Investment Overview In the first 11 months of 2012, Jianye Real Estate realized a cumulative contract sales amount of 9.3 billion yuan, an increase of 18% over the previous year, and has set a contract sales target of 103% of RMB 9 billion for this year. The sales pace of Jianye Real Estate has remained stable. This first reflects the company's good pace of development and sales control, making the company's sales cash flow more predictable. Furthermore, it reflects the continued diversification of the sales structure, that is, the diversification of the regional layout of sales items and the diversification of sales property types, which have supported sales growth. In the first half of 2012, the size of Jianye Real Estate's debt rose markedly. From 4.4 billion at the end of last year to 6.8 billion, the rise in long-term debt was particularly prominent. Exceeding 2.7 billion priority notes raised long-term debt to 3.3 billion. Debt rose rapidly, while cash remained at 3.8 billion yuan, reflecting the company's large capital expenditure and consumption of more capital. In contrast, the company's net debt ratio soared to 57.6% at the end of June 2012 from 29.2% at the end of last year. The early redemption of 87 million bonds had a limited impact on the weakening of the company's capital, yet the subsequent agreement with major bond investors was significant, preventing the company's capital from being continuously weakened until 2014, and the overall impact was positive. Based on the Jianye Real Estate Plan, the company is currently in the advanced stage of development from 18 prefecture-level cities in Henan Province to county-level cities. Tier 3 and 4 cities will gradually transition to becoming an important component of the company's sales. We believe that Jianye Real Estate still focuses its resources on prefecture-level cities and selectively enters some county-level cities with relatively developed economies. The third- and fourth-tier cities in Henan are benefiting from the trend of urbanization. Demand from Tier 3 and 4 cities with industrial support is growing rapidly and steadily, and it will be a region with advanced real estate production rates in the construction industry. We anticipate that in the future, the company will invest about one-third of its capital in third- and fourth-tier cities to create products with clear positioning and attractive prices that are of great significance for future sales. We are initially optimistic about the property sales loss rate in county-level cities, and we expect it to exceed 50%. From 2002 to 2012, Jianye Real Estate has developed into a medium-sized regional real estate enterprise with annual sales of 10 billion dollars through layout and attack. The company's steady development style has caused the company's performance growth rate to slow slightly, but at the same time, it has avoided quite a few market risks. Currently, Jianye Real Estate is entering the third stage of development in a more aggressive manner. Recently, industry sentiment has rebounded, the company's valuation has risen 25%, and the stock price is close to our target price of HK$2.55 for the previous period. We give Jianye Real Estate an “increase in holdings” rating. The target price for 12 months is HK$2.75, which is equivalent to 5 times the expected price-earnings ratio for 2013.