Asia Pacific Equity Research 05 August 2013

Corrected Note (first published 04 August 2013) (See page 11 for details)

Overweight

Hongkong Land

HKLD.SI, HKL SP Price: $6.95

Diversifying earnings base, reiterate OW

Price Target: $8.30

The market reacted positively to Hongkong Land’s (“HKL”) solid 1H13 results (underlying earnings +63% Y/Y). We reiterate our positive view on the company given limited supply of Grade A office in Central and the increasing earnings contribution from Singapore and China residential projects.  Less reliance on financial sector over time: Financial, legal and accounting have been the key tenants mix of HKL’s Central office portfolio. At peak, the financial industry accounted for 57% of the Central portfolio in 1998. Over time, competition from newer buildings such as IFC and ICC has caused some financial tenants to move out, resulting in financial tenants now accounting for 36% in 1H13. But the lower reliance on financial industry has not caused HKL's Central office rent to come down. Average rent for the Central office portfolio has increased from US$8.52 psf (~HK$66.5 psf) in 2008 to HK$96.6 psf in 1H13.  NAV sensitivity: In view of slower economic growth expectation for Hong Kong next year, we have adjusted our Central office rental growth assumption from 10% to 5% but the higher than expected retail rental growth reported in 1H13 could compensate for the marginal decline in office NAV. Our base case Dec-14 NAV is a 25 bps increase in cap rate for both office and retail. Our recent marketing in Asia found that investors are concerned about potential cap rate expansion. If cap rate increases to pre-GFC level, i.e. 5.0% -5.5%, then our sensitivity analysis (Table 1) shows that Dec-14 NAV would fall to US$10.56US$11.13.  Increasing earnings contribution from residential: Other than positive rental reversion, contribution from Singapore and China residential development is a key earnings driver. Majority of the Singapore projects to be completed in 2013 and 2014 have been pre-sold. Our FY14E/15E earnings estimates are adjusted up by 4%/3% respectively to incorporate the updated completion schedule.

Singapore Hong Kong Property Amy Luk, CFA

AC

(852) 2800 8524 [email protected] Bloomberg JPMA LUK J.P. Morgan Securities (Asia Pacific) Limited

Joy Wang (65) 6882-2312 [email protected] J.P. Morgan Securities Singapore Private Limited Price Performance 8.5 7.5 $ 6.5 5.5 Aug-12

Nov-12

Feb-13

May-13

Aug-13

HKLD.SI share price ($) FTSTI (rebased)

Abs Rel

YTD -0.6% -3.3%

1m 0.7% -1.8%

3m -6.1% -1.7%

12m 12.6% 5.4%

 Remains a top pick: Our Jun-14 PT of US$8.3 is based on a 28% discount to Jun-14 NAV, which is long-term average discount. The stock is trading at an undemanding valuation of 40% discount to NAV and 0.62x current P/B.

Hongkong Land Holdings Ltd (Reuters: HKLD.SI, Bloomberg: HKL SP) $ in mn, year-end Dec FY11A FY12A FY13E FY14E Revenue ($ mn) 1,224 1,115 1,664 1,765 Net Profit ($ mn) 703 777 816 870 Core Profit ($ mn) 703 777 816 870 EPS ($) 0.30 0.33 0.35 0.37 Core EPS ($) 0.30 0.33 0.35 0.37 Core EPS growth (%) (10.3%) 9.4% 4.7% 6.6% DPS ($) 0.16 0.17 0.18 0.18 ROE 3.2% 3.1% 3.1% 3.3% P/E (Core) 22.9 21.0 20.0 18.8 P/BV (x) 0.7 0.6 0.6 0.6 BVPS ($) 10.60 11.11 11.17 11.29 RNAV/Share 11.52 11.47 Dividend Yield 2.3% 2.4% 2.6% 2.6%

FY15E 1,688 875 875 0.37 0.37 0.6% 0.18 3.3% 18.7 0.6 11.39 2.6%

Company Data Shares O/S (mn) Market Cap ($ mn) Market Cap ($ mn) Price ($) Date Of Price Free Float(%) 3M - Avg daily volume (mn) 3M - Avg daily value ($ mn) 3M - Avg daily value ($ mn) FTSTI Exchange Rate Fiscal Year End

2,353 16,351 16,351 6.95 02 Aug 13 49.8% 1.66 11.47 11.5 3254.13 1.00 Dec

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 11 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.jpmorganmarkets.com

Asia Pacific Equity Research 05 August 2013

Amy Luk, CFA (852) 2800 8524 [email protected]

Company Description

P&L/NAV sensitivity metrics

Founded in Hong Kong in 1889, Hongkong Land is a member of the Jardine Matheson Group and is one of Asia's leading property investment, management and development groups. In Hong Kong, the Group owns 5m sqft of prime commercial space in Central. It also develops prime office properties in Singapore and high-end residential properties in Singapore and other regions through its wholly-owned MCL Land. It branched out to China in 2000 and is engaged in residential development.

HK office rental assumption

NAV impact (%)

Impact of each 5%

2.7%

HK retail rental assumption Impact of each 5%

0.7%

HK office cap rate assumption Impact of each 50bps change

5.8%

HK retail cap rate assumption Impact of each 50bps change

1.4%

Source: J.P. Morgan estimates.

Price target and valuation analysis Our Jun-14 PT of US$8.3 is based on a 28% discount to Jun-14 NAV, which is a long-term average discount. Downside risks include a sharp drop in HK Central rentals, sudden cap rate expansion and delay in residential completions. NAV breakdown (FY13E) Sing pty 17%

Others 2% FY13E

FY14E

HK office rental chg

3-5%

5%

HK retail rental chg

5-10%

5%

HK office cap rate

4.50%

4.75%

HK retail cap rate

Key assumptions

HK office 52%

China pty 15% HK res 0%

5.25%

110

116

Avg retail spot rental (HK$/sf)

184

193

Source: J.P. Morgan estimates.

HK retail 14%

Source: J.P. Morgan estimates.

EPS: J.P. Morgan vs. consensus J. P. Morgan

Consensus

FY13E

0.35

0.37

FY14E

0.37

0.35

Source: Bloomberg, J.P. Morgan estimates.

2

5.00%

Avg office spot rental (HK$/sf) (lettable)

Asia Pacific Equity Research 05 August 2013

Amy Luk, CFA (852) 2800 8524 [email protected]

Change in Central tenants mix over time Being a key office district in Hong Kong, Central has been a cluster for industries like banks and financial services, legal and accounting. While these industries remain the key tenant base for the largest commercial landlord in Central, Hongkong Land (“HKL”), the mix has changed over time, with less reliance on the financial industry now. Less reliance on financial industry In 1995, financial industry accounted for 49% of the Central office portfolio and gradually grew to the peak of 57% in 1998. The completion of the two International Finance Centres in Central and International Commercial Centre in West Kowloon has created competition for Hongkong Land. Some HKL tenants have chosen to move to a newer building for cost savings. In 1H13, financial industry accounted for 36% of the Central office portfolio.

Figure 1: Hongkong Land – Central office tenants mix in 1995

Figure 2: Hongkong Land – Central office tenants mix in 1998

Others 14% Property 3% Trading 12%

Banks and other financial services 49%

Trading 3% Government 5% Accounting 5%

Government 4%

Others Property 9% 4%

Banks and other financial services 57%

Legal 17%

Accounting 4% Legal 14%

Source: Company.

Source: Company.

Figure 3: Hongkong Land – Central office tenants mix in 2008

Figure 4: Hongkong Land – Central office tenants mix in 1H13

Property 4% Trading 3%

Others 12%

Others 14% Trading Property 6% 2% Banks and other financial services 44%

Government 5% Accounting 9%

Government 3% Accounting 8%

Legal 23%

Source: Company.

Banks and other financial services 36%

Legal 31%

Source: Company.

3

Amy Luk, CFA (852) 2800 8524 [email protected]

Asia Pacific Equity Research 05 August 2013

The less reliance on financial industry has not caused HKL's Central office rent to come down. In fact, the average effective rent for the Central office portfolio has increased from US$8.52 psf (~HK$66.5 psf) in 2008 to US$11.64 psf (~HK$90.3 psf) in 2012 and HK$96.6 psf in 1H13. During this period, the proportion of financial industry tenants has dropped from 44% in 2008 to 36% in 1H13, whereas legal sector grew from 23% in 2008 to 31% in 1H13. We believe that given the limited supply in Central office in the next few years and signs of improvement in Central leasing market, when the larger scale demand comes back, Central office rental will gradually pick up and benefit HKL. Figure 5: Hongkong Land – Central office portfolio average effective rent 14

40%

US$psf per month

12

30%

10

20%

8

10%

6

0%

4

-10%

2 0

-20% 00

01

02

03

04

05

06

07

Central portfolio average office effective rent

08

09

10

11

12

Y/Y growth (RHS)

Source: Company, J.P. Morgan estimates.

Cap rate sensitivity analysis There has been increasing concerns from investors on cap rate expansion after the US long-term bond yield spike in May this year. In the analyst briefing, management mentioned that both bond yield and rental outlook will be taken into consideration when valuers determine the cap rate applied to value HKL portfolio. Cap rate applied for Central office has stayed flat in 1H13 at 4% but there was a decline of US$43.4m in fair value of Central investment properties, partly due to capex spent on the portfolio. Overall investment properties value stayed flat. In our base case scenario, we assume a 25 bps cap rate expansion in 2014 and a 5% increase in Central office rent. If cap rate increases to pre-GFC level, i.e. around 5% to 5.5%, then our sensitivity analysis shows that Dec-14 NAV will drop to US$10.56 to US$11.13. A more robust rental growth can offset the cap rate expansion effect.

4

Amy Luk, CFA (852) 2800 8524 [email protected]

Asia Pacific Equity Research 05 August 2013

Table 1: Dec-14 NAV sensitivity analysis in USD Dec-14 NAV (USD) Cap rate 4.50% 4.75% (base case) 5.00% 5.25% 5.50%

-5% 11.17 10.83 10.53 10.26 10.01

0% 11.50 11.15 10.83 10.55 10.28

Average Central office rent +5% (base case) 11.84 11.47 11.13 10.83 10.56

+10% 12.17 11.79 11.44 11.12 10.83

+15% 12.51 12.10 11.74 11.41 11.11

Source: J.P. Morgan estimates.

Figure 6: Hongkong Land - capitalisation rates for HK office and retail 7.5

%

7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1H13 office

retail

Source: Company. Note: Office for One & Two Exchange Square; Retail for Prince’s Buildings until 2009, Landmark Atrium from 2010

Increasing residential contribution The contribution from residential sales in Singapore and China will be a major earnings driver in addition to positive rental reversion. From 2013-2015, a number of Singapore projects scheduled for completion have been 100% pre-sold, implying a high earnings locked-in rate. For those having a low locked-in rate such as Palms@Sixth Avenue (19% pre-sold) and Hallmark Residences (5% pre-sold), they are luxury projects where it will be challenging to achieve a high pre-sold rate given the Singapore residential market condition. We have already factored in slow sales rate for these projects in our assumptions. HKL started its China residential development in joint venture projects and acquired its first wholly-owned development in China in 2010 in Chongqing. Currently HKL has two wholly-owned residential projects in China, namely Yorkville South and Yorkville North, both located in Chongqing. The contracted sales progress of the two projects shows that the company has gained experience from the JV projects and developed execution ability in China residential development.

5

Asia Pacific Equity Research 05 August 2013

Amy Luk, CFA (852) 2800 8524 [email protected]

Table 2: Summary of Singapore projects Project The Estuary Este Villa Terrasse Uber 388 Palms@Sixth Avenue Hallmark Residences Ripple Bay J Gateway Jurong West Total

Units 608 121 414 95 32 75 679 738 672 3,434

GFA ('000 sf) 609 329 476 91 109 102 612 524 674 3,526

Estimated Completion Date 1H13 2H13 2014 2014 2014 2014 2015 2016 2017

Pre-Sold 100% 100% 100% 87% 19% 5% 100% 100% n/a

Source: Company, J.P. Morgan estimates.

Table 3: Wholly-owned residential projects in China Project Yorkville South - Phase 1 - Phase 2 Yorkville North

Units in Phase

Units launched for sale

Units Pre-sold (as at 30 Jun 2013)

HKL Share GFA Sold (sqm)

Completion Date

3,324 1,658 2,461

323 527 334

89% 78% 70%

65,200 55,200 25,500

2013 2014 2014/2015

Source: Company.

Figure 7: China contracted sales 400

US$m

350 300 250 200 150 100 50 0 1H11 Source: Company.

6

2H11

1H12

2H12

1H13

Asia Pacific Equity Research 05 August 2013

Amy Luk, CFA (852) 2800 8524 [email protected]

Change in earnings estimates We are changing our earnings estimates to incorporate the updated completion schedule for residential projects. Our FY14E/15E earnings are adjusted up by 4%/3% respectively. Our Dec-13 NAV and Dec-14 NAV are revised up by 1% and down 2% respectively to factor in change in rental forecasts.

Table 4: Summary of change in earnings estimates. Revenue Old New % change Core Net profit Old New % change Core EPS Old New % change NAV Old New % change

FY13E

FY14E

FY15E

1,641 1,664 1%

1,619 1,765 9%

1,609 1,688 5%

816 816 0%

836 870 4%

853 875 3%

0.35 0.35 0% Dec-13 11.41 11.52 1%

0.36 0.37 4% Dec-14 11.65 11.47 -2%

0.36 0.37 3%

Source: J.P. Morgan estimates.

Figure 8: Hongkong Land – current NAV chart

Figure 9: Hongkong Land – P/BV band chart

30.0%

12

USD

1.00x

20.0% 10.0%

+2 s.d.

10

+ 1 s.d.

8

0.80x

0.0% -10.0%

0.60x

-20.0%

6

-30.0% -40.0%

-1 s.d.

Average = -28.1%

-60.0%

0.40x

4

-50.0%

-2 s.d.

2

-70.0% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 NAV (Discount/Premium)

Source: Bloomberg, company data, J.P. Morgan estimates.

Mean

0 Jan-89

Jan-92

Jan-95

Jan-98

Jan-01

Jan-04

Jan-07

Jan-10

Jan-13

Source: Bloomberg, company data, J.P. Morgan estimates.

7

Asia Pacific Equity Research 05 August 2013

Amy Luk, CFA (852) 2800 8524 [email protected]

Table 5: Hongkong Land - NAV breakdown Project

Type

Hong Kong property development Hong Kong property investment Central office Central retail Mandarin Landmark HK investment properties total HK properties total

Office Retail Hotel

China property development Chongqing Shenyang Chengdu China pty dev total

Lux Res Lux Res Lux Res

China Investment properties China properties total Macau property One Central One Central One Central Macau property total Vietnam Indonesia Singapore properties Residential property Commercial property

Lux Res Retail Hotel

Dec-13 HK$m

US$m

% of GAV

US$/sh

Dec-14 HK$m

US$m

% of GAV

US$/sh

556

72

0.2%

0.03

556

72

0.2%

0.03

121,326 32,623 1,001 154,949

15,642 4,206 129 19,978 20,050

52.8% 14.2% 0.4% 67.5%

6.70 1.80 0.06 8.56 8.59

120,687 32,601 1,051 154,339

15,560 4,203 136 19,899 19,970

52.7% 14.2% 0.5% 67.4%

6.67 1.80 0.06 8.53 8.56

12,251 815 3,747 16,813

1,999 133 611 2,743

5.3% 0.4% 1.6% 7.3%

0.86 0.06 0.26 1.18

12,251 815 3,747 16,813

1,999 133 611 2,743

5.4% 0.4% 1.6% 7.3%

0.86 0.06 0.26 1.18

13,574

1,750 4,493

5.9%

0.75 1.93

13,574

1,750 4,493

5.9%

0.75 1.93

0 1,756 488

0 226 63 289

0.0% 0.8% 0.2%

0.00 0.10 0.03 0.12

0 1,756 488

0 226 63 289

0.0% 0.8% 0.2%

0.00 0.10 0.03 0.12

298 1,570

38 202

0.1% 0.7%

0.02 0.09

298 1,570

38 202

0.1% 0.7%

0.02 0.09

13,398 25,788 39,186

1,727 3,325 5,052 5,293

5.8% 11.2% 17.1%

0.74

13,398 25,531 38,929

1,727 3,292 5,019 5,260

5.9% 11.2% 17.0%

0.74 1.41 2.15 2.25

513

66 66 30,191 -3,316 26,875

0.2%

0.03 0.03 12.94 -1.42 11.52

513

66 66 30,078 -3,316 26,762

0.2%

0.03 0.03 12.89 -1.42 11.47

Overseas property total Others Investments Longfor Gross asset value Net Debt Net Asset Value Source: Company data, J.P. Morgan estimates.

8

229,703 -25,720 203,983

100.0%

2.16 2.27

228,837 -25,720 203,117

100%

Asia Pacific Equity Research 05 August 2013

Amy Luk, CFA (852) 2800 8524 [email protected]

Hongkong Land: Summary of Financials Income Statement $ in millions, year end Dec Revenues % change Y/Y EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Core net profit % change Y/Y Shares outstanding EPS (reported) ($) % change Y/Y Core EPS ($) % change Y/Y Balance sheet $ in millions, year end Dec Cash and cash equivalents Accounts receivable Inventories Others Current assets

FY12 1,115 (8.9%) 800 (3.8%) 71.8% (61) 905 7.6% (124) 13.7% 777 10.5% 777 10.5% 2,353 0.33 9.4% 0.33 9.4%

FY13E 1,664 49.3% 775 (3.2%) 46.6% (73) 932 3.0% (112) 12.1% 816 5.0% 816 5.0% 2,353 0.35 4.7% 0.35 4.7%

FY14E 1,765 6.0% 901 16.3% 51.1% (92) 1,004 7.6% (130) 12.9% 870 6.6% 870 6.6% 2,353 0.37 6.6% 0.37 6.6%

FY15E 1,688 (4.3%) 872 (3.3%) 51.6% (107) 1,001 (0.2%) (122) 12.2% 875 0.6% 875 0.6% 2,353 0.37 0.6% 0.37 0.6%

FY12 982 351 2,513 7 3,854

FY13E 615 280 2,262 7 3,164

FY14E 463 300 2,200 7 2,970

FY15E 643 300 2,000 7 2,950

LT investments Net fixed assets 23,494 24,476 Total Assets 31,785 32,217 Liabilities ST loans 365 850 Payables 1,143 1,234 Others 136 140 Total current liabilities 1,643 2,224 Long-term debt 3,891 3,604 Other liabilities 66 66 Total Liabilities 5,601 5,895 Shareholder's equity 26,148 26,286 BVPS 11.11 11.17 Source: Company reports and J.P. Morgan estimates.

25,092 32,639 607 1,333 144 2,083 3,898 66 6,047 26,555 11.29

Cash flow statement $ in millions, year end Dec EBIT Depr. & amortization Change in working capital Others Cash flow from operations

FY12 800 2 (454) 300

FY13E 775 2 414 1,021

FY14E 901 2 141 838

FY15E 872 2 307 966

Capex Disposal/(purchase) Net Interest Free cash flow

(555) (2) (34) (203)

(982) 0 (73) 103

(616) 0 (92) 301

(483) 0 (107) 577

Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Beginning cash Ending cash DPS ($)

0 936 0 (375) 967 981 0.17

0 200 0 (423) 981 614 0.18

0 50 0 (423) 614 462 0.18

0 120 0 (423) 462 642 0.18

FY12 71.8% 69.7% -

FY13E 46.6% 49.0% -

FY14E 51.1% 49.3% -

FY15E 51.6% 51.8% -

(9.8%) (8.9%) 10.5% 9.4% 13.2 11.1% 12.5% 0.0 1.2 3.1% 2.4%

48.8% 49.3% 5.0% 4.7% 10.7 12.7% 14.6% 0.1 1.2 3.1% 2.2%

6.0% 6.0% 6.6% 6.6% 9.9 13.2% 15.2% 0.1 1.2 3.3% 2.5%

(4.3%) (4.3%) 0.6% 0.6% 8.2 12.9% 14.8% 0.1 1.2 3.3% 2.4%

Ratio Analysis %, year end Dec EBIT margin Net margin SG&A/Sales

Sales per share growth - Sales growth 25,575 Net profit growth 33,102 EPS growth Interest coverage (x) 485 Net debt to total capital 1,439 Net debt to equity 148 Sales/assets 2,073 Assets/equity 4,139 ROE 66 ROCE 6,278 26,787 11.39

9

Asia Pacific Equity Research 05 August 2013

Amy Luk, CFA (852) 2800 8524 [email protected]

JPM Q-Profile Hongkong Land Holdings Ltd. (HONG KONG / Financials) As Of: 02-Aug-2013

[email protected]

Local Share Price

Current:

6.77

9.00

12 Mth Forward EPS

Current:

0.36

0.50

8.00

0.40

7.00 6.00

0.30

5.00 0.20

4.00 3.00

0.10

2.00

0.00

Earnings Yield (& local bond Yield) 18%

12Mth fwd EY

5%

Implied Value Of Growth*

Current:

Jan/13

Aug/13

Jun/12

Apr/11

Nov/11

Sep/10

Jul/09

Feb/10

Dec/08

Oct/07

May/08

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

Oct/00

May/01

Mar/00

Jan/99

-0.10 Aug/99

Jan/13

Current:

Hong Kong BY

Aug/13

Jun/12

Apr/11

Nov/11

Sep/10

Jul/09

Feb/10

Dec/08

Oct/07

May/08

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

Oct/00

May/01

Mar/00

Jan/99

Aug/99

Jun/98

0.00

Jun/98

1.00

16.84%

1.00

Proxy

16%

0.80

14%

0.60

12%

0.40

10%

0.20

8%

0.00

6%

-0.20

4%

-0.40

2%

-0.60

PE (1Yr Forward)

Current:

19.0x

10.0x

35.0x

8.0x

Current: PBV hist

Aug/13

Jan/13

Jun/12

Apr/11

Nov/11

Sep/10

Jul/09

Feb/10

Dec/08

Oct/07

May/08

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

Oct/00

May/01

Mar/00

Jan/99

Price/Book Value

40.0x

30.0x

Aug/99

-0.80 Jun/98

Aug/13

Jan/13

Jun/12

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Nov/04

Apr/04

Sep/03

Feb/03

Jul/02

Dec/01

May/01

Oct/00

Mar/00

Aug/99

Jan/99

Jun/98

0%

0.6x

PBV Forward

6.0x

25.0x

4.0x

20.0x

ROE (Trailing)

Current:

5.65

16.0

40.00

14.0

Current:

Aug/13

Jan/13

Jun/12

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

Oct/00

May/01

Mar/00

Dividend Yield (Trailing)

50.00 30.00

Aug/99

Jun/98

Aug/13

Jan/13

Jun/12

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Nov/04

Apr/04

Sep/03

Feb/03

Jul/02

Dec/01

May/01

Oct/00

-4.0x

Mar/00

0.0x Aug/99

-2.0x Jan/99

0.0x

5.0x Jun/98

10.0x

Jan/99

2.0x

15.0x

2.47

12.0

20.00

10.0

10.00 0.00

8.0

-10.00

6.0

-20.00

4.0

-30.00

2.0

-40.00

Jan/13

Aug/13

Jun/12

Apr/11

Nov/11

Sep/10

Jul/09

Feb/10

Dec/08

Oct/07

May/08

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

Oct/00

May/01

Mar/00

Aug/99

Jan/99

Aug/13

Jan/13

Jun/12

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Nov/04

Apr/04

Sep/03

Feb/03

Jul/02

Dec/01

May/01

Oct/00

Mar/00

Aug/99

Jan/99

Jun/98

Jun/98

0.0

-50.00

Summary Hongkong Land Holdings Ltd. HONG KONG Financials 12mth Forward PE P/BV (Trailing) Dividend Yield (Trailing) ROE (Trailing) Implied Value of Growth

15881.45 12.341056 SEDOL 6434915 Real Estate Management & Devel Latest Min Max 6.47 35.56 19.01x 0.23 9.13 0.61x 2.04 14.63 2.47 -38.30 39.46 5.65 -0.65 0.70 16.8%

Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs

10

Median 18.52 0.86 3.31 17.88 0.47

Average 19.84 1.73 4.07 13.42 0.40

2 S.D.+ 32.85 6.18 8.17 52.14 0.88

2 S.D. 6.84 -2.72 -0.03 -25.30 -0.09

% to Min -66% -62% -18% -777% -487%

As Of: Local Price: EPS: % to Max % to Med 87% -3% 1399% 41% 491% 34% 598% 216% 318% 177%

* Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)

2-Aug-13 6.77 0.36 % to Avg 4% 184% 64% 137% 137%

Asia Pacific Equity Research 05 August 2013

Amy Luk, CFA (852) 2800 8524 [email protected]

Editorial change to first bullet Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures



Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Hongkong Land within the past 12 months.

 

Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Hongkong Land.

Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Hongkong Land.



Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking Hongkong Land.



Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from Hongkong Land. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan– covered companies by visiting https://mm.jpmorgan.com/disclosures/company, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected].

Hongkong Land (HKLD.SI, HKL SP) Price Chart 18 N $3.2

OW $5.7

12

Price($)

N $4.8N $4.7

UW $4.6

OW $3.2

N $5.3

OW $5N $4.4 N $2.5 OW $2.35 OW $4.6 N $5.2

OW $8.32

OW $8.6

N $5.5 OW OW $8.8$8.2 UW $4.3 UW $5N $6.2OW $8.5 OW $8.3

6

0 Oct 06

Jul 07

Apr 08

Jan 09

Oct 09

Jul 10

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Mar 07, 2007.

Apr 11

Jan 12

Oct 12

Jul 13

Date

Rating Share Price ($)

Price Target ($)

07-Mar-07

N

4.48

4.80

08-Aug-07

N

4.10

4.70

07-Nov-07

OW

4.88

5.70

06-Mar-08

OW

4.42

5.00

01-Aug-08

N

4.13

4.40

17-Nov-08

N

2.37

2.50

06-Mar-09

OW

2.03

2.35

18-May-09 OW

2.63

3.20

26-May-09 N

3.34

3.20

06-Aug-09

3.96

4.60

01-Dec-09 N

4.90

5.20

07-Mar-10

N

4.91

5.30

01-Aug-10

N

5.35

5.50

21-Nov-10

OW

6.85

8.80

04-Mar-11

OW

6.84

8.20

06-Jun-11

OW

7.42

8.32

12-Sep-11

UW

5.63

4.60

07-Oct-11

UW

4.23

4.30

16-Feb-12

UW

5.71

5.00

27-Jul-12

N

5.94

6.20

17-Jan-13

OW

7.60

8.50

08-Mar-13

OW

7.55

8.60

22-Jul-13

OW

6.63

8.30

OW

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated

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Amy Luk, CFA (852) 2800 8524 [email protected]

Asia Pacific Equity Research 05 August 2013

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com. Coverage Universe: Luk, Amy Ka Ping: Champion REIT (2778.HK), Cheung Kong Holdings (0001.HK), Fortune Real Estate Investment Trust (FORT.SI), Great Eagle (0041.HK), Hang Lung Group (0010.HK), Hang Lung Properties (0101.HK), Henderson Land Development (0012.HK), Hongkong Land (HKLD.SI), Hysan Development Co (0014.HK), K Wah International Holdings (0173.HK), Kerry Properties (0683.HK), Link REIT (0823.HK), New World Development (0017.HK), Sino Land (0083.HK), Sun Hung Kai Properties (0016.HK), Swire Properties (1972.HK), The Wharf (Holdings) Limited (0004.HK) J.P. Morgan Equity Research Ratings Distribution, as of June 28, 2013 J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients*

Overweight (buy) 44% 56% 42% 76%

Neutral (hold) 44% 50% 50% 66%

Underweight (sell) 12% 40% 8% 55%

*Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email [email protected]. Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues. Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

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Amy Luk, CFA (852) 2800 8524 [email protected]

Asia Pacific Equity Research 05 August 2013

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Amy Luk, CFA (852) 2800 8524 [email protected]

Asia Pacific Equity Research 05 August 2013

JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise. "Other Disclosures" last revised May 4, 2013.

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