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1、China,October 31,2012Asia Pacific:ConglomeratesEquity ResearchKey takeaways from Goldman Sachs Greater China CEO summitConglomerates are cautiously optimistic about the outlook in 2013,We invited Wharf,MTRC,Shanghai Industrial,China Merchants and Fosunto the Goldman Sachs Greater China CEO summit in
2、 Hong Kong over Oct,HONG KONG AND CHINA CONGLOMERATESVALUATION SUMMARY AS OF OCT 30,2012,29-30.Common discussion topics:(1)whether recent improvement macrodata in China and the US will drive business recovery ahead and thequestion of its sustainability;(2)the ability to pass on cost pressure viapric
3、e increases;(3)potential impact of the HK governments recentintroduction of the buyer stamp duty(BSD)in residential property markets.Company-specific updates:Buy Wharf and Shanghai Industrial,CompanyHong KongHutchison WhampoaCheung Kong HldgsWharf HoldingsHPH TrustMTR CorporationWheelock&Co.NWS Hold
4、ingsCheung Kong Infra.Hopewell HoldingsJardine MathesonSwire Pacific A,Ticker0013.HK0001.HK0004.HKHPHT.SI0066.HK0020.HK0659.HK1038.HK0054.HKJARD.SI0019.HK,GSRatingBuyBuyBuy*BuyNeutralNeutralNeutralNeutralNeutralNeutralNeutral,ccyHKDHKDHKDUSDHKDHKDHKDHKDHKDUSDHKD,Shareprice75.30112.252.60.7829.833.51
5、1.945.727.262.491.9,FwdNAV117.05167.4786.390.9233.9456.3415.1552.6237.2282.30122.41,Prem/(disc)toNAV(%)(35.7)(33.0)(39.1)(16.0)(12.3)(40.5)(21.2)(13.2)(26.9)(24.2)(24.9),12EP/E(X)13.310.915.315.220.310.012.811.417.714.714.7,Despite a broader-base slowdown in the HK retail market,Wharf(CL-Buy),is cau
6、tiously optimistic about the outlook for its two retail malls which haveoutperform the industry(+15%ytd,vs.11%for HK)and expects high-singledigit sale growth in 4Q12.Its China property sales are likely to beat its FY12target of Rmb12.7bn,having secured Rmb11.4bn sales in Jan-Sept.,COSCO PacificShang
7、hai IndustrialTianjin Development HoldingsBeijing EnterprisesCITIC PacificChina MerchantsDalian Port(PDA)(H)Tianjin Port Dev(H)Shanghai Intl Port Gp,1199.HK0363.HK0882.HK0392.HK0267.HK0144.HK2880.HK3382.HK600018.SS,BuyBuyBuyNeutralNeutralNeutralNeutralNeutralNeutral,HKDHKDHKDHKDHKDHKDHKDHKDCNY,11.32
8、4.63.749.29.625.31.70.92.5,13.1737.1310.2463.1716.4125.991.600.962.90,(14.2)(33.7)(63.9)(22.2)(41.3)(2.9)3.1(3.1)(14.8),11.47.510.817.07.918.47.67.411.9,Chengdu IFS is close to 80%pre-let.We expect gradual completion of the,Fosun International 0656.HK*On our Asia-Pacific Conviction Buy/Sell List,Sel
9、l,HKD,3.8,5.27,(28.3),14.8,five IFS will raise China rental EBIT from HK$0.7bn to HK$2bn by 2015-17E.MTRCs(Neutral)patronage in HK remains steady,up 5%ytd.With theFAM formula under review by govt,we think uncertainty over its ability topass on cost increases,and hence MTRCs profitability,lingers.Mea
10、nwhile,there is no concrete time line for upcoming site tenders.Shanghai Industrial(Buy)is on track to achieve its property sales target ofHK$8bn in 2012 and believes SIUD will turn around by 2013.Managementreiterated its absolute dividend policy of no less than HK$1.0 annual DPS,supported by strong
11、 cash inflow from infrastructure&consumer divisions.China Merchants(Neutral)remains cautious and maintains its target ofsingle-digit%port volume growth and flat ASP in 2012-13.We think therecent entrustment agreement,which enables CMH to manage ChiwanWharf directly,is a long-term positive,but will t
12、ake time to materialize.We are concerned that Fosuns(Sell)initiatives to transform itself into aninvestment company will require heavy capex and push its gearing to 82%at end-2013E.We expect its industrial divisions will face continued cyclicalheadwinds.On a positive note,Fosuns active investment st
13、rategy hashistorically proven to be value-creative for the group and subsidiaries,butmay be more difficult to replicate in view of more intense competition.,Source:Bloomberg,Goldman Sachs research estimates,Simon Cheung,CFA+852-2978-6102 Goldman Sachs(Asia)L.L.C.Frank He+852-2978-7414 Goldman Sachs(
14、Asia)L.L.C.Janet Lu+852-2978-1642 Goldman Sachs(Asia)L.L.C.Alex Ye+852-2978-6666 Goldman Sachs(Asia)L.L.C.The Goldman Sachs Group,Inc.,Goldman Sachs does and seeks to do business withcompanies covered in its research reports.As a result,investors should be aware that the firm may have a conflict ofi
15、nterest that could affect the objectivity of this report.Investorsshould consider this report as only a single factor in makingtheir investment decision.For Reg AC certification and otherimportant disclosures,see the Disclosure Appendix,or go Analysts employed by non-US affiliates are not registered
16、/qualified as research analystswith FINRA in the U.S.Global Investment Research,2,October 31,2012,Asia Pacific:Conglomerates,Takeaways from Greater China CEO summit in Hong Kong(1)Wharf(4.HK;CL-Buy;12-month target price:HK$60.40)Investors have expressed concerns about the slower retail sales growth
17、at Wharfs twoshopping malls in recent months,for which management remains cautiously optimistic.InChina,the group continues to execute well on its property investment,having sold anotherRmb1.1bn in Sept,totaling Rmb11.4bn in the first nine months,running ahead of its full-year target of Rmb12.7bn(or
18、 GS estimate of Rmb13.2bn).In the meantime,theconstruction of its five IFS in China is in progress,with the first Chengdu IFS targetedto start operations in late 2013 and close to 80%of its retail space has been committed orpre-let.Upon completion of the five IFS,we estimate the groups China rental
19、EBITcontribution will increase from HK$0.7bn in 2012E to HK$2bn by 2015-17E.We maintainour CL-Buy on the stock.Despite 10%outperformance vs.its HK conglo peers in the pastthree months,the stocks valuation still looks undemanding,in our view,trading at a 39%discount to 2013E NAV,vs.mid-cycle of 30%.H
20、ong Kong:cautiously optimistic on retail sales;office rental remained stableAfter the slowdown in July,which management attributes to the typhoon and OlympicsGames,retail sales growth at Harbour City and Times Square picked up modestly to 9%and 12%yoy respectively in August,continuing its outperform
21、ance over the overall HKretail market(Exhibit 1).Cumulatively,retail sales grew 15%yoy at both malls.During theGolden Week Holiday,despite the weak sale performance as reported by jewelry retailers(e.g.,Chow Tai Fook,Luk Fook,etc.),Wharfs overall retail sales grew at single-digit%yoy,as high-end jew
22、elry and watches only accounts for low-teen%of Wharfs total retail sales(and 5%in GFA terms).Sales of fashion,leather and other consumer goods still performedwell ytd.Looking into 4Q,management remained cautiously optimistic and expectsdouble-digit%retail sales growth for the full year.As for Wharfs
23、 office portfolio,despite7.5%decline in Central office spot rents ytd,Wharfs rent and occupancy rates are steadyacross its portfolio,benefiting from the decentralizing trends.With passing rents muchlower than current spot rents,management expect positive rental reversion to continue in2013.Overall,w
24、e forecast 8%/5%retail rental growth and 5%/5%for office in 2012/13E.China:property sales likely to beat;rental projects on scheduleWithout any new project launches in Aug-Sept,the pace of Wharfs property sales in Chinahas moderated to Rmb1.1bn in Sept,vs.the monthly run rate of Rmb1.25bn in 1H12.Ye
25、ar-to-date,property sales have reached Rmb11.4bn at end-3Q.Barring any significantslowdown in Chinas property market,we think full year property sales are likely to exceedthe companys target of Rmb12.7bn.We forecast Rmb13.2bn in our model.Afterrecognizing HK$2.4bn China development profit in 1H12,we
26、 forecast another HK$2.1bn in2H12E,mainly attributed to associate or jointly controlled projects,e.g.,Tianjin PeacelandCove,The Magnificent,Chongqing International Community and Foshan Evian Town China investments start to bear fruit.CL-Buy”,we believe further improvement inoccupancy rates at its ne
27、wly-launched or recently-renovated projects will serve as the keyearnings driver before Chengdu IFS opens in 2014.For example,95%of ShanghaiWheelock Squares office space is occupied,up from 80%at end-2011 and 91%at end-1H12.Average asking rent has edged up to Rmb400psm(vs.Rmb360psm at end 2011).Afte
28、r there-launch of Chongqing Times Square in 3Q11,the project now achieves low-to-mid 20%gross rental yield on costs.In the medium term,we think gradual completion of the five IFSGoldman Sachs Global Investment Research,YTD,3,October 31,2012,Asia Pacific:Conglomerates,(International Financial Square)
29、projects will help to meaningfully raise earningscontribution from China rental projects.Chengdu IFS,which will be completed first in 2014,will include a large-scale 2mn sq ft retail mall.Currently,over 60%of the retail space hasbeen committed and another 20%is in final stages of negotiation.Some of
30、 those rentssigned are as high as Rmb1,500-1,800 psm,which management estimates may translateinto Rmb460-500mn retail rental revenue upon full completion by 2015.Withoutcomparable large-scale retail malls within the 1st and 2nd Ring Roads in Chengdu,the groupis not worried about competition and expe
31、ct 5-7%gross rental yield on cost in 2015-16.Closer partnership with GreentownAfter jointly acquiring a parcel of land in the Shanghai Pudong area in Sept 2012,Wharfindicated it will seek other cooperative opportunities with Greentown,leveraging onGreentowns strong brand name in the high-end residen
32、tial market and local expertise insourcing lands.At our conference,Greentown also mentioned it is considering forming aJV with Wharf in HK to conduct offshore financing to save interest costs.Exhibit 1:Retail sales growth at Harbour City and Times Square picked up modestly to 9%and 12%yoy,respective
33、ly,inAugust,continuing its outperformance over the overall HK retail marketMonthly retail sales growth at Harbour City and Times Square vs.overall Hong Kong market,YoY growth(%),Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 FY2011 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12,YTD,Harbou
34、r Citys retail sales,+42%,+42%,+42%,+39%,+28%,+34%,+27%,+34%,+23%,+17%,+25%,+19%,+7%,+13%,+6%,+9%,+15%,Times Squares retail sales,+33%,+34%,+31%,+21%,+21%,+21%,+21%,+24%,+10%,+17%,+18%,+8%,+23%,+10%,+12%,+15%,Hong Kong retail sales valueTotal visitors to Hong KongMainland visitors to HKMainland visi
35、tors to HK(overnight)-Mainlander%of HK visitors,+29%+16%+23%+18%63%,+29%+22%+33%+26%70%,+29%+18%+23%+18%72%,+24%+17%+29%+26%66%,+23%+16%+25%+20%67%,+23%+16%+25%+21%66%,+23%+17%+24%+15%68%,+25%+16%+24%+17%67%,+15%+15%+24%+24%75%,+16%+15%+14%-5%68%,+17%+16%+24%+12%67%,+11%+14%+24%+10%69%,+9%+13%+19%+4
36、%69%,+11%+19%+31%+15%69%,+4%+14%+22%+8%+75%,+5%+20%+28%+14%+76%,+11%+16%+23%+10%71%,YoY%of retail sales selectedcategories,Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 FY2011 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12,Department StoresClothing&FootwearJewellery,Watches&ValuablesMedi
37、cines and Cosmetics,+23%+28%+59%+19%,+26%+34%+51%+26%,+24%+33%+53%+19%,+22%+33%+51%+19%,+17%+26%+47%+16%,+25%+23%+35%+23%,+23%+24%+29%+21%,+22%+28%+47%+22%,+14%+16%+18%+14%,+9%+12%+14%+20%,+15%+16%+18%+23%,+10%+7%+15%+13%,+9%+5%+3%+13%,+9%+12%+3%+19%,+3%+0%+1%+12%,+9%+4%-3%+17%,+10%+9%+8%+17%,YoY gr
38、owth represents retail sales psf yoy growth since March 2012Source:Company data,CEIC.Goldman Sachs Global Investment Research,2,2,3,3,8,8,3,3,4,5,4,3,1,1,2,3,4,4,0,0,1,1,0,0,1,1,0,0,4,October 31,2012Exhibit 2:Wharfs China property sales reachedRmb11.4bn in Jan-Sept,vs.full year target of Rmb12.7bnWh
39、arfs China property sales proceeds(RMBbn)8.0,Asia Pacific:ConglomeratesExhibit 3:Upon completion of the 5 IFS projects,WharfsChina rental properties should reach 2,400 sqm in totalChina rental property projects completion schedule(000 sqm)3,000,7.0,7.0,Wharfs propertysalesinChinatotaledRMB11.4bninJa
40、nSept,vs.,6.0,5.7,fullyear targetofRMB12.7bn,2,500,2,400,5.04.0,4.0,4.8,5.0,3.9,2,000,1,500,3.02.0,2.5,1,000,665,1,200,1.0,500,379,379,379,1H10,2H10,1H11,2H11,1Q12,2Q12,3Q12,2010,2011,2012,2013,2014,2016,Source:Company data,Goldman Sachs Research estimates.Exhibit 4:Wharfs detailed net asset value b
41、reakdown,Source:Company data,Goldman Sachs Research estimates.,EV per,%of,EV per,%of,Attrib.equity,2012E,share,total,2013E,share,total,Operation,interest(%),Valuation methodology,(HK$mn),(HK$),EV,(HK$mn),(HK$),EV,Assumptions,Investment properties,Harbour City OfficeHarbour City Retail,100%100%,Renta
42、l capitalizationRental capitalization,35,84062,666,11.8320.69,1221,37,63265,800,12.4221.72,1221,Office rent+5%in 2013ERetail rent+5%in 2013E,Harbour City Service Apartments,100%,Rental capitalization,6,668,2.20,6,668,2.20,Times Square OfficeTimes Square RetailHong Kong-high-end residentialsHong Kong
43、-othersHong Kong hotels,100%100%100%100%100%,Rental capitalizationRental capitalizationRental capitalizationRental capitalizationValue per room,9,37124,2199,81912,03310,654,3.097.993.243.973.52,9,84025,4309,81915,66810,654,3.258.393.245.173.52,Office rent+5%in 2013ERetail rent+5%in 2013ECap rate=3.0
44、0%-7.50%HK$8.2 mn per room,China investment propertiesChina Hotels,88-100%100%,Rental capitalizationValue per room,34,0013,262,11.221.08,12,38,5363,658,12.721.21,12,Office and retail rent+3 to+5%in 2013EHK$2.3 mn per room,208,533,68.84,71,223,704,73.84,70,Development properties,HK propertyChina prop
45、ertyGreentown China Holdings(3900.HK),20%Various25%,DCFDCFMarket price,5,76554,1767,244,1.9017.882.39,218,5,17662,8839,320,1.7120.763.08,220,Flat property price yoy in 2013E+5%property price change in 2013EGS 12-month target price of HK$12.91,67,184,22.18,23,77,379,25.54,24,Logistics and terminal,Mo
46、dern Terminal Limited Hong Kong,68%,DCF,11,732,3.87,11,983,3.96,8.8%WACC,1.5%terminal growth,Dachan BayTaicang Port I&IIShekou Container Terminals I,II&IIIChiwan Container Terminals,44%35-48%14%8%,DCFDCFDCFDCF,3911,2531,892548,0.130.410.620.18,0,4221,2931,953566,0.140.430.640.19,0,10.9%WACC,2.0%term
47、inal growth10.9%WACC,2.0%terminal growth10.9%WACC,2.0%terminal growth10.9%WACC,2.0%terminal growth,15,817,5.22,5,16,216,5.35,5,Implied 12.7x 2013E PER,Telecommunication and media,Wharf T&Ti-CABLE Communications(1097.HK)Enterprise Value(EV),100%74%,Book valueMarket price,2,3775632,939294,473,0.780.19
48、0.9797.21,1100,2,5725633,134320,433,0.850.191.03105.77,1100,0.7x price to bookHK$0.38 per i-CABLE share,Adjusted net debtTotal net asset value(NAV)No.of shares outstanding(mn)NAV per share(HK$)Share price as ofDiscount to NAV(%),29-Oct-12,(53,535)240,9383,02979.5352.85(34),(17.67)79.53,(58,028)262,4
49、053,02986.6252.85(39),(19.16)86.62,Further NAV breakdown analysis,Retail(excl Harbour Center)OfficeResidential&industrialHotelsChina rental projectsTotal investment propertiesTotal China assetsTotal China properties,86,88545,21128,52013,91634,001208,533102,76798,682,28.6814.929.414.5911.2268.8437.32
50、35.83,301510512713837,91,22947,47132,15514,31238,536223,704118,630114,397,30.1115.6710.614.7212.7273.8443.0841.54,281510412704139,Greentown China:12-month NAV-based TP=HK$12.91;Key downside risks:Weaker-than-expected sales and/or macro hard landing.Source:Company data,Goldman Sachs Research estimate
