Prices in the luxury segment
reached new highs with more than 13 projects commanding more than Rmb100k per sq m.
CPI Compared with HK, where developers have tried hard to brand mid-end units as high-end ones,
0%
Shanghai’s mass-market residential apartments have maintained their branding status but have
Aug 09: -1.2% still appreciated by as much as their high-end equivalents. Most projects we visited, including one
situated 1.5 hours away from the city centre, is now selling for more than Rmb10k per sq m.
-5%
PPI
Similar to what we saw in Beijing, Tianjin and Shenyang a month ago, almost all local sales staff in
Aug 09: -7.9% Shanghai seemed quite satisfied with their sales progress and do not seem to be in a hurry to
-10%
Jan 08 Jul 08 Jan 09 Jul 09 boost sales in the remaining months of this year. Management teams noted that they are more
interested in maintaining current high prices than improving asset churn. This supports our view
Source: CEIC
that volume is likely to remain low while prices stay high for the rest of this year.

Chart 8 : Electricity
Meanwhile, the onset of mortgage tightening for second-home purchases since September should
consumption growth and
PMI have a negative impact on property sales, as property investors tend to rely more on mortgage
financing. We believe the more important factor causing volume decline is rapid price
15% 60% appreciation.
September PMI:
54.3%
The more remote projects we visited were in Lingang New City, Fengxiang and Minhang. Lingang
10% 55%
New City is about 35km south of Pudong International Airport and is at the ocean front close to
Donghai bridge which connects the mainland to the Yangshan Deep Water Port. New projects –
5% 50% including large-scale residential projects, low-rise office buildings and resort hotels, such as
Crowne Plaza (355 rooms) – are being developed around Dishui Lake. Greenland’s Future
World was first launched in 2007 at an ASP of Rmb7k per sq m. Only a few semi-detached units
0% 45%
charging Rmb11k-15k per sq m remain unsold. Lingang New City is part of the Nanhui District,
which has a focus on logistics and manufacturing given its proximity to the airport and port.
-5% 40%
Recently, the State Council incorporated Nanhui into Shanghai Pudong New District. This has
September
Electricity
elevated the economic status of Lingang New City and solidifies Pudong’s position as both a
consumption financial hub and a maritime centre in the country. The Shanghai government has also committed
+1% yoy
-10% 35% to developing the area by including seven sites in Lingang New City – total GFA of 500k sq m of
Feb 08 Aug 08 Feb 09 Aug 09
Electricity Consumption (LHS)
low-density residential units – on its land supply list. However, because the area faces adverse
PMI (index, RHS)
weather conditions and should mainly attract buyers working in the area, we think property prices
in Lingang New City will take a few years to appreciate.
Source: CEIC, China Federation of
Logistics & Purchasing
Shimao’s Emmen Royal County is located in the Spark Development Zone in Fengxiang District.
Chart 9 : Auto production/
sales monthly growth (yoy) The project is 50km south of Shanghai’s city centre and 35km east of Lingang New City. It is also
close to the water front of Hangzhou Bay. Shimao bought the project in 2007 in the secondary
market and took advantage of the natural surroundings of the project by developing a horse range
90% adjacent to its townhouses. The company launched the project at the end of 2008, but poor
Sep 09 sale: +77%
market conditions resulted in slow sales until April 2009; the project was then selling for Rmb7k
70%
Sep 09 production: +78% per sq m. Only 40 of the original 370 units are left, with the townhouses charging Rmb11k per sq
50%
m. The effective price is around Rmb9k per sq m with the 25% free GFA (underground or
balcony). Real estate agents indicated strong interest from Shanghai city residents who intend to
30% use the property as a weekend home, but also slower sales since the mortgage tightening in
September.
10%

Minhang, a villa district, is about 30 minutes away from the city centre. The area is well served by
-10%
metro line No. 5, but some projects are located quite a distance from the stations, so prices vary.
The sales offices of two projects we visited, Hopson Town and Forte Park Town, were relatively
-30%
Jan 07 Jan 08 Jan 09 empty due to lack of supply of new units. Hopson Town was last launched with an ASP of Rmb8k-
Production Sales
9k per sq m in February 2008 before the market began to correct. Because the 90/70 rule applies
to this project, most units are smaller apartments. Sales so far this year have been moderate.
Source: CEIC

Property Radar China | Macro Dynamics | 21 October 2009 4

 Local sales agents target an ASP of Rmb12k per sq m for the launch of 210 units next week,
representing 30% price growth from the initial launch in 2008.

Forte Park Town is located 10 minutes drive north of Hopson Town. It has mainly detached villas
selling for Rmb25k per sq m or Rmb5m-7m per villa unit, vs Rmb20k per sq m at the end of 2007,
representing 25% price growth from the last peak. The project targets mainly white-collar buyers
working in the southern part of Shanghai. 70% of launched units were sold at the launch last
week.

Figure 1 : Shanghai sites visited on 15 October

Source: ABN AMRO

Figure 2 : Lingang New City (Greenland’s Future World) Figure 3 : Lingang New City (Dishui Lake)

Source: ABN AMRO Source: ABN AMRO

Property Radar China | Macro Dynamics | 21 October 2009 5

Figure 4 : Shimao Emmen Royal County Figure 5 : Shimao Emmen Royal County

Source: ABN AMRO Source: ABN AMRO

Figure 6 : Hopson Town Figure 7 : Hopson Town

Source: ABN AMRO Source: ABN AMRO

Figure 8 : Forte Park Town Figure 9 : Forte Park Town

Source: ABN AMRO Source: ABN AMRO

Property Radar China | Macro Dynamics | 21 October 2009 6


The developers do not appear to
be in a hurry to seel their luxury
projects, thus we think future
phases will sell at higher prices
Property Radar China | Macro Dynamics | 21 October 2009
We think future phases will sell at higher prices
We saw the properties and construction sites of 12 luxury property developments and identify two
distinct categories: 1) quality projects built by reputable developers who are keen to sell the units
quickly; and 2) those that focus more on maximising selling prices and profit margins than sales
speed or the land appreciation tax implications. Not all high-end properties can sell quickly given
mispricing, weak marketing or disappointing product quality. On this front, the primary property
market in Shanghai appears to be more efficient and rational than the HK property market, where
primary supply is scarce and developers have marketed nearly every new project as a ‘luxury’
development, despite nearby properties selling at a huge discount vs when the project was
originally launched. Shanghai home buyers still have abundant choices in the primary luxury
market and can differentiate projects according to location and quality.
On average, the ASP of luxury properties is Rmb50k-60k per sq m for those located at the border
of the inner ring road, Rmb70k-90k per sq m for prime districts within the inner ring road, and
Rmb100k per sq m or above for the most prestigious areas with views of the Huangpu River.
However, as the market continues to heat up, more projects will likely become overpriced.
Shanghai Star River is one of the best luxury projects we saw in Shanghai. Although this is the
very first project developed by Star River in Shanghai and the project’s access to the subway is
not as convenient as competing projects, the units’ spaciousness, quality, detail, layout,
landscaping, greenery and furnishings are exceptional, in our view. ASP is Rmb60k per sq m vs
management’s initial guidance of Rmb46k per sq m. Sales hit Rmb4bn on the first day of the
launch, a record in Shanghai. Almost all 322 units launched are now sold and the next launch will
occur in two years. The project has auxiliary facilities such as a conventional hall, sports facilities,
a hotel and catering services. Buyers of Guangzhou Star River and Beijing Star River reportedly
flew to Shanghai for the launch but still failed secure units. We believe management aims to
establish its reputation in the city by offering premium quality products at a reasonable price. The
site was purchased in 2007 at what was then considered a very high price (more than Rmb10k
per sq m). Due to its superior quality Star River beat Gemdale and CRLN to win the site despite
having offered a lower bid. We believe Star River now trumps Yanlord’s Riverside City in setting
the standard for well-run, high-quality and large-scale luxury property in Shanghai.
Shanghai Shimao Riviera Garden’s location is more desireable but the quality of this project is
somewhat lower compared to Star River. The project is made up of seven mega towers (3,200
units), which was first launched in 2000 with much fanfare. Its waterfront location is within a five-
minute drive from Pudong Lujiazui, an area that attracts many locals and foreigners working in the
financial industry. This has supported fast sales at a high selling price. The project was the most
important project for the company between 2002 and 2006 and achieved Rmb2bn sales in 2005
and Rmb4bn in 2006. Its plan to launch the last tower at an ASP of Rmb65k per sq m was
derailed by the market correction in late-2008 and ASP fell to as low as Rmb40k-50k per sq m in
March 2009. The market recovery in 2Q09 then quickly boosted sales, with sales of 280 units (out
of a total of 414) generating Rmb2.5bn. In view of the buoyant market and difficulty in securing
new prime sites in Shanghai, management deliberately slowed sales after July by raising the
asking price to Rmb90k-120k per sq m for units above the 30th floor. Cheaper units sold earlier
this year are mostly below the 30th floor, which have views of the river partially blocked by SHKP’s
The Arch. The Arch should be launched in two years with a estimated ASP of more than Rmb200k
per sq m.
Like Shanghai Shimao Riviera Garden, Glorious’ Shanghai Bay is also a large-scale waterfront
residential project (total GFA of around 900k sq m), but the former is in the mature financial district
of Pudong while the latter is in Puxi, a still-developing residential area. With sales of Rmb2.6bn
the project ranked second in Shanghai in 2008, according to Soufun. Prices have jumped
significantly from Rmb30k per sq m in 2008 to Rmb60k per sq m with the recent launch of Tower 8
and to Rmb90k per sq m for Tower 2, which is situated at the waterfront. These prices significantly
exceed previous market expectations, thanks to the record-breaking price (Rmb27k per sq m)
achieved for a nearby government site. The integrated project includes two hotels, a shopping
mall and offices, with the Kempinski Hotel targeted to open in 2010. As a luxury property, we
believe Shanghai Bay’s ability to fetch Rmb90k per sq m in a non-prime location indicates that the
market is overheating.
7
Figure 10 : Shanghai sites visited on 16 October

Source: ABN AMRO

Property Radar China | Macro Dynamics | 21 October 2009 8

Figure 11 : Shanghai Star River Figure 12 : Shanghai Star River

Source: ABN AMRO Source: ABN AMRO

Figure 13 : Shanghai Shimao Riviera Figure 14 : Shanghai Shimao Riviera

Source: ABN AMRO Source: ABN AMRO

Figure 15 : Glorious’ Shanghai Bay Figure 16 : Glorious’ Shanghai Bay

Source: ABN AMRO Source: ABN AMRO

Property Radar China | Macro Dynamics | 21 October 2009 9

 SHUI’s three Shanghai projects: KIC, Ruihong Xincheng and Casa Lakeville
We view SHUI as the best proxy for the Shanghai market with almost 100% of its revenue came
from the financial capital between 2004 and 2006 (91% in 2007 and 81% in 2008).

SHUI’s Xintiandi project, known as Casa Lakeville, which is now in phase 3, is a very successful
integrated development that has preserved the historic buildings in the area. To many foreigners, it
is viewed as being among the first and most well-known luxury properties in Shanghai and in all of
China. The best three towers of Casa Lakeville were first launched in June 2008 at an ASP of
Rmb85k per sq m. Tower 11, which does not have a lake view, was launched in May 2009 at a
discounted price of Rmb57k per sq m. Tower 12, also without a lake view, saw immediate take-up
despite a 20% price increase from the previous month’s launch. The last tower, which has the
worst view, was launched in August at Rmb70k per sq m and was cleared almost immediately.
The remaining units of Casa Lakeville now command Rmb80k-120k per sq m.

Five low-rises (mainly duplexes) remain under construction above a retail podium in Casa
Lakeville. We think the target selling price will likely exceed Rmb100k per sq m. The next phase of
the Xintiandi project is the construction of Corporate Avenue P2, which is to be completed in 2011.
Relocation of the next residential phase, lot 116, is still ongoing but negotiations with local
residents will likely take time.

SHUI’s second major project in Shanghai is Ruihong Xincheng (RHXC), a large-scale (1.3m sq
m GFA) mass-market residential project located in the centre of Hongkou District above a subway
station. The quality of the project’s Phase 3 has improved significantly from Phase 2, which was
sold in 2006 for Rmb16k per sq m. Almost all 248 units of Phase 3 (mostly large-size units) were
sold at launch at Rmb30k per sq m. The next phase (lot 4) is situated between Phase 1 and
Phase 2 and is currently under construction. The sales staff aim to launch the project at the end of
2010 at an ASP of Rmb35k per sq m for the predominantly small-size apartments (80-90 sq m).
After lot 4, lot 6 will be next to go through relocation.

SHUI’s third project in Shanghai is located in Yangpu District close to several reputable
universities. The project provides a mix of low-rise office buildings and retail space, called KIC
Plaza, and a low-density residential area, called KIC Village. KIC Village Phase 2 offers 600 units
with a wide range of sizes that sell for an average of Rmb28k per sq m, versus Rmb22k per sq m
at the beginning of the year. The general image of the KIC project and the adjacent Wujiaochang
area has improved, thanks to the addition of several major shopping malls such as Wanda Plaza
in 2006, Orient Shopping Centre and Bailian Youyicheng in 2007 and the future Shanghai Hopson
International Plaza, which is currently under construction. We expect the area to become more
popular as tenants, workers and residents move into KIC Plaza and KIC Village.

Management has committed to increase its asset churn in the coming years and indicated that it
has sped up progress in relocations. SHUI’s brand, its product quality and superb master planning
should help consolidate its position in Shanghai, but we also believe landbank replenishment in
Shanghai remains crucial, especially as the company’s projects in other cities will take time to
make a meaningful contribution to the bottom line.

Property Radar China | Macro Dynamics | 21 October 2009 10

Figure 17 : Shui On Land’s Xintiandi Figure 18 : Xintiandi’s Conrad Hotel and Corporate
Avenue

Source: ABN AMRO Source: ABN AMRO

Figure 19 : Shui On Land’s Ruihong Xincheng (RHXC) P3 Figure 20 : RHXC’s adjacent lots to be resettled

Source: ABN AMRO Source: ABN AMRO

Figure 21 : Shui On Land’s KIC residential portion Figure 22 : Shui On Land’s KIC office portion

Source: ABN AMRO Source: ABN AMRO

Property Radar China | Macro Dynamics | 21 October 2009 11

 KERR’s Shanghai Central Residence, Yuchang’s Prince Hills, SPG Land’s Peninsula
Shanghai, and Pengxin’s Bundfield did not sell well during the bull market

Bundfield is located along the North Bund, just north of FRAN's Shanghai Port International
Cruise Terminal project. It offers a spectacular view of the Huangpu River, at the northern part of
the Pudong Lujiazui financial district and The Bund. However, views below the 14th floor will be
blocked by the Banyan Tree hotel after it is constructed. Prices therefore vary significantly: prices
for 128-278 sq m units below the 14th floor have risen to Rmb70k per sq m from Rmb50-60k per
sq m in January, while prices for 304-371 sq m units above the 14th floor have risen to Rmb120k-
160k per sq m from Rmb100k per sq m in January. Sales have been slow due to weak marketing,
mediocre product quality, inconvenient access and the wide price premium versus previous
phases of the same project that were developed by a different company. The project launched
more than 130 units in 2008 but only 30 have been sold so far. We believe the company aims to
maximise selling prices and profit rather than volume for this project.

We are slightly disappointed with the sales performance of KERR’s Shanghai Central
Residences Phase 2. The company launched 30 units of Tower 2 (all below the 20th floor) in
August but only managed to sell 16 at an ASP of Rmb86k per sq m, despite a improved market
environment. We believe the poor performance was due to the project’s average interior décor
standards. In contrast, nearby projects such as Huashan Residence (Jin’an District; selling for
Rmb95k per sq m) saw a better response at its launch last week. Another competing project in the
area is Wharf’s No.1 Xinhua Road, which launched recently at Rmb75k per sq m. For KERR’s
Shanghai Central Residence, the remaining units above the 20th floor will be launched at the end
of October. Management plans to raise prices 3-4%. The other two towers of Phase 2 are for
lease: Tower 3 offers 154 units (135-200 sq m) but is only 70% occupied, and Tower 1 offers 60
units (238-341 sq m) and is 92% occupied. Daily rents average around Rmb5.5 per sq m, implying
less than a 3% yield versus 4-5% at the peak of the market.

Another project with slow sales is Prince Hills located at a busy intersection in Changning District.
The project includes two residential towers, an office tower, a shopping podium and Hotel Nikko
(388 rooms), which is scheduled to open in 2010. Despite its prime location and supporting
facilities, more than 20 units remain unsold out of a total of 100 two years after the initial launch.
Prices have been relatively flat; the latest target price of Rmb70k per sq m is up slightly from the
Rmb50-60k per sq m at the launch in September 2007. CBRE is the sales agent for the project.
We believe the developer prefers to maximise prices rather volume given the scarcity value of the
project.

SPG is developing the Peninsula Shanghai in a joint venture with Hong Kong and Shanghai
Hotels. The hotel offers 235 hotel rooms and suites with impeccable interior décor. The
introductory room rate of around Rmb2,500 per night is nearly double that of SHIM’s Hyatt on the
Bund. One of its largest suites has two huge balconies, each of the size of a basketball court with
a 360-degree view of Shanghai Puxi and Pudong. The rack rate is Rmb85k. We believe the
hotel’s F&B and wedding banquet businesses should do well as Peninsula Shanghai provides a
classic European atmosphere quite unlike most of the modern five-star accommodation provided
by international hoteliers in Shanghai. Its entrance lobby mimics The Peninsula Hong Kong, a
popular rendezvous spot for high tea. Adjoining the hotel building is a serviced apartment, which
has no river view. The showroom was closed for redesigned during our visit, but the hotel staff
said that the 275-435 sq m units will likely command more than Rmb200k per sq m when
launched for sale towards the end of this year.

Property Radar China | Macro Dynamics | 21 October 2009 12

Figure 23 : Pengxin’s Bundfiled Figure 24 : Franshion's International Cruise Terminal

Source: ABN AMRO Source: ABN AMRO

Figure 25 : Kerry’s Central Residences Figure 26 : Kerry’s Central Residences

Source: ABN AMRO Source: ABN AMRO

Figure 27 : SPG Land’s Peninsula Shanghai Figure 28 : SPG Land’s Peninsula Residences

Source: ABN AMRO Source: ABN AMRO

Property Radar China | Macro Dynamics | 21 October 2009 13


Both sites are located in the
Dongjiadu area of South Bund
and have partial river views
GREE’s Bund House and CRLN’s Bound of Bund are still under construction
Bund House had no public showroom when it was launched in August. All 86 units were sold at
launch at an ASP of Rmb52k per sq m for total sales proceeds of Rmb1.5bn. Another batch is to
be launched later this year with a target ASP of Rmb70k per sq m. GREE’s CEO Shou Bainian
has purchased a unit in Bund House.

The Bound of Bund is just across the street and was originally the Phase 2 of The Bund Side,
which was first launched in 2005 at an ASP of Rmb18k per sq m. The latest selling price is
Rmb40k per sq m. The Bound of Bund has a total GFA of 100k sq m and is selling 288 units in six
towers. The cheapest units are 188 sq m and start at Rmb55k per sq m. However, the sales staff
emphasised that the company has not set a target maximum selling price or average price and
prefers to sell the project slowly over three years to maximise profit.

Figure 29 : Greentown’s Bund House Figure 30 : Greentown’s Bund House

Source: ABN AMRO Source: ABN AMRO

Figure 31 : CR Land’s The Bound of Bund Figure 32 : CR Land’s The Bound of Bund

Source: ABN AMRO Source: ABN AMRO

Property Radar China | Macro Dynamics | 21 October 2009 14

 Company figures

 Charts 11-14: Beijing, Shanghai, Shenzhen and Chart 10 : Secondary property price index of major cities
Chongqing posted volume drops of 16.8%, 22.7%, 14.6%,
and 7.1% in September 2009 vs August 2009. 280
Aug Shenzhen: +38% from low in Feb 09
260
 Charts 11-14: In the second full week of October (October Aug Beijing: +17% from low in Feb 09
12th-18th ), Beijing, Shanghai and Shenzhen showed wow 240

increases in transaction volume of 16%, 56%, and 46%. 220 Aug Guangzhou: +47% from low in Feb 09

This is partially due to the low base effect of poor sales in 200
“Golden Week”. Aug Shanghai: +29%from low in Feb 09
180
 Charts 11-14:In the first 18 days of October, transaction 160
volume in Beijing ,Shanghai dropped 25% and 11%,
140
espectively. While Shenzhen increased 73%. During the
same period, ASP in Beijing and Shenzhen increased 120

12.7% and 1.7% mom while dropped 3.3% in Shanghai. 100

May-04 May-05 May-06 May-07 May-08 May-09
 Charts 15-16: Vanke sold GFA 537k sq m in September at
Shanghai Guangzhou Beijing Shenzhen
an ASP of Rmb10k per sq m. COLI sold GFA 387k sq m in
September at an ASP HK$11.6k per sq m. Source: Centaline

Chart 11 : Beijing primary transaction prices and volumes Chart 12 : Shanghai primary transaction prices and
volumes

16,000 Oct ASP: Rmb:15,336 1,800 13,000 Oct ASP: Rmb:11,266 3,500
15,000 1,600 12,000 3,000
14,000 1,400
11,000 2,500
13,000 1,200
1,000 10,000 2,000
12,000
800 9,000 1,500
11,000 600 8,000 1,000
10,000 400
7,000 500
9,000 200
8,000 0 6,000 0
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09

GFA (RHS 000 Sqm) ASP (LHS Rmb) GFA (RHS 000 Sqm) ASP (LHS Rmb)

Source: Soufun Source: Soufun

* Last bar refers to transaction volume in the first 18 days of October * Last bar refers to transaction volume in the first 18 days of October

Chart 13 : Shenzhen primary transaction prices and Chart 14 : Chongqing primary transaction prices and
volumes volumes

Oct ASP: Rmb:19,753 900 5,000 3,000

20,000 Oct ASP: Rmb:4,527
800
4,500 2,500
18,000 700
600 4,000 2,000
16,000
500
14,000 400 3,500 1,500

12,000 300
3,000 1,000
200
10,000 100 2,500 500
8,000 0
2,000 0
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09
GFA (RHS 000 Sqm) ASP (LHS Rmb)
GFA (RHS 000 Sqm) ASP (LHS Rmb)

Source: Soufun Source: Soufun

* Last bar refers to transaction volume in the first 18 days of October * Last bar refers to transaction volume in the first 11 days of October

Chart 15 : Vanke monthly contracted sales and ASP Chart 16 : COLI monthly contracted sales and ASP

800 Nov 07 ASP: Rmb10,353 June 08 ASP: Sep 09: ASP 11,000 700 Dec 07 ASP: HK$ 14,607 16,000
Rmb10,308 Rmb 10,168 psm 14,000
700 600
10,000 July 08 ASP: HK$11,172
12,000
600 500
9,000 10,000
500 400
8,000
400 8,000 300 Feb 08 ASP: HK$7,029 Sep 09 ASP: HK$11,644 6,000
300 200 psm
4,000
7,000
200 100 2,000
100 6,000 0 0
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 07H1 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09
GFA sold (000 sqm LHS) 3MA GFA sold GFA sold (000 sqm LHS) 3MA GFA
ASP (Rmb psm RHS) 3MA ASP ASP (Rmb psm RHS) 3MA ASP

Source: Company data Source: Company data

Property Radar China | Macro Dynamics | 21 October 2009 15

 Chart 18: Real estate investment growth dropped from Chart 17 : GDP, FAI and consumption breakdown in 2007
39% in October 2007 to 7% in March 2009 and then
rebounded to 35% in August 2009. FAI growth rose to 100% Inventories
Exports Rural
34% in August 2009 from 22% in December 2008. Rural
Health, clothing,
Government Other property financial,
80%
 Chart 19: GFA sold in September of 2009 was 82m sq m household
Residential
GFA (up 58.3% yoy), while national GFA completed was
36m sq m (up 27.7% yoy). Recreational
60%
Consumption
Transport
 Chart 20: Shanghai stock market increased 4% mom in
September, but down 18.5% from July. PboC has left 40%
Urban Residence
Non-real estate
interest rate unchanged for 10 months now. urban FAI
Gross Capital
 Table 2: National ASP for the primary property market has 20%
Formation Food
gone up seven months in a row since March (4.9%
accumulatively). Guangzhou (up 12.9% since March) and 0%
Shenzhen (10.4% since March) have had the strongest GDP breakdown FAI breadown Consumption Urban
breakdown Consumption
accumulated growth.
Source: CEIC

Chart 18 : Growth of property investment and FAI (yoy) Chart 19 : Growth of GFA sold and GFA completed (yoy)

45% 40% 60%

40% 50% Sep 09: Nationa GFA sold up 58% yoy,
35% 40% National GFA completed up 28% yoy
35%
30% 30%
Aug 09: up 34% yoy
30% 20%
25%
10%
20%
25% 0%
15% Aug 09: up34% yoy
-10%
10% 20% -20%
5% -30%
0% 15% -40%
Feb 07 Aug 07 Feb 08 Aug 08 Feb 09 Aug 09 Feb 07 May 07 Aug 07 Nov 07 Mar 08 Jun 08 Sep 08 Dec 08 Apr 09 Jul 09
Real estate investment (LHS) FAI (RHS) GFA Completed GFA Sold

Source: NBS Source: NBS

Chart 20 : Lending rates and stock index Chart 21 : Growth of developer and mortgage loans (yoy)

8% 189 bpts cut 40%

6,000
55%
8% 35%
5,000
216 bpts cut 45%
7% 30%
4,000
7% 35% 25%
2Q09 Mortgage growth: 18.8%
3,000 20%
6% 25%
2,000 15%
6%
15%
10%
5% 1,000 2Q09 Developer loan growth: 20.5%
Mar 06 Jul 06 Nov 06Mar 07 Jul 07 Nov 07Mar 08 Jul 08 Nov 08Mar 09 Jul 09 5% 5%
Shanghai Stock Index (RHS) 1year lending rate (LHS) 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09
5+ yearlending rate (LHS) Developers Loan growth (LHS) Mortgage growth (RHS)

Source: SHEX, People’s Bank of China Source: PBoC

Table 2 : Selling price change in the primary markets of 10 major cities (mom)
Secondary mom Beijing Shanghai Guangzhou Shenzhen Hangzhou Nanjing Shenyang Tianjin Chengdu Chongqing National
Sep-08 -0.30% -0.90% -1.40% -5.60% -0.20% -2.90% 1.20% 0.10% -0.10% 0.00% -0.30%
Oct-08 -0.10% -0.30% -1.80% -2.50% -0.20% -0.80% 0.00% -0.20% -0.50% 0.50% -0.30%
Nov-08 -0.50% -0.40% -1.10% -2.40% 0.00% -2.20% -0.10% -0.10% -0.20% -0.80% -0.60%
Dec-08 -1.10% -0.30% -3.10% -0.20% -0.10% -0.40% -0.20% -0.50% -0.30% -0.40% -0.70%
Jan-09 -0.10% -0.10% 0.30% -0.20% -0.10% -0.10% -0.10% -0.30% -0.40% -1.10% -0.30%
Feb-09 -0.10% 0.00% -0.20% -0.10% -1.30% 0.00% 1.30% 0.20% -0.10% -0.20% -0.20%
Mar-09 0.20% 0.00% 0.20% 0.50% -0.10% 0.70% 0.30% 0.20% 0.40% 0.20% 0.10%
Apr-09 0.40% 0.10% 2.10% 2.00% -0.60% 0.20% -0.10% 0.30% 0.10% 0.10% 0.30%
May-09 0.50% 0.50% 1.40% 1.70% 0.70% 0.30% 0.10% 0.90% 0.70% 0.10% 0.70%
Jun-09 0.30% 1.00% 3.60% 0.90% 0.60% 0.30% 0.20% 0.90% 0.40% 1.10% 0.80%
Jul-09 1.40% 1.10% 2.70% 2.20% 1.20% 1.10% -0.10% 0.90% 0.40% 0.30% 1.10%
Aug-09 1.30% 1.20% 1.50% 1.60% 1.90% 1.00% 0.20% 2.00% 0.40% 1.30% 1.10%
Sep-09 0.40% 0.70% 1.40% 1.50% 2.00% 0.80% 0.40% 1.30% 1.20% 0.60% 0.80%
Source: National Development and Reform Commission

Property Radar China | Macro Dynamics | 21 October 2009 16

 Company figures

Table 3 : Price, PE multiples and NAV discounts of 15 property developers under our coverage

Target price Price Rating PE (x) NAV premium NAV/share (HK$) 2009F

(HK$) (HK$) 2009F 2010F 2011F 2009F 2010F 2011F 2009F 2010F 2011F gearing
COLI 21.32 17.96 Buy 24 17 16 84% 76% 72% 9.8 10.2 10.4 47%
CRLN 25.45 19.22 Buy 30 19 15 48% 39% 32% 13.0 13.8 14.6 45%
CGAR 3.16 3.21 Hold 19 16 14 107% 101% 95% 1.5 1.6 1.6 46%
GR&F 15.50 15.96 Hold 14 10 10 46% 41% 37% 10.9 11.3 11.7 128%
SHIM 17.11 15.20 Buy 24 17 11 56% 38% 33% 9.7 11.0 11.4 18%
SOHO 4.86 4.42 Hold 20 8 20 50% 70% 78% 3.0 2.6 2.5 -41%
AGIL 9.69 10.44 Hold 17 11 10 2% -5% -13% 10.2 11.0 12.0 15%
SINO 7.69 8.22 Buy 24 18 13 41% 27% 25% 5.8 6.4 6.6 40%
SHUI 4.24 4.91 Hold 10 21 19 31% 41% 13% 3.7 3.5 4.3 37%
FRAN 2.93 2.46 Buy 22 15 11 9% -5% -12% 2.3 2.6 2.8 35%
HOPS 10.28 15.10 Sell 10 9 9 -31% -39% -48% 21.9 24.8 28.8 60%
KWGP 4.59 5.89 Hold 17 16 11 -10% -15% -22% 6.6 6.9 7.6 19%
GREE 10.88 12.62 Hold 21 12 7 -44% -52% -51% 22.4 26.2 26.0 137%
CCLN 3.45 4.51 Sell n/a n/a n/a -26% -31% -38% 6.1 6.5 7.2 -12%
FORT 2.21 2.48 Hold 16 11 10 20% 5% -11% 2.1 2.4 2.8 154%
Note: Prices at close 20 October 2009 throughout the report. PE based on our estimated adjusted EPS; negative NAV premium means NAV discount
Source: ABN AMRO forecasts

Chart 22 : Price change (x-axis) vs forward consensus earnings change (y-axis), 17 April 2009 vs 16 October 2009

% 6 months consensus forward earnings change Western China focus

80% CCLN

70%

60% High gearing to persist

Acquisition taken place too late FORT
SOHO
50%
Top pick among high beta names AGIL
SINO Low transparency
40% Staying power in Guangdong
SHIM HOPS
GR&F
30% CRLN
GREE
Need to resume growth Property top pick Most bullish developer
20% COLI Expensive Land bank
Blue chip leader KWGP
10% Going national
Good business model
CGAR
0%
FRAN
-10% SHUI
Defensive landlord
Record revenue in 2009 % price change
-20%
-70% -50% -30% -10% 10% 30% 50% 70% 90% 110% 130% 150%

Source: Datastream

Table 4 : Revenue, earnings, EBITDA and EPS forecasts for 15 China property developers under our coverage

Revenue Adjusted earnings EBITDA Adjusted EPS (Rmb)

Rmbm 2009F 2010F 2011F 2009F 2010F 2011F 2009F 2010F 2011F 2009F 2010F 2011F
COLI* 34,891 42,417 41,015 6,241 8,385 9,108 10,857 15,185 15,013 0.76 1.03 1.12
CRLN* 15,243 24,653 32,138 3,270 5,088 6,601 6,251 11,077 13,374 0.65 1.01 1.31
CGAR 18,247 21,231 23,233 2,409 2,910 3,293 5,118 6,000 6,765 0.15 0.18 0.20
GR&F 19,464 25,316 25,587 3,217 4,744 4,671 6,789 9,961 9,453 1.00 1.47 1.45
SHIM 15,970 19,327 26,965 2,004 2,804 4,277 4,821 6,132 9,275 0.56 0.78 1.19
SOHO 7,176 11,869 7,013 1,125 2,737 1,109 2,541 6,216 2,175 0.20 0.48 0.19
AGIL 13,237 18,126 20,973 1,939 3,033 3,389 3,934 6,148 6,342 0.54 0.84 0.94
SINO 9,098 11,843 15,283 1,398 1,866 2,668 2,683 3,806 5,895 0.30 0.40 0.57
SHUI 7,599 5,300 6,585 2,025 960 1,073 3,938 2,190 3,166 0.44 0.21 0.23
FRAN* 7,238 8,884 9,318 1,024 1,533 1,988 2,782 3,879 3,679 0.11 0.17 0.22
HOPS* 12,278 14,452 16,812 2,439 2,567 2,733 4,472 5,449 6,634 1.53 1.61 1.72
KWGP 4,006 5,420 7,211 895 912 1,335 1,797 1,751 1,899 0.31 0.32 0.46
GREE 7,887 13,302 25,955 901 1,599 2,673 1,230 2,723 6,970 0.53 0.93 1.56
CCLN 1,135 1,533 3,652 (94) 85 134 54 237 599 (0.04) 0.03 0.05
FORT 4,727 5,243 5,221 340 493 549 795 971 1,364 0.13 0.20 0.22
*COLI, CRLN, FRAN, HOPS and CCLN figures are in HK$, while the rest are in Rmb.
Source: ABN AMRO forecasts

Property Radar China | Company Dynamics | 21 October 2009 17

Chart 23 : End–2009F breakdown of landbank by cost (Rmb/sq m)

100%

80%

60%

40%

20%

0%

-20%
COLI CRLN CGAR GR&F SHIM SOHO AGIL SINO SHUI FRAN HOPS KWGP GREE CCLN FORT

<500 500-1000 1000-2000 2000-3000 3000-5000 5000-10000 10000-20000 Above

Source: ABN AMRO forecasts

Chart 24 : End–2009F breakdown of landbank by selling prices (Rmb/sq m)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
COLI CRLN CGAR GR&F SHIM SOHO AGIL SINO SHUI FRAN HOPS KWGP GREE CCLN FORT

<5000 5000-7500 7500-10000 10000-15000 15000-20000 20000-30000 30000-50000 Above

Source: ABN AMRO forecasts

Chart 25 : Revenue breakdown by city, 2009F

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
COLI CRLN CGAR GR&F SHIM SOHO AGIL SINO SHUI FRAN HOPS KWGP GREE CCLN FORT

Beijing Shanghai Guangzhou Shenzhen 2nd-tier Others

Note: Second-tier cities include Tianjin, Dalian, Qingdao, Hangzhou, Suzhou, Nanjing, Chongqing, Chengdu, Zhongshan, Xianmen, and 17 other cities.
Source: ABN AMRO forecasts

Property Radar China | Company Dynamics | 21 October 2009 18

Our 12-month target price is the
Table 5 : Scenario analysis, target price and NAV under different scenarios
sum of our DCF valuation for
development properties and end-
Scenario analysis Worst Worse Better Best Central
2010F NAV for investment
Price
properties
2008 variance 0% 0% 0% 0% 0%
For our DCF, we divide the 2009 growth -15% -10% -5% 5% varies
development properties into 2010 growth -10% -5% 5% 10% varies
three periods with: 1) the near Volume
term, between 2009 and 2010, 2008 variance 0% 0% 0% 0% 0%
based on the existing landbank 2009 variance -20% -10% 0% 5% 0%
only; 2) the medium term,
2010 variance -20% -10% 0% 5% 0%
ranging from one to four years,
Capitalisation rate
assuming continuous
Residential 12% 11% 10% 9% 6%
replenishment but no growth of
landbank with different Office 11% 10% 9% 8% 8%
assumptions about growth in Retail 10% 9% 8% 7% 8%
land cost, ASP, GFA sold per year Hotel 13% 12% 11% 10% 10%
for different companies; and, Cost of equity varies varies varies varies varies
3) the long term, with 3% Interest rate 8% 7% 6% 5% 7%
perpetual growth applied to all
companies
Medium-term growth
ASP increase 0% 0% 5% 10% varies
For NAV, we estimate rental,
Land cost increase 5% 0% 0% 5% varies
occupancy and capitalisation
rates with a finite horizon of 2018
GFA increase 0% 5% 5% 10% varies
As a secondary reference, we Medium term duration 2 3 3 4 varies
also estimate the total NAV for Beta 2 1.6 1.4 1.2 varies
the entire company, including Target price (HK$/share)
both development and COLI 6.26 9.36 15.08 25.34 21.32
investment properties
CRLN 0.19 3.66 13.25 29.92 25.45
CGAR -0.35 0.45 2.90 8.20 3.16
Table 5 lists all the assumptions
GR&F -7.78 -2.94 12.05 36.31 15.50
we use for our target price and
NAV calculations SHIM -2.03 2.43 13.09 36.12 17.11
SOHO 1.20 2.98 6.81 13.43 4.86
AGIL -2.06 1.42 11.88 33.93 9.69
SINO -2.12 -0.24 5.83 16.71 7.69
SHUI -3.19 -1.68 2.31 9.25 4.24
FRAN 0.89 1.70 3.35 6.37 2.93
HOPS -7.13 -0.01 16.13 46.01 10.28
KWGP -1.23 0.41 5.18 13.46 4.59
GREE -20.67 -14.58 10.19 49.31 10.88
CCLN 1.51 2.16 3.93 7.82 3.45
FORT -4.82 -2.73 3.81 15.67 2.21
NAV (HK$/share)
COLI 8.86 9.48 10.03 10.42 10.23
CRLN 6.65 8.97 12.23 15.86 13.83
CGAR 0.22 0.80 1.62 2.55 1.60
GR&F 2.07 5.08 9.24 13.99 11.29
SHIM 2.52 5.61 9.79 14.59 11.00
SOHO 2.50 3.04 3.80 4.60 3.68
AGIL 3.39 6.17 10.12 14.63 10.98
SINO 2.14 3.75 5.94 8.41 6.45
SHUI -1.72 0.13 2.87 6.25 3.48
FRAN 1.28 1.87 2.65 3.59 2.60
HOPS 6.20 12.86 23.00 34.53 24.8
KWGP 2.93 4.41 6.46 8.79 6.90
GREE 9.90 15.84 24.09 33.09 26.18
CCLN 3.93 4.94 6.48 8.25 6.54
FORT -1.12 0.20 2.07 4.13 2.37
Note: Central scenario assumes 2010 and 2011 price changes of 5-15% in major cities
Source: ABN AMRO estimates

Property Radar China | Company Dynamics | 21 October 2009 19

Chart 26 : MSCI China sector price Chart 27 : MSCI China sector price Chart 28 : MSCI China sector price
movement – one week movement – one month movement – three months
Automobiles Automobiles IT
IT IT F&B
Oil & Gas Retail Retail
Property 4.56% F&B Banks
Retail Oil & Gas Oil & Gas
China China Automobiles
F&B Banks China

Metals/Mining Insurance Insurance

Banks Property 2.94% Metals/Mining
Insurance Transportation Transportation
Transportation Metals/Mining Telecom
Telecom Telecom Capital Goods
Capital Goods Capital Goods Property 1.46%
Utilities Utilities Utilities

0% 2% 4% 6% 8% 10% 12% 0% 5% 10% 15% 20% 25% 0% 10% 20% 30% 40% 50%

Price as of 20 October 2009 Price as of 20 October 2009 Price as of 20 October 2009

Source: Datastream Source: Datastream Source: Datastream

Table 6 : Brokerage firm rating on 15 China property developers on 20 October 2009

COLI CRLN CGAR GR&F SHIM SOHO SINO AGIL SHUI FRAN HOPS KWGP GREE CCLN FORT Buy Hold Sell
ABN AMRO Buy Buy Hold Hold Buy Hold Buy Hold Hold Buy Sell Hold Hold Sell Hold 5 8 2
Brokerage 2 Hold Buy Hold Hold Buy Buy Hold Buy 4 4 0
Brokerage 3 Buy Buy Buy Buy Buy Buy Hold 6 1 0
Brokerage 4 Buy Buy Sell Sell Buy Buy Buy Hold Buy Hold Sell Sell Buy 7 2 4
Brokerage 5 Hold Buy Hold Hold Buy Hold 2 4 0
Brokerage 6 Hold Buy Hold Buy Buy Buy Buy Hold 5 3 0
Brokerage 7 Sell Sell Sell Sell Sell Sell 0 0 6
Brokerage 8 Hold Buy Buy Buy Hold Buy 4 2 0
Brokerage 9 Hold Sell Buy Buy Buy Buy Hold Buy Hold Buy Hold Sell Buy 7 4 2
Brokerage 10 Buy Buy Buy Buy Buy Buy Buy 7 0 0
Brokerage 11 Hold Hold Hold Buy Buy Hold Hold Hold Buy 3 6 0
Brokerage 12 Buy Buy Sell Hold Buy Buy Hold Buy Buy Buy 7 2 1
Brokerage 13 Hold Buy Hold Buy Buy Sell 3 2 1
Brokerage 14 Hold Buy Buy Buy Hold Buy Hold Buy Hold Buy 6 4 0
Brokerage 15 Buy Buy Buy Buy Buy Buy Buy Buy Buy 9 0 0
Buy 6 11 4 5 8 6 7 6 4 3 3 5 1 2 4 75
Hold 7 1 3 6 1 1 4 4 3 0 2 4 4 0 2 37
Sell 1 2 3 2 0 0 0 1 0 0 2 1 2 1 1 18
Source: ABN AMRO, Bloomberg
Note: For other brokerage firms we obtain their target prices from Bloomberg and apply 10% benchmark against current market price to derive the ratings (ie target price/current market
price > 110% = Buy; <90% = Hold, in between = Hold)

Chart 29 : 12-month forward weekly rolling PE band based on consensus earnings forecasts

1,200 Thickest line = Market capitalization weighted RBS China Property Index

Highest = 24.4
1,000 19 October 2009 Index = 440, Forward PE =14.4x
+1STD = 15

800 Ave. = 11.2

-1STD = 7.4
600
Lowest = 4.9

400

200

-
Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09

Source: Datastream

Property Radar China | Company Dynamics | 21 October 2009 20

 Recent publications
 Real Estate China: Disappointing Golden Week Sale (6 October 2009)

 Property Radar China: Timing is everything (25 September 2009)

 CC Land Holdings (1224): Slim profits in 2010 (21 September 2009)

 China Resources Land (1109): Defensive with upside potential (21 September 2009)

 Greentown China : Growth at all costs (17 September 2009)

Table 7 : Regional property team

China and Hong Kong Hong Kong Taiwan
David Ng, Head of Regional Property Research Raymond Liu Andre Chang, CFA
+852 2700 5369 +852 2700 5524 +886 2 8722 3018
Email: david.k.c.ng@rbs.com Email : raymond.liu@rbs.com Email : andre.chang@rbs.com

China Singapore Thailand

Frank Miao Fera Wirawan Gift Srisomburananont
+86 21 2893 9727 +65 6518 7238 +66 2 680 1025
Email : frank.miao@cn.abnamro.com Email: fera.wirawan@rbs.com Email: gift.srisomburananont@asp-intl.com
Source: ABN AMRO

Table 8 : Global sales team

Australia Ramesh Raghavan US
Woon Millen +65 65187244 Juanita Halim
+61 2 8259 5260 Email: ramesh.raghavan@rbs.com +1 203 97177059
Email: woon.millen@rbs.com Email: juanita.halim@rbs.com

China and Hong Kong London Saurabh Singhi

Graham Lappin Mark O’Hanlon +1 203 9717087
+852 2700 5153 +44 207 6785434 Email: saurabh.singhi@rbs.com
Email: graham.lappin@rbs.com Email: mark.ohanlon@rbs.com
Donald Floyd
James McIntosh Marina Chow +1 203 897 7093
+852 2700 5691 +44 207 6782652 Email: donald.floyd@rbs.com
Email: james.mcintosh@rbs.com Email: marina.chow@rbs.com
Jon Lanuza
Joe Batchelor Sanjay Kanal +1 203 897 9842
+852 2700 5216 +44 207 6785418 Email: jose.lanuza@rbs.com
Email: joe.batchelor@rbs.com Email: sanjay.kanal@rbs.com
Joy Kim
Nelson Li Rajiv Nihalani +1 415 343 7003
+852 2700 5583 +44 20 7678 2347 Email: joyce.kim@rbs.com
Email: nelson.li@rbs.com Email: rajiv.nihalani@rbs.com

Sandy Li Patrick Han

+852 2700 5169 +44 20 7678 5288
Email: sandy.li@rbs.com Email: patrick.han@rbs.com

Winson Liu India Korea

+852 2700 5182 Anil Shah John Choi
Email: winson.liu@rbs.com +9122 6715 5444 +822 2131 6407
Email: anil.shah@in.abnamro.com Email: john.choi@kr.abnamro.com
Singapore
Garett Lim Arvind Shah Kyoung Keun Lim
+65 6518 5358 +9122 6715 5344 +822 2131 6422
garett.lim@rbs.com Email: arvind.shah@in.abnamro.com Email: k.k.lim@kr.abnamro.com

Julie Seol Roshan Sony Seung Lee

+65 65187228 +9122 6715 5327 +822 2131 6413
Email: julie.seol@rbs.com Email: roshan.sony@in.abnamro.com Email: seung.lee@kr.abnamro.com

Paul Rathband
+65 65187226
Email: paul.rathband@rbs.com
Source: ABN AMRO

Property Radar China | Company Dynamics | 21 October 2009 21

Recommendation structure
Absolute performance, short term (trading) recommendation: A Trading Buy recommendation implies upside of 5% or more and a Trading Sell indicates downside of 5% or more. The
trading recommendation time horizon is 0-60 days. For Australian coverage, a Trading Buy recommendation implies upside of 5% or more from the suggested entry price range, and a
Trading Sell recommendation implies downside of 5% or more from the suggested entry price range. The trading recommendation time horizon is 0-60 days.
Absolute performance, long term (fundamental) recommendation: The recommendation is based on implied upside/downside for the stock from the target price. A Buy/Sell implies
upside/downside of 10% or more and a Hold less than 10%. For UK Small/Mid-Cap Analysis a Buy/Sell implies upside/downside of 10% or more, an Add/Reduce 5-10% and a Hold less
than 5%. For UK-based Investment Funds research the recommendation structure is not based on upside/downside to the target price. Rather it is the subjective view of the analyst based
on an assessment of the resources and track record of the fund management company. For listed property trusts (LPT) or real estate investment trusts (REIT) the recommendation is
based upon the target price plus the dividend yield, ie total return.
Performance parameters and horizon: Given the volatility of share prices and our pre-disposition not to change recommendations frequently, these performance parameters should be
interpreted flexibly. Performance in this context only reflects capital appreciation and the horizon is 12 months. Sector relative to market: The sector view relative to the market is the
responsibility of the strategy team. Overweight/Underweight implies upside/downside of 10% or more and Neutral implies less than 10% upside/downside. Target price: The target price is
the level the stock should currently trade at if the market were to accept the analyst's view of the stock and if the necessary catalysts were in place to effect this change in perception within
the performance horizon. In this way, therefore, the target price abstracts from the need to take a view on the market or sector. If it is felt that the catalysts are not fully in place to effect a
re-rating of the stock to its warranted value, the target price will differ from 'fair' value.

Distribution of recommendations
The tables below show the distribution of ABN AMRO's recommendations (both long term and trading). The first column displays the distribution of recommendations globally and the
second column shows the distribution for the region. Numbers in brackets show the percentage for each category where ABN AMRO has an investment banking relationship.

Long Term recommendations (as at 21 Oct 2009) Trading recommendations (as at 21 Oct 2009)

Global total (IB%) Asia Pacific total Global total (IB%) Asia Pacific total
(IB%) (IB%)
Buy 512 (3) 358 (1) Trading Buy 4 (0) 4 (0)
Add 0 (0) 0 (0)
Hold 378 (3) 228 (0)
Reduce 0 (0) 0 (0)
Sell 128 (0) 84 (0) Trading Sell 1 (0) 1 (0)
Total (IB%) 1018 (3) 670 (0) Total (IB%) 5 (0) 5 (0)
Source: ABN AMRO Source: ABN AMRO

Valuation and risks to target price

Agile Property Holdings (RIC: 3383.HK, Rec: Hold, CP: HK$10.44, TP: HK$9.69): Our 12-month target price is the sum of our valuations of the company's development properties
using a three-stage DCF method and its investment properties using end-2009F NAV. Upside risks to our target price include a cash windfall from further stake disposals. Downside risk
would be: 1) market weakness in Guangdong; 2) slower than expected volume in Hainan project; 3) cash shortage due to capital withdraw from the Huizhou Bailuhu project; 4) delays in
project launches.
C C Land Holdings (RIC: 1224.HK, Rec: Sell, CP: HK$4.51, TP: HK$3.45): Our target price is based on the sum of our DCF valuation of development properties and end-2009F NAV of
investment properties. Upside risks to our target rice are: 1) a sudden rebound in transaction volumes and ASP; 2) unexpected positive government incentives; and 3) improved market
sentiment, due to lack of cooling measures.
China Overseas (RIC: 0688.HK, Rec: Buy, CP: HK$17.96, TP: HK$21.32): Our target price is based on the sum of our three-stage DCF valuation of its development properties and end-
2009F NAV of its investment properties. Downside risks include tightening of the macro lending environment, further tightening of mortgage on second home purchases, and the inability of
the company to accumulate prime land site at reasonable cost.
China Resources Land (RIC: 1109.HK, Rec: Buy, CP: HK$19.22, TP: HK$25.45): Our target price is based on the sum of our three-stage DCF valuation of its development properties
and end-2009F NAV of its investment properties. Upside risks include better-than-expected launches in Shenzhen. Downside risks include 1) thin margin due to high land cost; 2) less
support from the parent due to a slowing economy; and 3) weak demand for high-end projects.
Country Garden Holdings (RIC: 2007.HK, Rec: Hold, CP: HK$3.21, TP: HK$3.16): Our target price is based on the sum of our three-stage DCF valuation of its development properties
and end-2009F NAV of its investment properties. Upside risks include strong ramp-up of sales contribution from its Shenyang, Chaohu and Inner Mongolia projects. Downside risks include
further deterioration in sales performance of projects in the south and further book losses on its financial derivatives.
Franshion Properties (RIC: 0817.HK, Rec: Buy, CP: HK$2.46, TP: HK$2.93): Our target price is based on the sum of our three-stage DCF valuation of its development properties and
end-2009F NAV of its investment properties. Downside risks are: 1) construction delays in Shanghai; 2) rental and occupancy deterioration in the investment property market; and 3)
unexpected cooling measures. Upside risks include faster and better selling prices at its Shanghai Huishan project and acquisition of prime sites.
Greentown China (RIC: 3900.HK, Rec: Hold, CP: HK$12.62, TP: HK$10.88): Our target price is based on the sum of our three-stage DCF valuation of its development properties and
end-2009F NAV of its investment properties. Upside risks include improvement of net gearing through stake disposals and a new available financial channel. Downside risks include
cooling measures introduced by the government and an inability to acquire a new financing channel.
Guangzhou R&F (RIC: 2777.HK, Rec: Hold, CP: HK$15.96, TP: HK$15.50): Our target price is based on the sum of our three-stage DCF valuation of the development properties and
end-2009F NAV of the investment properties. Upside risks include acquisitions of land for further development. Downside risks are inability to reduce net gearing, lack of buyers for the
company's investment properties, and a delay in bond issuance.
Hopson Development (RIC: 0754.HK, Rec: Sell, CP: HK$15.10, TP: HK$10.28): Our target price is based on the sum of our three-stage DCF valuation of the company's development
properties and NAV of its investment properties. Upside risks include stronger-than-expected sales performance in Beijing and Guangzhou and the ability to continue to expand landbank
cheaper than land cost. Another upside risk is the unexpected increase in GFA delivery.
KWG Property Holding (RIC: 1813.HK, Rec: Hold, CP: HK$5.89, TP: HK$4.59): Our target price is based on the sum of our valuation of the company's development properties using a
three-stage DCF method and its investment properties using end-2009F NAV. Upside risks include a faster-than-expected recovery of the Chengdu market. Downside risks include
prolonged market weakness in Guangdong and a drying up of liquidity due to foreign capital withdrawal.
Shanghai Forte Land (RIC: 2337.HK, Rec: Hold, CP: HK$2.48, TP: HK$2.21): Our target price is based on the sum of our three-stage DCF valuation of FORT's development properties
and end-2009F NAV of its investment properties. Downside risks include delayed corporate bond issuance, difficulty in rolling forward existing debt, and further property-market
deterioration. Upside risks are a faster-than-expected domestic bond listing and a faster-than-expected warming of the Wuhan and Chongqing markets.
Shimao Property (RIC: 0813.HK, Rec: Buy, CP: HK$15.20, TP: HK$17.11): We use three-stage DCF and NAV analyses to calculate our target price. Downside risks include financial
difficulties leading to project delays and disposals, damage to brand equity from aggressive price cuts, and an inability to grow landbank in prime locations due to competitors bidding up
the price. Another downside risk is that the company may be overly optimistic about the outlook for China's real estate market, thus engaging in over-expansion and buying landbank at an
unjustifiably high cost.
Shui On Land (RIC: 0272.HK, Rec: Hold, CP: HK$4.91, TP: HK$4.24): Our target price is based on the sum of our three-stage DCF valuation of development properties and end-2009F
NAV of investment properties. Downside risks include completion delays due to relocation issues and further deterioration of the investment property market. Upside risks include faster-
than-expected pick-up in the investment property market in Shanghai and stronger ASP increases in Chongqing and Wuhan.
Sino-Ocean Land (RIC: 3377.HK, Rec: Buy, CP: HK$8.22, TP: HK$7.69): Our TP is based on the sum of a DCF value of the company's development properties and end-2009F NAV of
its investment properties. Downside risks include further cooling measures in the property market, lower than expected transaction volume due to change of market sentiment, and inability
to expand landbank at reasonable cost.
SOHO China (RIC: 0410.HK, Rec: Hold, CP: HK$4.42, TP: HK$4.86): Our target price is based on the sum of our three-stage DCF valuation of SOHO's development properties and
end-2009F NAV of its investment properties. Downside risks include further deterioration in the Beijing market, failure to negotiate a favourable purchase price for its potential acquisitions
and inability to sell acquired projects at an appropriate profit. Upside risks include surprise land acquisition at cheap cost, or any bank expansion through other means of acquisition.

Property Radar China | Disclosures Appendix | 21 October 2009

Regulatory disclosures
Subject companies: 3383.HK, 1224.HK, 0688.HK, 1109.HK, 2007.HK, 0817.HK, 3900.HK, 2777.HK, 0754.HK, 1813.HK, 2337.HK, 0813.HK, 0272.HK, 3377.HK, 0410.HK
ABN AMRO beneficially own 1% or more of a class of common equity securities of this company: 2777.HK, X2777.SS

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____________________________________________________________________________________________________________________________________________________
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____________________________________________________________________________________________________________________________________________________
For a discussion of the valuation methodologies used to derive our price targets and the risks that could impede their achievement, please refer to our latest published research on those
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Property Radar China | Disclosures Appendix | 21 October 2009