2 Asia Pacific Equity Research 02 September 2019 Cusson Leung, CFA (852) 2800-8526 Equity Ratings and Price Targets Mkt CapPriceRatingPrice Target CompanyTicker($ mn)CCYPriceCurPrevCurEnd Date Prev End Date CK Asset Holdings Ltd (1113)1113 HK25,067HKD53.25OWn/c68.80Dec-1979.00n/c Henderson Land Development (0012)12 HK22,522HKD36.50OWn/c46.00Dec-1956.40n/c Kerry Properties (0683)683 HK4,910HKD26.45NOW27.30Dec-1938.40n/c New World Development (0017)17 HK12,746HKD9.78OWn/c10.50Dec-1914.20n/c Sino Land (0083)83 HK9,731HKD11.20UWOW9.70Dec-1915.70n/c Sun Hung Kai Properties (0016)16 HK41,033HKD111.10NUW103.24Dec-19127.20n/c Wheelock and Company Limited (0020)20 HK11,893HKD45.55NOW44.70Dec-1962.70n/c The Wharf (Holdings) Limited (0004)4 HK6,665HKD17.16OWn/c21.50Dec-1930.90n/c Hang Lung Properties (0101)101 HK10,158HKD17.72OWn/c19.10Dec-1920.50n/c Hongkong LandHKL SP12,846USD5.46NUW5.10Dec-195.85n/c Hysan Development Co (0014)14 HK4,235HKD31.75UWOW28.20Dec-1949.20n/c Swire Properties (1972)1972 HK19,199HKD25.75UWN23.40Dec-1932.30n/c Wharf REIC (1997)1997 HK16,427HKD42.45UWN33.00Dec-1954.00n/c Champion REIT (2778)2778 HK3,943HKD5.28Nn/c5.10Dec-196.90n/c Fortune REIT (0778)778 HK2,218HKD9.00Nn/c9.70Dec-1910.50n/c Link REIT (0823)823 HK23,624HKD88.00OWn/c99.90Dec-19108.60n/c Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 30 Aug 19. 微信公众号 免费知识星球VIP知识星球 3 Asia Pacific Equity Research 02 September 2019 Cusson Leung, CFA (852) 2800-8526 Table of Contents Increasingly selective amid uncertainties.4 What are the uncertainties?.4 Methodology to quantify the downside to NAV.6 Combining the worst-case assumptions.9 A much more condensed OW list.10 Upside risks.12 Further downgrade risks.12 What to expect from the upcoming policy address?.13 CK Asset Holdings Ltd (1113) .15 Henderson Land Development (0012) .18 Kerry Properties (0683).21 New World Development (0017).24 Sino Land (0083).27 Sun Hung Kai Properties (0016).30 Wheelock and Company Limited (0020).33 The Wharf (Holdings) Limited (0004).35 Hang Lung Properties (0101).38 Hongkong Land.40 Hysan Development Co (0014).43 Swire Properties (1972).45 Wharf REIC (1997) .48 Champion REIT (2778) .51 Fortune REIT (0778).53 Link REIT (0823).55 4 Asia Pacific Equity Research 02 September 2019 Cusson Leung, CFA (852) 2800-8526 Increasingly selective amid uncertainties The Hang Seng Properties Index has corrected by 19% from its peak set in Apr 2019. This was a sharp correction in a short time span given the uncertainties lying ahead in the property market. Uncertainty implies the difficulty to quantify the actual downside risks when the market tends to err on the conservative side. While price drifts could be very sensitive to news flow, we believe most investors would start to map out a “worst case” scenario. Against this backdrop, we are stress-testing our assumptions to determine the worst- case impact to the Hong Kong property companies under our coverage. As a result of this exercise, we are consolidating our OW list to only 6 names: CKA, Henderson Land, NWD, Wharf, HLP and Link REIT. We see potential for further downside risks to stocks such as Hysan, Swire Prop, Wharf REIC and Sino Land. Figure 1: Historical steep declines of the HSP index Source: Bloomberg What are the uncertainties? Re-escalation of the China-US trade war We believe this has a bigger impact on the Hong Kong property market than the current social unrest in Hong Kong given the high correlation between the Hong Kong and China economies. The import and export trades as well as the transportation and storage se