Accessible version China Property (H/A) Investor feedback: "wait-and-see" to skepticism; FY25 earnings preview Price Objective Change From "wait-and-see" to skepticism on policy outlook Investor feedback to our sector outlook report (YA report dated 08 January 2026), in which we expressed our contrarian positive view on the sector, has ranged from a broadly "wait- and-see" stance to skepticism. The strong performance of other sectors (especially tech) has also reduced any perceived urgency to reposition. Ke ...

Summary of Key Points from the Conference Call Industry Overview - **China Residential Market**: Developers are increasingly negative due to accelerated price declines, leading to margin and earnings pressure in 2025 and 2026. BEKE anticipates a 30% YoY decline in existing home GTV in Q4 2025 and a 13% and 6% decline in existing and new home transaction GTV in 2026 respectively [2][19]. - **Hong Kong Residential Market**: Developers report a strong recovery in transaction volume driven by rate cuts, rising rental demand, and increased investment from mainland Chinese buyers. There is potential for gradual price increases in new project launches [3]. - **Retail Sector**: High-end malls in China and Hong Kong are experiencing better momentum in 2H25, attributed to positive wealth effects from stock markets and rising gold prices. However, mass market retail remains challenging due to consumption downgrades and e-commerce penetration [4]. - **Office Market in Hong Kong**: There are signs of recovery in the Central office market, driven by increased leasing inquiries from the financial sector and IPO-related services [5]. Company-Specific Insights - **CR Land**: Reported a 17% YoY decline in contract sales gross value to Rmb170bn and expects downward pressure on earnings in 2025 due to lack of one-off gains [8]. - **COLI**: Experienced a 21% YoY decline in contract sales gross value to Rmb189bn, with expectations of launching large projects to mitigate sales decline [9]. - **Greentown China**: Reported a 6% YoY decline in contract sales to Rmb120bn, with expectations of slight profit in 2025 but continued pressure from vintage inventory [10]. - **Poly Developments**: Focused on liquidity and destocking, with a significant portion of sales coming from vintage inventory [11]. - **CR Mixc**: Forecasted double-digit core net profit growth for FY2025, supported by strong same-store sales growth [15]. - **Beike (KE Holdings)**: Expects a 30% YoY decline in GTV for existing homes in Q4 2025, but maintains a guidance of Rmb7bn adjusted operating profit for 2026 [19][20]. Market Preferences - **Stock Preferences**: Preference for HK developers like Henderson and Sino due to the bottoming of the HK residential market, and for retail properties like CR Mixc and Swire Properties due to recovery in mainland China retail [6]. Risks and Valuation - **Valuation Methods**: P/BV methods are used for mainland China property developers, while discount to NAV is used for Hong Kong developers and landlords [31]. - **Key Risks**: For Hong Kong, risks include weakening macroeconomic conditions and increased housing supply. For mainland China, risks involve government policies restricting demand and tight financing for developers [32]. Additional Insights - **Market Sentiment**: There is a cautious optimism among developers in Hong Kong regarding sales momentum and potential price increases, while mainland developers face significant challenges due to declining sales and margins [3][4][5][8][9][10][11].

Summary of Conference Call on China Property Sector Industry Overview - The conference call focuses on the **China Property Sector**, highlighting the current market conditions and future expectations for developers and policies affecting the industry. Key Points and Arguments Market Conditions - The sector is expected to trade within a range due to sluggish fundamentals and potential policy support, with a current P/E ratio of **8.5x FY27E**, aligning with historical averages [1][2] - National inventory is projected to remain high at **24 months** through **2027**, but Tier 1 and top 15 cities may see inventory decrease to **15 months** by **2026/27** [3][4] - New home sales volume/value is forecasted to decline by **5%-7%** and **8%-10%** in **2025**, with further mid-single-digit declines in **2026** [3][4] Developer Performance - Top developers are focusing on major cities, acquiring land only in the **10-20 largest cities** since **2024**, despite generating sales from **60 cities** [4][5] - Developers with younger land banks (acquired after **2022**) tend to have higher returns on invested capital (ROIC), with **Binjiang, C&D, and COLI** having the youngest land banks [5][6] - The earnings estimates for the sector have been trimmed by single-digit percentages, reflecting minor changes in contracted sales forecasts [5][6] Policy Outlook - Policymakers are expected to emphasize quality housing in the upcoming **15th Five-Year Plan**, with no major new policy support anticipated until **March 2026** [2][24] - Potential policy tools include tax deductibility for mortgage interest, lower transaction taxes, direct subsidies to home buyers, and relaxation of urban redevelopment restrictions [2][29] - The **Fourth Plenary Session** is expected to provide preliminary guidelines for property policy over the next five years, focusing on balancing growth and risk control [24][27] Risks and Challenges - Secondary home prices have declined by **1.6% MoM** in September, nearing the steepest decline observed in the second half of **2023** [21][22] - Real estate investment fell by **20% YoY** in September, worsening from a **10%** decline in the first half of **2025** [22][23] - Home prices are expected to face significant downside risks, with estimates suggesting a potential **20%** correction for entry-level buyers in Tier 1 cities [56][58] Developer Ratings and Forecasts - Price objectives for several developers have been revised, with **Binjiang** seeing an increase from **12.8 billion** to **13.5 billion**, while **Poly** was cut from **8.0 billion** to **7.5 billion** [8][9] - The contracted sales forecast for key developers has been adjusted, with **CMSK** seeing an increase due to better-than-expected performance, while **COLI** and **Poly** have been trimmed due to deteriorating market conditions [76][79] Conclusion - The China Property Sector is currently facing a challenging environment with sluggish sales, high inventory levels, and declining prices. However, top developers are strategically focusing on major cities and improving their land bank quality, which may position them better for future recovery as policy support is anticipated in the coming years.

Summary of the Conference Call on Hong Kong and Mainland China Real Estate Industry Overview - **Industry**: Real Estate in Hong Kong and Mainland China - **Date**: 28 February 2025 Key Points and Arguments Hong Kong Real Estate 1. **New World Development**: Released a new price list for 41 units in State Pavilia, priced between HKD 7.8 million to HKD 14.3 million per unit, translating to HKD 21,807 to HKD 32,333 per square foot after discount [5] 2. **Centa-Valuation Index (CVI)**: Declined by 4.37 percentage points week-over-week to 36.89 points, indicating potential downward pressure on property prices if it does not recover above 40 points [6] 3. **Coasto Project**: Wang On Properties reported 1,100 indications of interest for 60 units, resulting in a 17x oversubscription, with unit prices ranging from HKD 3.8 million to HKD 7.2 million [7] 4. **Sun Hung Kai Properties**: Noted signs of business improvement in the first half of the year, including faster property sales and landbank replenishment, suggesting the end of the earnings decline cycle [4] Mainland China Real Estate 1. **Land Sales in Shanghai**: The city plans to sell 13 sites with a total reserve price of RMB 11.3 billion, with significant sites in Minhang and Qingpu districts [8] 2. **CR Land Acquisition**: Acquired a plot in Beijing's Shunyi District for RMB 6 billion, with a plot ratio of 1.0 and an average value of approximately RMB 35,000 per square meter [9] 3. **Logan Group**: Over 80.8% of offshore creditors approved a debt restructuring plan, indicating progress in financial recovery [10] Market Valuation and Performance 1. **Valuation Summary**: Various Hong Kong property developers have target prices significantly above current market prices, indicating potential upside. For example, CK Asset has a target price of HKD 44.60 compared to a current price of HKD 33.90 [12] 2. **Share Price Performance**: The report includes a detailed performance analysis of various companies, showing a mixed performance over different time frames, with some companies like New World Development experiencing significant declines [21] Additional Insights 1. **Rental Pipelines**: Solid rental pipelines are expected to provide visibility on dividend outlooks for companies like Sun Hung Kai Properties [4] 2. **Market Trends**: The report highlights a cumulative decline in the CVI over the past three weeks, suggesting a cautious outlook for property prices in the near term [6] Conclusion The conference call provided a comprehensive overview of the current state of the real estate market in Hong Kong and Mainland China, highlighting both challenges and opportunities. Key players are showing signs of recovery, but market indicators suggest caution moving forward.