Company China Shui On Land Limited 6 May 2016 -...

Deutsche Bank Markets Research

Asia China

HY Corporate Credit Real Estate

Company

Shui On Land Limited

Date 6 May 2016

High-quality asset company; initiate on SHUION PerpC17 with Buy

________________________________________________________________________________________________________________

Deutsche Bank AG/Hong Kong

DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 057/04/2016.

Karen Kwan, MBA

Research Analyst

(+852 ) 2203 5930

[email protected]

Initiate on Shui On Land with CreditBuy on SHUION PerpC17 and Hold on rest We like Shui On Land’s (SHUION, NR/NR/NR) mostly high-quality assets, proven track record of going through various property cycles and steady recurring income. Management has shown more determination in disposing commercial assets and targets to lower its net debt/total equity ratio to 50% by end-2017. Having said that, the company’s credit metrics are weak and valuations for the overall China property HY sector are not appealing. We believe Shui On Land should be able to tap the on-shore Panda bond market, and we expect that to happen in 2H16/early 2017. We initiate on SHUION PerpC17 with CreditBuy, and have CreditHold recommendations on the USD bonds SHUION'17, SHUION'18, SHUION'19C17, SHUION'20C17 and SHUION'17 CNH bonds. We like its 10.125% USD500mn perpetual callable Dec, 2017 (ask price 106.5, ask YTC 5.80%, ask YTM 12.31%) for essentially a short-dated bond of 1 year and 7 months given our expectations that the property company will call this bond and it provides good carry, in our view. We find Shui On PerpC17’s ask YTC more attractive than Greentown PerpC19’s ask YTC of 5.45% (which has a longer call date of Jan, 2019, about 13 months longer). We note that given limited supply of off-shore property HY issuance, there is some scarcity value to short-dated bonds. Key upside risks include: faster or cheaper refinancing via on-shore markets, disciplined landbanking in Shanghai and/or Wuhan, faster or better-priced disposals. Downside risks include slower-than-expected sales from Shanghai due to more severe tightening, inability to raise Panda bonds, and severe RMB depreciation.

Key credit considerations High-quality assets in core regions of Shanghai and key tier-2 cities Proven track record of going through various property cycles Well-established reputation in large-scale high-end and mid-high end

investment properties Steady recurring income Broad funding channels in the off-shore market Annual contract sales’ partial dependency on commercial asset sales No new landbanking (excluding relocation payments) for the past several

years and potential landbanking in Shanghai and Wuhan over the next few years

Recent improvements in en-bloc sales should help to gradually lower its high gearing, which had been largely a result of a historical heavy investment property portfolio

Projects with relocations could face delays/ and or changes on progress depending on local government

Weak credit metrics

Gradually de-leveraging high-quality asset holder We recognize that Shui On’s credit metrics are on the weak side, but we like the fact that it is gradually de-leveraging and gross margins would improve in 2016-2017 from last year’s levels. The company targets to lower total debt as well as expects its average costs of borrowing to drop by about 1ppt in 2016 from 2015’s 6.2%. At current levels, we believe that its 10.125% PerpC17 still offers good carry.

6 May 2016

HY Corporate Credit,Real Estate


Page 2 Deutsche Bank AG/Hong Kong

The Basics: background and landbank

Company background and management

Shui On Land is a developer with a focus on development and operation of large-scale mixed-used complex in city-core as well as high- to mid-high end residential projects in five cities in China. The company was founded in 2004 as the flagship of the Shui On Group, a Hong Kong-based private group founded in 1971 which is primarily engaged in real estate development and construction. Shui On Land got listed on the Hong Kong Stock Exchange in October, 2006. Its market cap reached HKD16.1bn (or USD2.1bn) as of 5 May, 2016. Mr. Lo Hong Sui, Vincent (aged 67) is the Chairman of Shui On Land, and CEO of the company from 2004 to March 2011. He resumed a more active role in the company management following the resignation of Mr Lee Chun Kong, the ex-CEO in January 2014. As at the end of February, 2016, Mr. Lo Hong Sui, Vincent is the largest shareholder with 57.1% stake in the company. Mr Douglas Sung became the CFO of Shui On Land since early January, 2016 and is a member of the Executive Committee. He has a deep understanding of the real estate sector as well as finance, with over 20 years of experience in Asia real estate, having worked in sell-side research as well as direct investment and fund management. Mr Frankie Wong is an Executive Director of the company and an adviser to the Chairman of Shui On Group. He is an experienced person who joined the Shui On Group in 1981 and worked at its sister company SOCAM Development (983 HK, non-rated) as well. We note that Chairman Lo’s daughter, Stephanie Lo, is Director – Product Development for China Xintiandi Limited, a wholly owned subsidiary of Shui On Land. She has a background in architecture and interior design.

Good landbank quality As of end-2015, Shui On’s total landbank was 9.4mn sq m (leasable and saleable landbank, excluding 2.4mn sq m of clubhouse, carparks and other facilities), of which 7.7mn sq m was attributable. Its landbank is relatively balanced in exposure to residential, office, and retail/hotel/serviced apartments by GFA (see Fig. 1). At end-2015, 29% of Shui On’s attributable landbank was in Shanghai by GFA, with the next highest geographical exposure at 22% in Chongqing. Its other geographical exposure consisted of 18% in Dalian, 17% in Foshan, and 14% in Wuhan. Subsequently, it had engaged in a transaction to sell some Foshan assets to Country Garden for over RMB1.7bn (at roughly RMB8k/sq m). On May 3, Shui On announced it sold two offices in Wuhan (A1 and A3) to CITIC China for an aggregate initial purchase price of RMB4.499bn. We still expect Shui On to sell some Foshan Lingnan Tiandi retail assets, and potentially some of Shanghai assets such as some office GFA from KIC later this year. These coupled with the announced disposals of Foshan assets to Country Garden and Wuhan transaction to CITIC China should enable Shui On to attain its target commercial sales of RMB10bn in 2016 smoothly, in our view. Looking into 2017, there are still commercial assets (such as office and retail from Chongqing and Wuhan and KIC office in Shanghai) available for disposal.

Figure 1: Shui On Land's attributable landbank breakdown as of end-2015*

Asset type % of attributable GFA

Residential 35%

Office 33%

Retail 27%

Hotel/Serviced Apts 5% *excluding carparks, clubhouse, and other facilities Source: Company data, Deutsche Bank

6 May 2016



Deutsche Bank AG/Hong Kong Page 3

Figure 2: Shui On Land's attributable landbank breakdown by location as of

end-2015*

Location % of attributable GFA

Shanghai 29%

Chongqing 22%

Dalian 18%

Foshan 17%

Wuhan 14% *excluding carparks, clubhouse, and other facilities Source: Company data, Deutsche Bank

Among the cities where Shui On operates, Dalian is the only one which still has abnormally high residential inventory levels at around 20 months at end-March, according to CREIS data (estimated by available for sale properties/average monthly sales of the latest 3 months). While we are concerned about Dalian’s weak supply-demand dynamics, we feel comfortable about the other four cities where Shui On’s projects are located. Furthermore, we estimate Dalian Tiandi to constitute only around 6% of Shui On’s total residential saleable resources amount in 2016.

Figure 3: Overall residential inventory months in Dalian

0

5

10

15

20

25

30

35

40

45

Feb

-10

May

-10

Au

g-1

0

No

v-1

0

Feb

-11

May

-11

Au

g-1

1

No

v-1

1

Feb

-12

May

-12

Au

g-1

2

No

v-1

2

Feb

-13

May

-13

Aug-1

3

No

v-1

3

Feb

-14

May

-14

Aug-1

4

No

v-1

4

Feb

-15

May

-15

Aug-1

5

No

v-1

5

Feb

-16

Inventory

Note: The number of inventory months is calculated by monthly ending inventory divided by average of monthly sales of last 3 months Source: Soufun, CREIS, Deutsche Bank

Contract sales and operating cashflow outlook for 2016

2016 contract sales: progress thus far is good Shui On’s 2016 contract sales target of RMB24bn (of which residential/commercial split is expected to be RMB14bn/10bn) looks manageable to us. We estimate over 70% of its FY2016 residential saleable resources would come from Shanghai, including from The Gallery (Lot 2) of Rui Hong Xin Cheng (“RHXC”). Already, it achieved RMB3.6bn of sales from the Upper (Lot 9) at RHXC earlier this year (Feb ASP was RMB80k/sq m whereas in Oct, 2015, the ASP was about RMB71k/sq m). Potentially, Lot 2 has 103,700sq m of available for sale GFA for launch from 2Q16 to 2017, with potential saleable resources of RMB9.3-10.4bn to if we assume an ASP of RMB90-100k/sq m. By end-March, Shui On already achieved RMB5.8bn of residential contract sales (locking in 41% of the residential full year contract sales target of RMB14bn) and additionally, there was RMB1.6bn of unsubscribed property sales. Historically, Shui On’s asset turnover had been slow but showed good improvement in 2015 and it is on the right track so far this year as well.

6 May 2016




Shanghai tightening might affect sales pace of projects there; having said that, Shui On’s projects are mostly well-located and hence we are not overly worried about it. We also note that most of Shui On’s landbank is vintage -- that was acquired many years ago; hence, its overall GPM should continue to be above the China property sector average. The company guides GPM of over 30% over the next few years, which we agree that it should be able to achieve. That would translate to a higher YoY GPM in 2016 booking vs. 2015’s 26.1%. This would also be helped by a higher portion of revenue booking from Shanghai that we expect in 2016 vs. 2015.

Figure 4: Shui On’s contract sales trend since 2011

5.9 5.6

9.9

5.58.3

14.04.8

0.2

6.7

4.2

13.2

10.0

114%

-46%

190%

-41%

121%

12%

-100%

-50%

0%

50%

100%

150%

200%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2011 2012 2013 2014 2015 2016 Target

YoY growthContracted sales

(RMB bn)

Residential (LHS) Commercial (LHS) YoY change in total contracted sales (RHS)

Source: Company data, Deutsche Bank

Expect mild rental income growth: We expect Shui On to be able to achieve a single digit YoY growth in rental income in 2016 vs. 2015’s RMB1.54bn, despite disposal of 1, 2, and 3 Corporate Avenues. This is mainly because there will be new GFA to be completed this year and also we see further ramp-up of the HUB in Shanghai.

Figure 5: Shanghai’s The Hub model Figure 6: The Hub complex at night

Picture taken in Oct, 2015 Source: Deutsche Bank


6 May 2016




Figure 7: Inside The Hub shopping mall Figure 8: Model of Shanghai’s Rui Hong Xin Cheng



Figure 9: Exterior of Shanghai’s Rui Hong Xin Cheng Figure 10: A showflat of Rui Hong Xin Cheng



Leveraging on ample liquidity: We believe one of the reasons contributing to Shui On’s success in disposing some en-bloc commercial property has been the ample liquidity environment in HK and China. There is also a variety of third parties purchasing commercial assets from Shui On -- including Link REIT, Country Garden, and CITIC China.

Expect a positive net operating cashflow for 2016: We expect a positive net operating cashflow this year. Figure 11 captures the company guided major operating cashflow items. Shui On expects its 2016 new start GFA to be down slightly YoY from 2015’s ~0.5mn sq m. However, the geographical mix of the new starts would change. While management indicates possibilities of acquiring new projects in Shanghai and Wuhan, we do not think the size of each project would be as big as the typical projects before, after learning from its experience.

6 May 2016




Figure 11: Shui On’s guided 2016 major operating cashflow items

(in RMB bn)

Cash carried forward from previous year 5.2

Cash collected from residential (same yr) 11.2

Cash collected from commercial (same yr) 7

Rental income 1.5

Other income 0.5

Total operating cash inflow 25.4

Outflows

Relocation and Foshan land premium -3

Construction costs -6

SG&A -2.5

Interests -3.5

Taxes -2

Our estimated figure of other landbanking -4

Total operating cash outflow after accounting for above items

-21

Note: the other landbanking figure of RMB4bn is DB estimate, and not company guidance Source: Company data, Deutsche Bank

Debt breakdown and refinancing potential

On-shore financing: Shui On Land has not yet tapped the on-shore bond market (be it regular corporate bonds or Panda bonds), but we believe it would be able to issue Panda bonds on-shore using its off-shore list co., likely to be in 2H16/early 2017. There is no filing on the Shanghai Exchange yet, so we can infer that Shui On has not applied for on-shore Panda bonds yet. When we visited the Bond division of the Shanghai Stock Exchange in January, the Exchange indicated that there is no specific list of requirements for issuers of Panda bonds as this market is still in a trial status. Hence, compared to some other bond markets, the Panda bond approval process and timing seem more opaque to us. However, to reference some other China developers that we currently cover, we estimate the rough size that Shui On might be able to issue on-shore. We reckon that YTD, developers have only tapped the private on-shore Panda bond market, though a few peers like Shimao and Country Garden indicated they would like to be able to tap the public on-shore Panda bond market when that becomes available. Let us take Agile as an example. Agile had previously already applied for RMB15bn quota of on-shore Panda bonds before its FY2015 results announcement and we note that Agile’s (list co.) net assets of as June-2015 was RMB41.58bn (and some industry contacts indicated that one should subtract the net assets of the on-shore entities that have issued corporate bonds, which in Agile’s case are not big); and taking 40% of that would translate to RMB16.6bn if we ignore the on-shore entities. That gets us close to the figure of RMB15bn of on-shore Panda bonds quota for which Agile had applied. Although there is no written explicit cap on private Panda bond issuance size, if we make an assumption and take 40% of Shui On Land’s net assets at the list co. level (RMB46.1bn) at end-2015, that would translate to RMB18.4bn. As a first-time on-shore bond issuer (Shui On has not issued the normal domestic corporate bonds), we take a 20-25% haircut on size, that would translate to a potential tapping of RMB13.8-14.8bn of on-shore Panda bonds for Shui On, per our estimate. Again, we note there are no official written rules on the limit of size of issuance for Panda bonds. There is only a maximum of 40% of net assets for issuance of domestic public corporate bonds.

6 May 2016




Aims to lower foreign currency debt exposure and costs of borrowing Shui On’s exposure to foreign currency debt should also drop to around 40% or lower at end-2016 from end-2015’s 46% out of total debt, due to the release of RMB4-5bn of foreign currency debt related to Corporate Avenue in Shanghai. Furthermore, management targets to lower total debt as well as expects its average costs of borrowing to drop by about 1ppt in 2016 from 2015’s 6.2%.

Figure 12: Panda bonds issuance by China property developers since 2015

Company Coupon (%) Issue date Maturity Original Maturity (Yrs)

Amt issued (RMBmn)

Country Garden 4.75 02-Mar-16 02-Mar-21 3+2 4,000

Country Garden 4.99 30-Dec-15 30-Dec-20 3+2 1,000

Powerlong 6.80 28-Dec-15 28-Dec-19 2+2 200

Powerlong 7.30 28-Dec-15 28-Dec-20 3+2 300

Shimao 4.80 18-Jan-16 18-Jan-21 5 4,000

Sunac 5.20 21-Jan-16 21-Jan-20 4 1,500 Note: Sunac’s IR mentioned at its results briefing that the company plans to tap Panda bonds in 2016; according to Bloomberg, Sunac tapped Panda Bonds in Jan, raising 4-year bonds of RMB1.5bn at 5.20%. Source: Company, Deutsche Bank, Bloomberg Finance LP

Figure 13: Shui On’s debt breakdown by currency at end-

2015

Figure 14: Debt breakdown by currency (incl. perpetual)

at end-2015

RMB

54%USD

34%

HKD

12%

RMB

49%

USD

40%

HKD

11%

Note: the above does not include perpetual capital securities and derivatives Source: Company data, Deutsche Bank

Note: assuming USD225mn of convertible perpetual capital securities and USD500mn of perpetual capital securities as 100% debt The above does not include derivatives Source: Company data, Deutsche Bank

The company does have high refinancing needs in 2017 in the off-shore bond market, with RMB notes of RMB2.5bn due in Feb 2017 and USD500mn senior notes due in Nov 2017. Its USD500m perps will be callable in Dec 2017, and a total of USD752.5mn of senior notes will be callable in 1H17. We expect the company to fund the majority of these refinancing needs with on-shore Panda bonds as well as internally generated cash, such as disposals of commercial assets. From a credit perspective, while it is credit positive to recuperate cash and realize the asset value monetization, we also feel that it has been selling some of its high-quality commercial properties in prime locations of Shanghai, which would be difficult to replace in the future. But the company does need to increase its asset churn and de-leverage, so that should be the priority, as it is.

6 May 2016




Figure 15: Shui On’s debt maturity breakdown

5.88.9

4.1

1.42.7

0.31.46.0 4.9

11.6

0.9

12.8 12.4

21.9

0

5

10

15

20

25

0

5

10

15

20

25

2016 2017 2018-2020 2020 & after

RMB bn

Senior notes HKD bank borrowings

USD bank borrowings RMB bank and other borrowings

Note: the above does not include perpetual capital securities and derivatives Source: Company data, Deutsche Bank

Results recap for 2015 Shui On Land delivered a mixed set results for 2015. Its revenue was down 37% to RMB6.5bn mainly due to sharp decline of 48% in booked property sales ASP with less contribution from Shanghai. As a result, gross margin dropped notably by 7.5ppt to 26.1% in 2015 from 33.6% in 2014. On the other hand, core earnings grew robustly by 438% YoY to RMB2.4bn thanks to divestment of 1 & 2 Corporate Avenue in Shanghai. Accounting for a disposal gain of investment properties of RMB3.2bn, our calculated EBITDA was up 63% YoY to RMB3.9bn in 2015.

Credit metrics Shui On Land recorded some improvements in its credit metrics in 2015 thanks to the company’s efforts to accelerate asset turnover and deleverage. Adjusted EBITDA/interest coverage improved to 1.1x at YE15 from 0.7x at YE14 and 0.3x at end-Jun 15, while total debt/EBITDA dropped to 12.5x in 2015 from 20.3x in 2014. It has reduced exposure to (convertible) perpetual capital securities. As a result, adjusted net gearing ratio (assuming hybrids as 50% debt and 50% equity) improved to 90.8% at YE15 from 92.5% at YE14 and 102.8% as of June, 2015. While we recognize it is still relatively high vs some peers, we believe the company has moved in the right direction and lowered its average cost of borrowing. We see more management determination in improving the company’s capital structure. Its liquidity position was weak at end-2015 with total cash of RMB10.6bn covering 83% of short-term debt. Management indicated at its results briefing that they will target to bring down the net debt/total equity ratio to around 50% by end-2017 and reduce exposure to foreign currency debt in 2016.

Valuations

Peer comparison and bond valuations Shui On Land is not rated by the off-shore credit rating agencies. We think it should have similar issue rating as compared to Yuzhou (issue rating: B1/B/ BB-) and GZ R&F (issue rating: B1/B/BB) in terms of credit quality. Both of the peers have better 2015 gross margins, stronger interest coverage and lower gross leverage than Shui On but Shui On has a higher percentage of recurring income/total revenue, better landbank quality than the two and lower net gearing than GZ R&F. In terms of geographical exposure and mix of commercial/residential assets and the ability to fetch premium in pricing of

6 May 2016




residential properties due to brand name, we view China Jinmao Holdings as a close comparable. However, due to the SOE background of Jinmao, bondholders would view it quite differently from Shui On, in our view. We also view Cifi and Yanlord as close peers in terms of landbank distribution which have high exposure to Shanghai and big tier-2 cities. Having said that, Cifi and Yanlord possess more diversified geographical distribution and stronger credit metrics than Shui On.

We initiate with CreditBuy on SHUION PerpC17 and CreditHold on the USD bonds SHUION'17, SHUION'18, SHUION'19C17, SHUION'20C17 and SHUION'17 CNH bonds. SHUION'20C17 trades flat to GZRFPR'20C17 in YTM while SHUION'19C17 trades ~20bp wider than YUZHOU'19C17 for a longer tenor of 0.4 year, which is fair, in our view. Besides, we slightly prefer SHUION'20C17 (mid price: 108.125, YTM: 7.38%, YTW: 6.16%; Z-sprd: 539bp) and SHUION'19C17 (mid price: 108.125, YTM: 6.67%, YTW: 6.14%; Z-sprd: 537bp) to SHUION'18 (mid price: 105.875, YTM: 5.59%, Z-sprd: 471bp) for a steep YTM curve. Key upside risks include: faster or cheaper refinancing via on-shore markets, disciplined landbanking in Shanghai and/or Wuhan, faster or better-priced disposals leading to more-than-expected de-leveraging. Downside risks include slower-than-expected sales from Shanghai due to more severe tightening, inability to raise Panda bonds, and severe RMB depreciation.

Perps valuations We view BJCAPT PerpC18 (ask Price: 106.9, YTC: 4.58%, G-sprd: 384bp), BJCAPT PerpC19 (ask Price: 105.9, YTC: 5.3%, G-sprd: 429bp), and GRNCH PerpC19 (ask Price: 108.9, YTC: 5.45%, G-sprd: 458bp) as close peers to SHUION PerpC17 (ask Price: 106.5, YTC: 5.79%, G-sprd: 513bp), all of which have strong step-up at next call date, though we acknowledge BJCAPT is SOE-backed and GRNCH’s largest shareholder is SOE CCCG, which are reflected in the two notches uplift in issuer ratings by Moody’s. However, Beijing Capital Land and Greentown showed higher Debt/EBITDA in its 2015 results. We think the SHUION PerpC17 looks attractive for a short duration of 1.6 years.

In Fig. 17, we compare the valuations of various China corporate perpetuals. We select USD senior notes issued by the same issuer or if not available, senior notes of peers with the same issue rating to compare valuation of perps to senior notes ratio. The maturity of the selected senior notes is close to the next callable date of the perps we analyze. We then compare the perps’ G-spread to next call date (or to step-up date) to the tenor-adjusted G-spread of senior notes peer to get the perps to senior ratio. In terms of valuation versus senior notes peer, SHUION'PerpC17 and GRNCH 9% Perp also look slightly more attractive compared to Beijing Capital Land’s. SHUION PerpC17’s ask G-spread to next call/ step-up date is 513bp, about 1.1x of adjusted G-spread of SHUION'17. At current levels, we believe that its 10.125% PerpC17 offers good carry.

6 May 2016




Figure 16: Summary of terms of selected perpetual bonds

A gi le Property Bei j ing Cap Land Bei j ing Cap Land

Ch ina

Communicat ions

Construct ion Greentown Shu i On Land

Bond ticker AGILE 8.25% 49s BJCAPT 8.375% 49s BJCAPT 7.125% 49s CHCOMU 3.5% 49s GRNCH 9% 49s SHUION 10.125% 49s

Issuer/Guarantor Rating Ba3/BB-/NR Ba2/NR/BB+ Ba2/NR/BB+ A3/NR/A- Ba3/BB/NR NR/NR/NR

Issue Rating NR/NR/NR NR/NR/NR NR/NR/NR A3/NR/NR NR/NR/NR NR/NR/NR

Format Reg S only Reg S only Reg S only Reg S only Reg S only Reg S only

Coupon 8.250% 8.375% 7.125% 3.500% 9.000% 10.125%

Issue Date 11-Jan-13 8-Apr-13 2-Dec-14 21-Apr-15 28-Jan-14 10-Dec-12

Amount outstanding ($mn) 700 400 450 1,100 500 500

Ranking Jr Subordinated Sr Unsecured Sr Unsecured Sr Unsecured Subordinated Sr Unsecured

1st Call Date 18-Jul-18 8-Apr-18 2-Dec-19 21-Apr-20 28-Jan-19 10-Dec-17

Subsequent call date On 18 Jul 2023 and

on 18 Jul 2028 only

Each coupon

payment after the

initial call date

Each coupon

payment after the

initial call date

Each coupon

payment after the

initial call date

Each coupon

payment after the

initial call date

Each coupon

payment after the

initial call date

Coupon reset details Fixed 8.25% coupon

till Jul 2018; then

resets at 5YR UST +

746.3bps till Jul 2023;

then resets at 5YR

UST + 746.3bp+25bp

till Jul 2033,

thereafter reset at

5YR UST + 746.3bp

+100bp

Fixed 8.375% coupon

till April 2018; then

resets at 5YR UST +

756.7bps+500bp till

April 2023, then

resets at 5yr UST

+1256.7bps

thereafter

Fixed 7.125% coupon

till Dec 2019; then

resets at 5YR UST +

553.2bps+500bp till

Dec 2024, then resets

at 5yr UST

+1053.2bps

thereafter

Fixed 3.5% coupon

till Apr 2020; then

resets at 5YR UST +

219.2bp + 500bps

thereafter

Fixed 9% coupon till

Jan 2019; then resets

at 5YR UST

+737.3bps+500bp

and every 5 years

thereafter.

Fixed 10.125%

coupon Dec 2017;

then resets at 5YR

UST + 948.7bps+

300bp thereafter

Coupon Deferrable/Cumulative Yes/Yes Yes/Yes Yes/Yes Yes/Yes Yes/Yes Yes/Yes

Dividend limitations Yes Yes Yes Yes Yes Yes

Redemption due to Change of

Control

Yes N/A Yes Yes Yes Yes

*Note that both Agile and Beijing Capital Land have been put on review for possible downgrade by Moody’s. China Communications Construction is on negative outlook by Moody’s. *Note that Beijing Capital Land’s parent Beijing Capital Group’s family corporate rating is Ba2, but issuer Central Plaza Development’s rating is Ba3 by Moody’s. Source: Company data, Deutsche Bank

Figure 17: Valuations of selected China property perpetuals vs senior notes

Priced to call Priced to first step-up

Bond

Size

(US$mn)

1st Call

Date

2nd Call

Date Step up Rank

Ask

Price YTC (%)

Cash

carry

Spread

(call) bp

Sen. spd

(call) bp

Perp/senior

ratio (call)

Spread

(st. up) bp

Sen. spd

(st. up) bp

Perp/senior

ratio (st. up) Rec.

Strong s tep-up at f i rs t cal l date

BJCAPT 8.375% 400 Apr-18 Oct-18 500bp in Apr'18 Sen 106.9 4.6 7.8% 384 367 1.05 384 367 1.05 Hold

BJCAPT 7.125% 450 Dec-19 Jun-20 500bp in Dec'19 Sen 105.9 5.3 6.7% 429 401 1.07 429 401 1.07 Hold

GRNCH 9% 500 Jan-19 Jul-19 500bp in Jan'19 Sub 108.9 5.4 8.3% 458 406 1.13 458 406 1.13 Hold

SHUION 10.125% 500 Dec-17 Jun-18 300bp in Dec'17 Sen 106.5 5.8 9.5% 513 463 1.11 513 463 1.11 Buy

Weak s tep-up at ~10Y mark

AGILE 8.25% 700 Jul-18 Jan-19 25bp in Jul'23 Sub 90.8 13.2 9.1% 1,243 548 2.27 909 648 1.40 Hold Source: Bloomberg Finance LP, Deutsche Bank

6 May 2016




Figure 18: RV charts of selected China perpetuals in ask yield to call

BJCAPT'PerpC18

BJCAPT'PerpC19GRNCH'PerpC19

AGILE'PerpC18

SHUION'PerpC17

CHCOMU'PerpC20

3.0

4.5

6.0

7.5

9.0

10.5

12.0

13.5

1.5 2.0 2.5 3.0 3.5 4.0 4.5

Ask YTC (%)

Years-to-next -cal l

*Agile is on this chart for comparison purposes but we do not believe Agile will call its perpetuals given step-up in spreads is low, while we do believe Shui On Land will call its perpetuals in Dec, 2017. Source: Bloomberg Finance LP, Deutsche Bank

Figure 19: Peer comparison of operational statistics for 2015

Company Shui On Land Cifi GZ R&F Yuzhou Yanlord China Jinmao

Stock Code 272.HK 884.HK 2777.HK 1628.HK YLLG.SP 817.HK

Issue ratings NR/NR/NR B1/B+/BB- B1/B/BB B1/B/BB- Ba3/BB-/NR Baa3/BBB-/BBB-

Reporting period FY15 FY15 FY15 FY15 FY15 FY15

Reporting currency (RMBmn) (RMBmn) (RMBmn) (RMBmn) (RMBmn) (HKDmn)

Market cap as of 28-Apr-16 (USDmn)

#NAME? #NAME?

Operating Statistics

Total land bank in GFA as of YE15 (mn sq m) 11.8 12.5 41.8 8.6 4.1 13.0

Number of cities as of YE15 6 15 29 11 9 15

Number of projects as of YE15 8 88 Over 70 54 36 54

2015 Contracted sales (RMB bn) 21.5 30.2 54.4 14.0 28.9 30.1

2015 Contracted GFA (mn sq m) 0.6 2.1 4.1 1.4 1.0 1.3

2015 Contracted ASP (RMB per sq m) 34,100 14,692 13,200 9,997 29,299 22,764

2015 recognized property sales (RMB bn) 4.4 17.0 40.7 10.2 16.1 16.3

Recognized GFA (mn sq m) 0.3 1.3 3.5 1.1 0.6 n.a.

Recognized ASP (RMB per sq m) 15,000 12,873 11,590 9,172 27,303 n.a. Note: China Jinmao's landbank excludes GFA for primary development of 20.6mn sq m Source: Company, Deutsche Bank

6 May 2016




Figure 20: Peer comparison of financial summary

Company MEDIAN Shui On Land CIFI GZ R&F Yuzhou Yanlord China Jinmao

Stock Code 272.HK 884.HK 2777.HK 1628.HK YLLG.SP 817.HK

Issue ratings NR/NR/NR B1/B+/BB- B1/B/BB B1/B/BB- Ba3/BB-/NR Baa3/BBB-/BBB-

Reporting period FY15 FY15 FY15 FY15 FY15 FY15 FY15

Reporting currency (RMBmn) (RMBmn) (RMBmn) (RMBmn) (RMBmn) (HKDmn)

Market cap as of 21-Apr-16 (USDmn)

#NAME? #NAME?

Income Statement

Revenue 6,472 18,231 44,291 10,376 16,581 22,110

Revenue from investment properties 1612 1184 3547 218 401 3749

Recurring income as a % of revenue 25% 6% 8% 3% 2% 17%

Gross profit 1,689 4,144 14,207 3,709 4,555 8,549

EBITDA ^ 3,863 3,184 11,354 3,167 3,501 6,416

EBIT 2,188 3,357 11,353 3,245 3,594 6,955

Gross interest -3,579 -1,774 -6,019 -1,299 -1,262 -2,757

Profit before tax 4,088 3,805 11,590 3,143 4,317 7,973

Attributable profit/(loss) to shareholders 788 2,095 5,616 1,657 1,469 3,789

Balance Sheet

Total cash 10,614 14,905 21,284 11,949 17,568 16,417

Total assets 117,180 67,452 183,733 52,846 79,897 158,900

Advanced proceeds from customers 5,025 10,396 18,408 7,221 n.a. n.a.

Short term debt 12,815 2,794 32,679 3,987 6,110 8,575

Net debt 37,653 9,050 61,154 8,134 965 32,561

Total debt 48,267 23,955 82,439 20,083 18,533 48,978

Total equity 46,118 15,283 49,217 10,241 30,534 58,903

KEY CREDIT METRICS

Profitability

Revenue growth 20.1% -36.9% 12.7% 27.6% 32.4% 41.3% -25.2%

EBITDA growth 22.8% 62.8% -5.0% 17.3% 29.3% 28.2% -30.9%

Gross margin 29.8% 26.1% 22.7% 32.1% 35.8% 27.5% 38.7%

EBITDA margin 27.3% 59.7% 17.5% 25.6% 30.5% 21.1% 29.0%

Net margin 12.4% 12.2% 11.5% 12.7% 16.0% 8.9% 17.1%

Return on equity (ROE) 12.2% 2.1% 18.2% 14.6% 18.6% 7.4% 9.8%

Selling expenses as a % of revenue 2.4% 3.5% 2.0% 2.0% 2.8% 2.1% 4.4%

Admin and other operating expenses as a % of revenue 5.0% 13.9% 3.3% 5.4% 2.9% 4.5% 7.0%

Interest and Debt Coverage

EBITDA interest coverage *^ 2.1x 1.1x 1.8x 1.9x 2.4x 2.8x 2.3x

Recurring income / Gross interest 0.5x 0.5x 0.7x 0.6x 0.3x 0.3x 1.4x

Debt / EBITDA *^ 7.4x 12.5x 7.5x 7.3x 6.3x 5.3x 7.6x

Net debt / EBITDA *^ 4.0x 9.7x 2.8x 5.4x 2.6x 0.3x 5.1x

Total debt / Total capital 56.1% 51.1% 61.1% 62.6% 66.2% 37.8% 45.4%

Total debt / Total assets 36.8% 41.2% 35.5% 44.9% 38.0% 23.2% 30.8%

Net debt / Equity 69.3% 81.6% 59.2% 124.3% 79.4% 3.2% 55.3%

Net debt / Equity ^^ 70.5% 90.8% 59.2% 144.0% 79.4% 3.2% 61.6%

Net debt / Equity ^^^ 73.9% 100.9% 59.2% 167.6% 79.4% 3.2% 68.4%

Liquidity and Debt Subordination

Total cash / Short-term debt 239.5% 82.8% 533.6% 65.1% 299.7% 287.5% 191.5%

Total cash / Total debt 46.5% 22.0% 62.2% 25.8% 59.5% 94.8% 33.5%

Total cash / Total assets 15.3% 9.1% 22.1% 11.6% 19.1% 22.0% 10.3%

Short-term debt / Total debt 23.2% 26.6% 11.7% 39.6% 19.9% 33.0% 17.5% Note: * Ratios are calculated based on trailing 12-month data; ^ EBITDA includes cash distribution from JVs and associates; ^^ 50% of hybrid is treated as debt and 50% as equity, ^^^ 100% of hybrid is treated as debt Source: Company, Deutsche Bank

6 May 2016




Figure 21: Key financial summary of Shui On Land

C ompany

Stock code

Reporting period FY13 FY14 FY15 1H15

Reporting currency (RMBm) (RMBm) (RMBm) (RMBm)

Income statement

Revenue 9,828 10,249 6,472 2,027

Gross profit 3,155 3,446 1,689 578

EBITDA ^ 2,083 2,373 3,863 155

Gross interest (3,103) (3,474) (3,579) (1,844)

Net income 2,125 1,778 788 1,195

C ash Flows Statement

FFO (Funds from operations) (1,565) (1,702) (3,566) n.a.

Changes in working capital 731 (7,972) (853) n.a.

Cash from operations 1,826 (6,771) (890) (2,278)

Balance Sheet

Total cash 10,180 12,430 10,614 7,126

Restricted cash embedded in total cash 4,802 5,762 7,270 4,823

Inventory (completed properties held for sale) 1,536 4,648 2,560 2,627

Total assets 98,602 108,323 117,180 112,947

Short term debt 6,315 11,687 12,815 9,030

Net debt (incl. restricted cash) 27,081 35,838 37,653 41,309

Total equity 36,155 37,811 36,645 38,827

Total debt 37,261 48,268 48,267 48,435

K EY C REDIT METRIC S

Revenue growth 103.9% 4.3% -36.9% -61.3%

EBITDA growth 61.1% 13.9% 62.8% -87.7%

Gross margin 32.1% 33.6% 26.1% 28.5%

EBITDA margin 21.2% 23.2% 59.7% 7.6%

EBITDA interest coverage *^ 0.7x 0.7x 1.1x 0.3x

Debt / EBITDA *^ 17.9x 20.3x 12.5x 38.1x

Debt / EBITDA ^^ 18.6x 21.6x 13.1x 41.0x

Debt / EBITDA ^^ 19.4x 22.8x 13.6x 43.9x

Net debt / EBITDA *^ 13.0x 15.1x 9.7x 32.5x

Net debt / EBITDA ^^ 13.7x 16.4x 10.3x 35.4x

Net debt / EBITDA ^^^ 14.5x 17.6x 10.9x 38.2x

Total debt / Total capital 46.9% 51.8% 51.1% 50.5%

Net debt / Equity (cash incl. restricted cash) 64.2% 79.8% 81.6% 87.2%

Net debt / Equity ^^ 70.5% 92.5% 90.8% 102.8%

Net debt / Equity ^^^ 77.2% 107.2% 100.9% 121.3%

Unrestricted cash / Short-term debt 141.7% 85.2% 49.4% 63.5%

Total cash / (ST debt + 6-month COGS) 105.5% 82.4% 69.8% 68.0%

Total cash / Short-term debt 161.2% 106.4% 82.8% 78.9%

Shui On Land (NR/NR/NR)

272.HK

Note: * Ratios are calculated based on trailing 12-month data; ^ EBITDA includes cash distribution from JVs and associates; ^^ 50% hybrid is treated as debt and 50% as equity; ^^^100% hybrid is treated as debt Note that we included derivative financial instruments on the liability section in our total debt figures; for instance, there were RMB275mn of derivatives financial instruments at end-2015. Source: Company, Deutsche Bank

6 May 2016




Figure 22: RV charts of China property BB issuance in terms of mid-YTW

CENCHI'18C16

CENCHI'20C17CENCHI'21C19

COGARD'19C17

COGARD'20C18COGARD'21C17

COGARD'23C18

GRNCH'18C16

GRNCH'20C18

GRNCH'19C17

LNGFOR'19C16

LNGFOR'23C18

ROADKG'17C16SHIMAO'20C17

SHIMAO'21C18SHIMAO'22C19

SOHOCH'22C17

YLLGSP'18C16

2.5

3.5

4.5

5.5

6.5

7.5

8.5

0 1 2 3 4 5

YTW (%)

Years-to- worst

China property BB bonds

CENCHI COGARD LNGFOR SHIMAO GRNCH

Log. (CENCHI) Log. (COGARD) Log. (LNGFOR) Log. (SHIMAO) Log. (GRNCH)

Source: Bloomberg Finance LP, Deutsche Bank

Figure 23: RV charts of China property BB issuance in terms of mid-YTM

CENCHI'18C16

CENCHI'20C17

CENCHI'21C19

COGARD'19C17

COGARD'20C18

COGARD'21C17

COGARD'23C18

GRNCH'18C16

GRNCH'20C18

GRNCH'19C17

LNGFOR'19C16 LNGFOR'23C18

ROADKG'17C16

SHIMAO'20C17

SHIMAO'21C18 SHIMAO'22C19

SOHOCH'22C17

YLLGSP'18C16

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

1 2 3 4 5 6 7 8

YTM (%)

Years-to- matur i ty

China property BB bonds

CENCHI COGARD LNGFOR SHIMAO GRNCH

Log. (CENCHI) Log. (COGARD) Log. (LNGFOR) Log. (SHIMAO) Log. (GRNCH) Source: Bloomberg Finance LP, Deutsche Bank

6 May 2016




Figure 24: RV charts of selected China property B and CCC issuance in terms of mid-YTW

AGILE'17

AGILE'19C17

AGILE'20C18

CAPG'18

CAPG'19C17

CHINSC'20C18

CIFIHG'19C17

CIFIHG'20C18

EVERRE'18C16

EVERRE'19

EVERRE'20C18

FANHAI'19C17

FANHAI'20C18

FUTLAN'17

FUTLAN'19C17

FTHDGR'17

FTHDGR'20C17

FTHDGR'19C17

FTHDGR'18

KWGPRO'17

KWGPRO'19C17

KWGPRO'19C17 new

KWGPRO'20C17

PWRLNG'18

LOGPH'17

LOGPH'19C17 GZRFPR'19C17

GZRFPR'20C17

SUNAC'19C17

SHUION'17

SHUION'18

SHUION'19C17SHUION'20C17

TPHL'19C17

TPHL'20C18

YUZHOU'19C17YUZHOU'19C17 new

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

YTW (%)

Years-to-worst

AGILE CAPG CIFIHG FANHAI EVERRE FUTLAN

FTHDGR KWGPRO LOGPH GZRFPR SUNAC SHUION

TPHL YUZHOU Log. (AGILE) Log. (CAPG) Log. (CIFIHG) Log. (FANHAI)

Log. (EVERRE) Log. (FUTLAN) Log. (FTHDGR) Log. (KWGPRO) Log. (LOGPH) Log. (GZRFPR)

Log. (SUNAC) Log. (SHUION) Log. (TPHL) Log. (YUZHOU)


6 May 2016




Figure 25: RV charts of selected China property B and CCC issuance in terms of mid-YTM

AGILE'17

AGILE'19C17

AGILE'20C18

CAPG'18

CAPG'19C17

CHINSC'20C18

CIFIHG'19C17

CIFIHG'20C18

EVERRE'18C16

EVERRE'19

EVERRE'20C18

FANHAI'19C17

FANHAI'20C18

FUTLAN'17

FUTLAN'19C17

FTHDGR'17

FTHDGR'20C17

FTHDGR'19C17

FTHDGR'18

KWGPRO'17

KWGPRO'19C17KWGPRO'19C17 new

KWGPRO'20C17PWRLNG'18

LOGPH'17

LOGPH'19C17

GZRFPR'19C17

GZRFPR'20C17

SUNAC'18C16

SUNAC'19C17

SHUION'17

SHUION'18

SHUION'19C17

SHUION'20C17

TPHL'19C17

TPHL'20C18

YUZHOU'18C16

YUZHOU'19C17 YUZHOU'19C17 new

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

YTM (%)

Years-to-maturity

AGILE CAPG CIFIHG EVERRE FUTLAN FTHDGR KWGPRO

LOGPH GZRFPR SUNAC SHUION TPHL YUZHOU FANHAI

Log. (AGILE) Log. (CAPG) Log. (CIFIHG) Log. (EVERRE) Log. (FUTLAN) Log. (FTHDGR) Log. (KWGPRO)

Log. (LOGPH) Log. (GZRFPR) Log. (SUNAC) Log. (SHUION) Log. (TPHL) Log. (YUZHOU) Log. (FANHAI)


The author of this report wishes to acknowledge the contribution made by Meili Mou, an employee of CRISIL Global Research & Analytics, a division of CRISIL Limited, a third-party provider of offshore research support services to Deutsche Bank.

6 May 2016




Appendix 1

Important Disclosures

Additional information available upon request

Disclosure checklist

Institution Disclosure

Shui On Land Ltd

SHUION 9.625% notes due 2019 14

SHUION 10.125% perpetual notes 14


Shui On Development Holding Ltd 6.875 20170226 14


SHUION 8.7% notes due 2017 14 *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr.

Important Disclosures Required by U.S. Regulators

Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See Important Disclosures Required by Non-US Regulators and Explanatory Notes.

14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year.

For disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Karen Kwan The authors of this report wish to acknowledge the contribution made by Mary Mou,an employee of Irevna, a third-party provider to Deutsche Bank of offshore research support services.

6 May 2016




Deutsche Bank debt rating key Bond rating dispersion and banking relationships

CreditBuy (“C-B”): The total return of the Reference Credit Instrument (bond or CDS) is expected to outperform the credit spread of bonds / CDS of other issuers operating in similar sectors or rating categories over the next six months.

CreditHold (“C-H”): The credit spread of the Reference Credit Instrument (bond or CDS) is expected to perform in line with the credit spread of bonds / CDS of other issuers operating in similar sectors or rating categories over the next six months.

CreditSell (“C-S”): The credit spread of the Reference Credit Instrument (bond or CDS) is expected to underperform the credit spread of bonds / CDS of other issuers operating in similar sectors or rating categories over the next six months.

CreditNoRec (“C-NR”): We have not assigned a recommendation to this issuer. Any references to valuation are based on an issuer’s credit rating.

Reference Credit Instrument (“RCI”): The Reference Credit Instrument for each issuer is selected by the analyst as the most appropriate valuation benchmark (whether bonds or Credit Default Swaps) and is detailed in this report. Recommendations on other credit instruments of an issuer may differ from the recommendation on the Reference Credit Instrument based on an assessment of value relative to the Reference Credit Instrument which might take into account other factors such as differing covenant language, coupon steps, liquidity and maturity. The Reference Credit Instrument is subject to change, at the discretion of the analyst.

DB Credit Opinion Definition : The DB Credit Opinion follows the same scale as S & P's credit ratings ranging from AAA for the Highest credit quality to C for the Weakest credit quality. It reflects our opinion on the creditworthiness of a company. We derive our Credit Opinion from fundamental credit analysis of the company, comparable analysis, benchmarking against rating agencies and qualitative judgement.

11 %

78 %

11 %43 %

29 %

47 %

0

50

100

150

200

250

300

350

400

450

Buy Hold Sell

Asia-Pacific Universe

Companies Covered Cos. w/ Banking Relationship

(a) Regulatory Disclosures

(b) 1.Important Additional Conflict Disclosures

Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

(c) 2.Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.

6 May 2016




(d) Additional Information

The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively

"Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sources

believed to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness.

If you use the services of Deutsche Bank in connection with a purchase or sale of a security that is discussed in this

report, or is included or discussed in another communication (oral or written) from a Deutsche Bank analyst, Deutsche

Bank may act as principal for its own account or as agent for another person.

Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for its own

account or with customers, in a manner inconsistent with the views taken in this research report. Others within

Deutsche Bank, including strategists, sales staff and other analysts, may take views that are inconsistent with those

taken in this research report. Deutsche Bank issues a variety of research products, including fundamental analysis,

equity-linked analysis, quantitative analysis and trade ideas. Recommendations contained in one type of communication

may differ from recommendations contained in others, whether as a result of differing time horizons, methodologies or

otherwise. Deutsche Bank and/or its affiliates may also be holding debt securities of the issuers it writes on.

Analysts are paid in part based on the profitability of Deutsche Bank AG and its affiliates, which includes investment

banking revenues.

Opinions, estimates and projections constitute the current judgment of the author as of the date of this report. They do

not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no

obligation to update, modify or amend this report or to otherwise notify a recipient thereof if any opinion, forecast or

estimate contained herein changes or subsequently becomes inaccurate. This report is provided for informational

purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any

particular trading strategy. Target prices are inherently imprecise and a product of the analyst’s judgment. The financial

instruments discussed in this report may not be suitable for all investors and investors must make their own informed

investment decisions. Prices and availability of financial instruments are subject to change without notice and

investment transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is

denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the

investment. Past performance is not necessarily indicative of future results. Unless otherwise indicated, prices are

current as of the end of the previous trading session, and are sourced from local exchanges via Reuters, Bloomberg and

other vendors. Data is sourced from Deutsche Bank, subject companies, and in some cases, other parties.

Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promise

to pay fixed or variable interest rates. For an investor who is long fixed rate instruments (thus receiving these cash

flows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thus cause a

loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, the higher will be the

loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among the most common adverse

macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, client segmentation, regulation

(including changes in assets holding limits for different types of investors), changes in tax policies, currency

convertibility (which may constrain currency conversion, repatriation of profits and/or the liquidation of positions), and

settlement issues related to local clearing houses are also important risk factors to be considered. The sensitivity of fixed

income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, to

FX depreciation, or to specified interest rates – these are common in emerging markets. It is important to note that the

index fixings may -- by construction -- lag or mis-measure the actual move in the underlying variables they are intended

to track. The choice of the proper fixing (or metric) is particularly important in swaps markets, where floating coupon

rates (i.e., coupons indexed to a typically short-dated interest rate reference index) are exchanged for fixed coupons. It is

also important to acknowledge that funding in a currency that differs from the currency in which coupons are

denominated carries FX risk. Naturally, options on swaps (swaptions) also bear the risks typical to options in addition to

the risks related to rates movements.

6 May 2016




Derivative transactions involve numerous risks including, among others, market, counterparty default and illiquidity risk.

The appropriateness or otherwise of these products for use by investors is dependent on the investors' own

circumstances including their tax position, their regulatory environment and the nature of their other assets and

liabilities, and as such, investors should take expert legal and financial advice before entering into any transaction similar

to or inspired by the contents of this publication. The risk of loss in futures trading and options, foreign or domestic, can

be substantial. As a result of the high degree of leverage obtainable in futures and options trading, losses may be

incurred that are greater than the amount of funds initially deposited. Trading in options involves risk and is not suitable

for all investors. Prior to buying or selling an option investors must review the "Characteristics and Risks of Standardized

Options”, at http://www.optionsclearing.com/about/publications/character-risks.jsp. If you are unable to access the

website please contact your Deutsche Bank representative for a copy of this important document.

Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i)

exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by

numerous market factors, including world and national economic, political and regulatory events, events in equity and

debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed

exchange controls which could affect the value of the currency. Investors in securities such as ADRs, whose values are

affected by the currency of an underlying security, effectively assume currency risk.

Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the

investor's home jurisdiction.

United States: Approved and/or distributed by Deutsche Bank Securities Incorporated, a member of FINRA, NFA and

SIPC. Analysts employed by non-US affiliates may not be associated persons of Deutsche Bank Securities Incorporated

and therefore not subject to FINRA regulations concerning communications with subject companies, public appearances

and securities held by analysts.

Germany: Approved and/or distributed by Deutsche Bank AG, a joint stock corporation with limited liability incorporated

in the Federal Republic of Germany with its principal office in Frankfurt am Main. Deutsche Bank AG is authorized under

German Banking Law and is subject to supervision by the European Central Bank and by BaFin, Germany’s Federal

Financial Supervisory Authority.

United Kingdom: Approved and/or distributed by Deutsche Bank AG acting through its London Branch at Winchester

House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank AG in the United Kingdom is authorised by the

Prudential Regulation Authority and is subject to limited regulation by the Prudential Regulation Authority and Financial

Conduct Authority. Details about the extent of our authorisation and regulation are available on request.

Hong Kong: Distributed by Deutsche Bank AG, Hong Kong Branch.

India: Prepared by Deutsche Equities India Pvt Ltd, which is registered by the Securities and Exchange Board of India

(SEBI) as a stock broker. Research Analyst SEBI Registration Number is INH000001741. DEIPL may have received

administrative warnings from the SEBI for breaches of Indian regulations.

Japan: Approved and/or distributed by Deutsche Securities Inc.(DSI). Registration number - Registered as a financial

instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA,

Type II Financial Instruments Firms Association and The Financial Futures Association of Japan. Commissions and risks

involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by

multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to

losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional

losses stemming from foreign exchange fluctuations. We may also charge commissions and fees for certain categories

of investment advice, products and services. Recommended investment strategies, products and services carry the risk

of losses to principal and other losses as a result of changes in market and/or economic trends, and/or fluctuations in

market value. Before deciding on the purchase of financial products and/or services, customers should carefully read the

relevant disclosures, prospectuses and other documentation. "Moody's", "Standard & Poor's", and "Fitch" mentioned in

this report are not registered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the

name of the entity. Reports on Japanese listed companies not written by analysts of DSI are written by Deutsche Bank

6 May 2016




Group's analysts with the coverage companies specified by DSI. Some of the foreign securities stated on this report are

not disclosed according to the Financial Instruments and Exchange Law of Japan.

Korea: Distributed by Deutsche Securities Korea Co.

South Africa: Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register

Number in South Africa: 1998/003298/10).

Singapore: by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch (One Raffles

Quay #18-00 South Tower Singapore 048583, +65 6423 8001), which may be contacted in respect of any matters

arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who

is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and

regulations), they accept legal responsibility to such person for its contents.

Taiwan: Information on securities/investments that trade in Taiwan is for your reference only. Readers should

independently evaluate investment risks and are solely responsible for their investment decisions. Deutsche Bank

research may not be distributed to the Taiwan public media or quoted or used by the Taiwan public media without

written consent. Information on securities/instruments that do not trade in Taiwan is for informational purposes only and

is not to be construed as a recommendation to trade in such securities/instruments. Deutsche Securities Asia Limited,

Taipei Branch may not execute transactions for clients in these securities/instruments.

Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial Centre

Regulatory Authority. Deutsche Bank AG - QFC Branch may only undertake the financial services activities that fall

within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower,

West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related

financial products or services are only available to Business Customers, as defined by the Qatar Financial Centre

Regulatory Authority.

Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute,

any appraisal or evaluation activity requiring a license in the Russian Federation.

Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073-37) is regulated by the

Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall

within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya

District, P.O. Box 301809, Faisaliah Tower - 17th Floor, 11372 Riyadh, Saudi Arabia.

United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated

by the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services

activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai

International Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U.A.E. This information has been

distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as

defined by the Dubai Financial Services Authority.

Australia: Retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product

referred to in this report and consider the PDS before making any decision about whether to acquire the product. Please

refer to Australian specific research disclosures and related information at

https://australia.db.com/australia/content/research-information.html

Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the

meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively.

Additional information relative to securities, other financial products or issuers discussed in this report is available upon

request. This report may not be reproduced, distributed or published without Deutsche Bank's prior written consent.

Copyright © 2016 Deutsche Bank AG

David Folkerts-Landau Chief Economist and Global Head of Research

Raj Hindocha Global Chief Operating Officer

Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

Steve Pollard Global Head

Equity Research

Michael Spencer Regional Head

Asia Pacific Research

Ralf Hoffmann Regional Head

Deutsche Bank Research, Germany

Andreas Neubauer Regional Head

Equity Research, Germany

International Locations

Deutsche Bank AG

Deutsche Bank Place

Level 16

Corner of Hunter & Phillip Streets

Sydney, NSW 2000

Australia

Tel: (61) 2 8258 1234

Deutsche Bank AG

Große Gallusstraße 10-14

60272 Frankfurt am Main

Germany

Tel: (49) 69 910 00

Deutsche Bank AG

Filiale Hongkong

International Commerce Centre,

1 Austin Road West,Kowloon,

Hong Kong

Tel: (852) 2203 8888

Deutsche Securities Inc.

2-11-1 Nagatacho

Sanno Park Tower

Chiyoda-ku, Tokyo 100-6171

Japan

Tel: (81) 3 5156 6770

Deutsche Bank AG London

1 Great Winchester Street

London EC2N 2EQ

United Kingdom

Tel: (44) 20 7545 8000

Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005

United States of America

Tel: (1) 212 250 2500

Company China Shui On Land Limited 6 May 2016 -...

Documents

Transcript of Company China Shui On Land Limited 6 May 2016 -...