We initiate coverage on KWG with a Buy rating and HKD7.49 target price (35% potential upside). We believe KWG’s quality landbank (>80% GAV from T1/T2 cities) will support 27%/20% attributable contracted sales growth in 2017-18. Coupled with its fast ramp-up in rental income (33% CAGR), we expect it to deliver a 15% earnings CAGR in FY17-19, while maintaining the gross margin high above the sector average at 33-35%. Also, KWG trades at only 4.0x FY18F P/E, 0.6x FY17F P/B and a 59% discount to NAV, which is much cheaper than the sector average of 7.3x P/E, 1.4x P/B and 36% discount to NAV, as well as a 7-10% dividend yield in the next three years. (Stephen Cheung - 852 2203 6182)

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