ConsumerStaplesSector monthly 20120904 - Kim Eng

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Hong KongSector Report 4 September 2012

Consumer Staples Monthly Post-results Strategy Results highlights. Most of the staples companies under our coverage reported respectable bottom-line growth in the just-released interim results, led by stellar gross margin expansion despite lacklustre top-line growth and increased SG&A burdens. Competition has intensified across different segments, most notably in the beverages, restaurants and meat spaces. In addition, consumers’ shift in taste has led to more pressure for F&B players to innovate their product offerings, in our view. Food retailers’ results in general disappointed on weak SSSG and rising OPEX.

Coverage review. We maintain our BUYs on CRE (291), China Foods (506), Biostime (1112), Vinda (3331) and Mengniu (2319) on favourable risk-reward profiles. We downgrade Want Want (151) and Tingyi (322) from HOLD to SELL, as their valuation premiums may not be sustainable in light of top-line slowdown risks ahead. We maintain SELLs on Ajisen (538), China Yurun (1068) and Huiyuan Juice (1886) on low earnings visibility and loss of market share. We maintain HOLDs on UPC (220) and Hengan (1044), as we believe all positives are priced in. We downgrade Prince Frog (1259) from BUY to HOLD on higher execution risk.

Raw material price trends. Soybean and corn futures hit all-time highs globally driven by the drought in the US. Palm oil prices weakened on subdued demand and ample supply. Sugar prices stayed soft on supply surpluses. Milk powder prices rose 8% as compared to the last auction two weeks ago. FCOJ prices rebounded on weather premiums as hurricane activity often peaks in August and September in Florida, though fundamentally the citrus crop is expected to be robust while global demand is projected to be slack. Pork and hog prices went up along with rising feed costs. Wood pulp prices slid given uninspiring demand in Europe.

Time to Underweight. We believe the YTD outperformance in the staples sector has now come to an end as we foresee limited catalysts to drive earnings growth further. The staples sector is now trading at 20.0X forward PER and 13.4X EV/EBITDA. Nonetheless, we only project a 3-year profit CAGR of 16.8% for the industry, putting it at a PEG of 1.2X, against a historical average of 1.1X. However, we are still positive towards the HPC, baby-related, dairy and brewery segments on massive sales mix upgrade potential and solid demand growth. We are cautious on restaurants and the meat and beverages spaces on a lower return outlook.

Conviction BUYs: China Foods and Vinda. Our top sector picks are China Foods and Vinda, given their re-rating potential backed by robust expected earnings growth. We like CF for its consistent NPM and ROE improvements in addition to industry-leading profit CAGR going forward, backed by the efficiency of a streamlined corporate structure. We like Vinda for its visible volume growth outlook and enhanced brand presence. While the tissue industry may be exposed to oversupply risk ahead, we believe Vinda can continue to gain market share with its differentiated products and distribution strength. In addition, while the market has worried about rising threats from imported wine and a negative mix shift in beverages, we believe CF is able to overcome these headwinds owing to its previous product rationalisation efforts and scale advantage.

Underweight Jacqueline KO, CFA [email protected] (852) 2268 0633 China Foods (506)

Vinda (3331)

Overweight Equal-weight Underweight Household &

Personal Care Food retailer Restaurants

Baby care and baby food

Wine Meat

Dairy related Beverages Brewery Edible oil

Instant noodles Liquor & tobacco

BUYs HOLD SELLs/SHORTs CRE (291) UPC (220) Want Want (151) Vitasoy (345) Hengan (1044) Café de Coral (341) China Foods

(506)* Prince Frog

(1259) Ajisen (538)

Biostime (1112) China Yurun (1068) Vinda (3331)* China Huiyuan

Juice (1886) China Mengniu

(2319) Tingyi (322)

* Conviction buys

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Source: Bloomberg

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4 September 2012 Page 2 of 14

China Consumer Staples Monthly

1H12 Results key wrap up

Want Want (151, SELL, TP HKD8.43) – De-rating risk mounting on lower growth; Downgrade

WW’s NPAT growth of 38% YoY was in line with our estimates as weak sales were offset by strong GPM expansion and improved OPEX efficiency. Strong snack food sales and profitability in addition to solid Hot-kid milk sales were the key positive, while weak rice crackers sales disappointed. Management’s cut of dry food sales growth guidance from original 20% to 10-15%. Overall, we adjust our FY12/13/14E estimates by (3%)/(11%)/(16%) on lower sales growth assumptions. We downgrade our recommendation on WW from HOLD to SELL as we see softening top-line growth and growing pressure to increase its A&P ahead to lead to a decline of its profit CAGR from our original estimates of 25.3% to 20.3% over FY12E-14E. We peg our TP to 23.0X FY13 PER vs. 25X previously.

http://www.kimeng.com.hk/upload/research_reports/WantWantChina_20120830_CU.pdf

UPC (220, HOLD, TP HKD7.67) – Slowing noodles sales a concern; Upgrade

UPC’s 1H12 earnings beat forecasts on a surprising 6ppt YoY GPM expansion. Solid market share gains across the board are a key positive, while a key negative is noodles sales fell short of management’s target. We attribute the noodles sales slowdown to heightened market competition as Tingyi and other competitors are following UPC in launching spicy & sour beef flavoured noodles, with increased marketing and promotional efforts. On the beverage front, UPC surpassed its peers’ growth amid overall industry weakness, as revealed by 22%/82% growth in sales of its juices/other beverages, thanks to strong demand for its crystal sugar pear juice, Aha coffee and Assam milk tea. Tea sales were flat YoY as UPC rationalised its product line by suspending the Jasmine tea series and re-launching it in June. We raise our FY12/13/14E estimates by 17%/13%/14% on the better-than-expected results. We raise our TP multiples to 23X FY13 PER from 18X originally.

http://www.kimeng.com.hk/upload/research_reports/UniPresident_20120827_CU.pdf

CRE (291, BUY, TP HKD33.0) – De-rating unjustified; Maintained

CRE’s 1H12 core NPAT was down by just 4% YoY as 2Q performance was stronger than expected. Major KPIs are solid and closely track its guidance: i) retail SSSG of 5.7% in 1H12 put paid to market talk of a sharp SSSG slowdown in 2Qii) beer sales volume growth was 6% YoY in 1H12 against the industry’s 4.9%, with respectable growth in high-end products. Looking ahead, we expect its retail business to see SSSG stabilise in 3Q and offer room to absorb costs associated with new-store additions, since CRE will keep its rapid expansion pipeline. We believe its cash pile of HKD24b and a HKD10b portfolio of investment properties in HK will offer adequate resources for the retail network expansion. Overall, we expect CRE’s growth ahead to be top-line driven and a notable margin improvement is unlikely in the near term. We keep our forecast unchanged with TP based on 25.0X FY13 core PER.

http://www.kimeng.com.hk/upload/research_reports/ChinaResEnt_20120820_CU.pdf



Tingyi (322, SELL, TP HKD16.53) – High risks on margins and organic growth; Downgrade

Tingyi’s adjusted NPAT was flat YoY, with sales growth of 9.5% YoY boosted by the contribution from Pepsi. Key positives are slightly better-than-expected GPM expansion and an accelerating pace of product launches. Key negatives are weak organic beverage sales growth, a plunge in the profitability of its instant food division and surging OPEX. The noodles division turned in satisfactory 2Q revenue with high margin bowl/high-end packet sales up by 20%/27% YoY. Beverages division results were a mixed bag, as while overall top-line growth turned positive and reversed the trend of the last three quarters, the number includes USD355m in sales of Pepsi’s carbonated drinks as well as Tropicana juice. Its key beverage category, RTD tea, recorded a sales decline of 34% YoY. We cut our FY12/13/14E earnings estimates by 18%/13%/11% on weaker sales and higher OPEX assumptions. Our new TP is based on 24.0X FY13 PER.

http://www.kimeng.com.hk/upload/research_reports/Tingyi_20120821_CU.pdf

China Foods (506, BUY, TP HKD8.91) – Better profitability; Maintained

CF’s 1H12 NPAT growth of 50% YoY beat expectations on a lower effective tax rate. EBIT growth of 25% YoY despite weak sales growth of 16% YoY is respectable, backed by improved cost efficiency following the adoption of a new organisational structure. Key positives are decent EBIT margin enhancement at its wine division as well as narrowing losses at the confectionery segment. Wine sales growth of 12% YoY was slightly below the industry’s 14%, as CF rationalised its product lines by cutting low-margin SKUs. We expect its sales growth to accelerate ahead on enhanced sales network coverage and product innovation, while profitability should improve on a better sales mix. Its beverages sales growth was weak as Coke lost market share amid rising competition. However, we anticipate this segment will see stable growth and EBIT margins thanks to its enhanced scale. On a separate note, we believe its two less meaningful business units are seeing improving outlooks too. We adjust our FY12/13/14E estimates by 14%/3%/0% on weaker sales but lower cost assumptions. Our new TP is based on 18.0X FY13 PER.

http://www.kimeng.com.hk/upload/research_reports/ChinaFoods_20120830_CU.pdf

Ajisen (538, SELL, TP HKD3.21) – Uncertain recovery ahead; Maintained

Ajisen’s NP/core OP were down by 82%/88% YoY despite in-line sales, as operating deleveraging in the negative SSSG environment led to surges in the ratios of all OPEX to sales items. On top of that, the net addition of just 10 stores in 6M12 disappointed, as 20 stores were closed during the period. Hence, Ajisen only targets a net addition of 30 to 40 stores in FY12E. In short, we believe its expansion has reached a bottleneck and we anticipate low per-store profitability and a long breakeven period for new stores to persist in the short to medium term. Meanwhile, the latest industry figures suggest that the industry’s growth rate has slowed to a 9-year low, with net margin contracting notably on surging operating costs. We foresee labour shortages and ongoing hikes in minimum wages to be the biggest challenges facing restaurant operators. We slash our FY12/13/14E estimates by 57%/36%/21% due to the significant earnings miss. Our new TP is based on 18.0X FY13 PER.

http://www.kimeng.com.hk/upload/research_reports/Ajisen_20120823_CU.pdf



Hengan (1044, HOLD, TP HKD75.5) – Growth to improve but in price; Maintained

Hengan’s 1H12 top-line growth of 10% YoY disappointed, but was offset by stellar GPM improvement. EBIT/NPAT growth of 59%/38% was in line. Tissue sales growth of 13% was weak given insufficient capacity that resulted from delays in capacity additions and diminished promotional efforts. However, growth momentum has picked up in July with new capacity adds and increased marketing efforts. Its sanitary napkins sustained their leadership position with solid margin improvements and satisfactory sales growth momentum. Diaper and snack food sales were weak. Yet, management expects a more extensive promotion campaign from August onwards to boost diapers sales. Nonetheless, we are still cautious on its diapers’ growth prospect ahead on intense competition from MNCs and low- to mid-end players. We have fine-tuned our estimates by 2%/(1%)/0.2% in FY12/13/14E to reflect upside risk in GPM but lower sales assumptions. Our TP is based on 23X FY13 PER.

http://www.kimeng.com.hk/upload/research_reports/Hengan_20120830_CU.pdf

China Yurun (1068, SELL, TP HKD4.33) – Market share war to linger; Maintained

Yurun reported a core net loss of HKD647m due to substantial deterioration across all KPIs including the top line, GPM and SG&A to sales ratio, along with a plunge in utilisation rates. The only two key positives were the stabilisation of slaughtering volume and a slight recovery of LTPM margins HoH. Its blended GPM was down 10.5ppts YoY or 2.3ppts HoH due to heavy promotional discounts offered to customers. One worrying sign was that it was selling its frozen pork at a negative GPM of 11%, indicating its market share-driven strategy. Also, we observed that there was a shift in its distribution channel, as indicated by the sharp decline of sales contribution from the supermarket channel. Overall, we project Yurun to stay in losses on an ex-government subsidy basis for FY12E and FY13E owing to a margin squeeze. Considering Yurun is showing no sign of slowing down its pace of expansion, we expect the new capacity additions to create further pressure on the industry. Our new TP is based on 0.5X FY13 PBR, which is at the lowest end of its 5-year historical average PBR band.

http://www.kimeng.com.hk/upload/research_reports/ChinaYurunFood_20120816_CU.pdf

Biostime (1112, BUY, TP HKD24.4) – Strong results justify our bullish call; Maintained

Biostime’s 1H12 NPAT of CNY274m surpassed our estimates by 5% backed by YoY sales growth of 57% YoY, led by 72% growth in its infant formula sales. Key positives are the solid additions of new sales points and the number of active Mama100 members. While the rich margins of the supreme and high-tier infant formula markets have attracted many newcomers, we believe the trend towards trading up is still progressing, and a growing market allows room for healthy competition, in our view. We believe its strong SSSG at major channels reflect its robust sales potential and its current penetration at supermarkets and specialty stores are just at 50%/30%, implying massive room to grow. We still see its Mama100 membership programme cementing strong ties with its customers; a higher proportion of recurrent sales from active members would greatly improve its sales visibility. We raise our FY12E-14E estimates by a marginal 1 to 3%. TP is unchanged based on 18X PER.

http://www.kimeng.com.hk/upload/research_reports/Biostime_20120817_CU.pdf



Prince Frog (1259, HOLD, TP HKD2.63) – Downgrade on higher risk; Downgrade

PF’s NPAT growth of 47% YoY surpassed our estimate of 30% growth, due to a 2-ppt YoY GPM expansion, a surprising 2-ppt decline of the S&D cost to sales ratio on top of a lower effective tax rate and finance cost, as well as higher other income and gains. Core OP was up 31% YoY and met with our projection. Sales growth of children’s skincare products was on track with sales growth of 29% YoY, while its high-margin KA series sales more than doubled YoY and accounted for 13% of its segment sales. Key negatives were AR days and inventory days lengthened by 5/13 days YoY. We expect the situation to continue ahead, as PF expands further into modern retail channels. PF has kept its FY12E A&P guidance intact at 15-16%, as most of the effort is geared towards 2H12. Looking ahead, we foresee that there may be a possibility for a further increase of its A&P budget due to intensifying industry competition. We lower our FY12/13/14E estimates by 1%/9%/14% on more conservative sales assumptions. Our new TP is based on 8X FY13 PER against 10X previously.

http://www.kimeng.com.hk/upload/research_reports/PrinceFrog_20120823_CU.pdf

China Mengniu (2319, BUY, TP HKD29.1) – Re-rating factors intact; maintained

Mengniu’s 1H12 NPAT fell 18% YoY on lacklustre sales, which were down 1% YoY as volume fell 5%. Key positives are good OPEX control as the SG&A to sales ratio edged up by just 0.7ppt YoY, while the mix upgrade trend is still solid. The key negative is its AR days rose by 4 days YoY as Mengniu extended credit lines to its distributors to speed up its sales recovery. Sales of higher-margin Milk Deluxe and Future Star grew by 14% YoY, lifting their contribution to liquid milk sales by 5ppts. We anticipate that its gross margins will improve by 50bps p.a. over next two years as mix upgrades are still underway. Management has highlighted the strategy of focusing on product SKUs, quality control, product innovation and distribution restructuring in its upcoming five-year plan. We anticipate improving raw milk sourcing to drive a re-rating. We expect sales to grow by 11% HoH and 9% YoY given on-track recovery in July and August. We adjust our FY12/13/14E estimates by (12%)/(14%)/(11%). Our new TP is based on 23.0X FY13 PER, against 17X previously.

http://www.kimeng.com.hk/upload/research_reports/ChinaMengniu_20120829_CU.pdf

Vinda (3331, BUY, TP HKD14.4) – Stable pulp prices boost margins; maintained

Vinda’s 1H12 results missed on weaker-than-expected GPMs and exceptional items. Nonetheless, its revenue growth of 31% YoY surprised us on the upside, backed by 29% YoY volume growth. Sales via modern channels are on the rise while it is on track to achieve its capacity expansion plan, which will underpin sales volume growth of 25-30% p.a over FY12-14E. Management expects pulp price to be relatively stable at the current level over the next two years given weakened pulp demand and increased supply. We project gross margin expansions of 4.4ppt/0.6ppt/0.2ppt YoY in FY12/13/14E. We expect accelerating sales growth of non-toilet roll products in the near to medium term to drive up its margins as well. We adjust our FY12/13/14E estimates by (8%)/ (2%)/1% accordingly. Our new TP is based on 16.0X FY13 adjusted PER.

http://www.kimeng.com.hk/upload/research_reports/Vinda_20120831_CU.pdf



Figure 1: Sugar price trend (CNY/metric tonne) Figure 2: Palm oil price trend (CNY/metric tonne)

Source: Bloomberg, Kim Eng Securities Source: Bloomberg, Kim Eng Securities

Figure 3: Live hog price trend (CNY/kg) Figure 4: Wholesale pork price (CNY/kg)


Figure 5: Wheat price trend (CNY/metric tonne) Figure 6: Corn price trend (CNY/metric tonne)


Figure 7: Malting barley price trend (USD/metric tonne) Figure 8: Milk powder price trend


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Figure 9: Wood pulp price trend (USD/metric tonne) Figure 10: Soybean future price (USD/bu)


Figure 11: FCOJ price(USD/lb) Figure 12: Crude oil price (USD/barrel)


Figure 13: Sales and COGS of selective companies

Company Core sales exposure (FY11) COGS breakdown

Want Want China (151)

Dairy & beverages 47.3% Rice crackers 27.7% Snack foods 24.5%

Rice 4.2%, Milk powder 16.9%, Sugar 8.3% Condensed milk 5.8%, Palm Oil 3.0%, Potato starch 2.2% Packaging materials 35.0%

Uni-President China (220)

RTD tea 29.5%, Instant noodles 35.3% Juice drinks 19.0%, Other beverages 14.6%

Sugar 9%, Flour 9%, Palm oil 7% Juice concentrates 7%, PET 25%, Other packaging 25%

Tingyi (322) Instant noodles 45.7% Beverages 50.8%, Bakery 2.6%

Palm oil 12-15% of noodle costs, Wheat 12-18% of noodle costs Sugar 10% of beverage costs, PET 60% of beverage costs

China Foods (506) Wine 12.4%, Beverages 35.2% Kitchen food 50.3%, Confectionery 2.1% (note that wine and beverage units are the key earnings contributors)

Sugar: 10-15% of beverage costs Packaging 30-35% of beverage costs Juice concentrates and purees 30-40% of beverage costs Grape & grape juices:50%

China Mengniu (2319)

UHT milk 55.7%, Milk beverages 22.3% Ice cream 8.7%, Yogurt 12.2%

Raw milk: 40-50% Packaging 25%

Vitasoy* (345) Soymilk 50%, tea 18%, water 4%, milk 5%, juice 3%, tofu 10%

Milk powder: 9% Sugar: 6% Soybean 3%

CRE (291) Brewery 24.1%, Food 9.7% Beverage 2.8%, Retail 63.4%

Barley 15-20% of brewery COGS, Packaging 50% of brewery COGSRice 6% of brewery COGS

China Huiyuan Juice (1886)

100% juice 24.5%, Nectars 34.1% Juice drinks 27.2%

Juice concentrates and purees 27%, PET packaging materials 17% Other packaging materials 17%, Sugar 8%

China Yurun (1068) Chilled meat 74.0%, Frozen meat 15.0% LTMP 10.0%, HTMP 1.0%

Live hog price ~90% of upstream COGS Raw meat ~70% of downstream COGS

Vinda (3331) Toilet rolls 61% Other tissue products 39%

Wood pulp ~40% of COGS Packaging materials 10%

Hengan (1044) Tissue paper 47%; Sanitary napkins 24%; Diapers 16%; Food and snacks 9%; others 4%

Wood pulp ~30% of COGS Fluff pulp 8%; Petrochemicals 27%; Packaging 11%

* With March year-end Source: Company data, Kim Eng Securities

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Figure 14: Coverage list- Valuation summary (as of closing of 31 August)

FY12E Latest Mkt EV/ Div Net 3Mth daily price Stock cap PER (x) P/BV EBITDA ROE yield gearing turnoverCompany (HKD) code (USDm) 2011A 2012F 2013F (x) (x) (%) (%) (%) (USDm)Want Want China 9.60 151 16,280.3 38.8 29.2 26.1 10.4 23.5 38.6 2.1 N/A 16.0Uni-President China 8.00 220 3,691.7 77.5 28.5 24.0 3.2 14.7 11.8 1.1 36.8 5.9China Res. Ent. 23.05 291 7,094.1 29.3 22.0 17.5 1.4 6.3 6.7 3.0 N/A 10.5Tingyi 22.95 322 16,453.9 43.3 42.5 33.3 6.5 14.6 20.9 1.5 N/A 14.7Café De Coral* 21.65 341 1,586.8 25.8 23.3 20.7 3.5 10.7 15.6 3.0 N/A 0.6Vitasoy* 6.62 345 867.8 24.1 19.2 15.8 4.2 8.8 22.7 3.4 10.2 0.5China Foods 7.72 506 2,766.2 33.4 20.5 15.6 2.9 9.0 15.0 1.8 N/A 1.7Ajisen China 4.76 538 655.2 14.6 40.7 26.7 1.8 10.3 4.4 1.4 N/A 2.3Hengan 78.00 1044 12,290.3 36.1 28.2 23.3 7.0 19.4 26.4 2.3 N/A 21.3China Yurun 4.74 1068 1,107.7 8.1 N/A N/A 0.6 21.2 N/A N/A 13.5 13.1Biostime 19.10 1112 1,474.9 18.3 14.0 10.8 4.2 10.6 32.2 2.9 N/A 1.2Prince Frog 2.37 1259 306.1 9.3 8.3 7.2 1.5 4.6 22.8 2.4 N/A 1.6China Huiyuan Juice 2.33 1886 441.5 78.4 366.5 374.1 0.6 19.5 0.1 0.1 69.8 0.2China Mengniu 23.35 2319 5,292.1 21.6 24.3 18.5 2.8 10.4 11.9 0.9 N/A 13.1Vinda 12.12 3331 1,553.9 28.0 18.3 13.8 2.9 11.7 17.9 2.9 36.4 4.7Average (ex-Huiyuan PE) 4,790.8 32.4 24.5 20.0 3.6 13.4 17.6 2.1 N/A 7.2* With March year end(FY3/12A,FY3/13E, FY3/14E) Source: Kim Eng Securities estimates, Bloomberg

Fig. 15: Kim Eng’s Consumer Staple HKD10m Portfolio (as of closing of 31 August)

Name Code

Latest price

(HKD)

No. of shares

(‘000) Value

(HKD’000) % of

portfolioEntry price

(HKD)Vinda 3331 12.12 300.0 3,636.0 33.0 10.30CRE 291 23.05 120.1 2,768.3 25.1 27.10/22.95Biostime 1112 19.10 178.8 3,415.1 31.0 14.92Want Want China 151 9.60 100 960.0 0.1 9.52China Foods 506 7.72 65.8 508.0 4.6 8.40/7.61Total 11,017.4 Performance (August, MoM) (Return,%)Return +0.6 HSI return (1.7) Relative performance (%) +2.3 Performance(YTD) Return 10.2 HSI return 5.7 Relative performance (%) 4.5 Source: Kim Eng Securities

Fig. 16: Kim Eng’s Consumer Staple HKD10m Portfolio (as of closing of 31 August)

Name CodeLatest price

(HKD)No. of

shares (‘000)Value

(HKD’000) % of

portfolioEntry price

(HKD)Vinda 3331 12.12 300.0 3,636.0 33.0 10.30CRE 291 23.05 60.1 1,385.3 12.6 27.10/22.95Biostime 1112 19.10 100.0 1,910.0 17.3 14.92China Foods 506 7.72 529.3 4,086.1 37.1 8.40/7.61/

7.72Total 11,017.4 Source: Kim Eng Securities



Figure 17: Share price performance

Source: Kim Eng Securities, Bloomberg

Figure 18: Relative return- leisure F&B sector Figure 19: Relative return- wine sector


Figure 20: Relative return- dairy sector Figure 21: Relative return-HPC sector


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TingyiChina Foods

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Figure 22: Relative return- restaurants sector Figure 23: Relative return-food retailer sector


Figure 24: Relative return-brewery sector Figure 25: Relative return- infant formula sector


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RESEARCH OFFICES REGIONAL

P K BASU Regional Head, Research & Economics (65) 6432 1821 [email protected]

WONG Chew Hann, CA Acting Regional Head of Institutional Research (603) 2297 8686 [email protected]

THAM Mun Hon Regional Strategist (852) 2268 0630 [email protected]

ONG Seng Yeow Regional Products & Planning (852) 2268 0644 [email protected]

ECONOMICS Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]

Luz LORENZO Economist Philippines | Indonesia (63) 2 849 8836 [email protected]

MALAYSIA WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] Strategy Construction & Infrastructure Desmond CH’NG, ACA (603) 2297 8680 [email protected] Banking - Regional LIAW Thong Jung (603) 2297 8688 [email protected] Oil & Gas Automotive Shipping ONG Chee Ting (603) 2297 8678 [email protected] Plantations Mohshin AZIZ (603) 2297 8692 [email protected] Aviation Petrochem Power YIN Shao Yang, CPA (603) 2297 8916 [email protected] Gaming – Regional Media Power WONG Wei Sum, CFA (603) 2297 8679 [email protected] Property & REITs LEE Yen Ling (603) 2297 8691 [email protected] Building Materials Manufacturing Technology

LEE Cheng Hooi Head of Retail [email protected] Technicals

ONG KONG / HINA Edward FUNG Head of Research (852) 2268 0632 [email protected] Construction Ivan CHEUNG, CFA (852) 2268 0634 [email protected] Property Industrial Ivan LI, CFA (852) 2268 0641 [email protected] Banking & Finance Jacqueline KO, CFA (852) 2268 0633 [email protected] Consumer Staples Andy POON (852) 2268 0645 [email protected] Telecom & equipment Alex YEUNG (852) 2268 0636 [email protected] Industrial

INDIA Jigar SHAH Head of Research (91) 22 6623 2601 [email protected] Oil & Gas Automobile Cement Anubhav GUPTA (91) 22 6623 2605 [email protected] Metal & Mining Capital goods Property Ganesh RAM (91) 226623 2607 [email protected] Telecom Contractor

SINGAPORE Stephanie WONG Head of Research (65) 6432 1451 [email protected] Strategy Small & Mid Caps Gregory YAP (65) 6432 1450 [email protected] Technology & Manufacturing Telcos - Regional Wilson LIEW (65) 6432 1454 [email protected] Hotel & Resort Property & Construction James KOH (65) 6432 1431 [email protected] Logistics Resources Consumer Small & Mid Caps YEAK Chee Keong, CFA (65) 6433 5730 [email protected] Healthcare Offshore & Marine Alison FOK (65) 6433 5745 [email protected] Services S-chips Bernard CHIN (65) 6433 5726 [email protected] Transport (Land, Shipping & Aviation) ONG Kian Lin (65) 6432 1470 [email protected] REITs / Property Wei Bin (65) 6432 1455 [email protected] S-chips Small & Mid Caps

INDONESIA Katarina SETIAWAN Head of Research (62) 21 2557 1125 [email protected] Consumer Strategy Telcos Lucky ARIESANDI, CFA (62) 21 2557 1127 [email protected] Base metals Coal Oil & Gas Rahmi MARINA (62) 21 2557 1128 [email protected] Banking Multifinance Pandu ANUGRAH (62) 21 2557 1137 [email protected] Auto Heavy equipment Plantation Toll road Adi N. WICAKSONO (62) 21 2557 1130 [email protected] Generalist Anthony YUNUS (62) 21 2557 1134 [email protected] Cement Infrastructure Property Arwani PRANADJAYA (62) 21 2557 1129 [email protected] Technicals

PHILIPPINES Luz LORENZO Head of Research +63 2 849 8836 [email protected] Strategy Laura DY-LIACCO (63) 2 849 8840 [email protected] Utilities Conglomerates Telcos Lovell SARREAL (63) 2 849 8841 [email protected] Consumer Media Cement Kenneth NERECINA (63) 2 849 8839 [email protected] Conglomerates Property Ports/ Logistics Katherine TAN (63) 2 849 8843 [email protected] Banks Construction Ramon ADVIENTO (63) 2 849 8842 [email protected] Mining

THAILAND Mayuree CHOWVIKRAN Head of Research (66) 2658 6300 ext 1440 [email protected] Strategy

Maria BRENDA SANCHEZ LAPIZ Co-Head of Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] Consumer/ Big Caps

Andrew STOTZ Strategist (66) 2658 6300 ext 5091 [email protected]

Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] Media Commerce Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] Energy Petrochem Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] Property Woraphon WIROONSRI (66) 2658 6300 ext 1560 [email protected] Banking & Finance Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] Transportation Small cap. Suchot THIRAWANNARAT (66) 2658 6300 ext 1550 [email protected] Automotive Construction Materials Soft commodity Pongrat RATANATAVANANANDA (66) 2658 6300 ext 1398 [email protected] Services/ Small Caps

VIETNAM Michael KOKALARI, CFA Head of Research +84 838 38 66 47 [email protected] Strategy Nguyen Thi Ngan Tuyen +84 844 55 58 88 x 8081 [email protected] Food and Beverage Oil and Gas Ngo Bich Van +84 844 55 58 88 x 8084 [email protected] Banking Nguyen Quang Duy +84 844 55 58 88 x 8082 [email protected] Rubber Dang Thi Kim Thoa +84 844 55 58 88 x 8083 [email protected] Consumer Nguyen Trung Hoa +84 844 55 58 88 x 8088 [email protected] Steel Sugar Macro



APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS

This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report. This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. Malaysia

Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore

This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect. US

This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. UK

This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.



DISCLOSURES Legal Entities Disclosures

Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: MATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Kim Eng Vietnam Securities Company (“KEVS”) (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 4 September 2012, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

As of 4 September 2012, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report except Ivan Cheung who have held interest in KWG Property (1813 HK).

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment.

OTHERS Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Reminder

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings

Maybank Kim Eng Research uses the following rating system:

BUY Total return is expected to be above 15% in the next 12 months

HOLD Total return is expected to be between -15% to +15% in the next 12 months

SELL Total return is expected to be below -15% in the next 12 months

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

Some common terms abbreviated in this report (where they appear):

Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax



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Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India Tel: (91).22.6623.2600 Fax: (91).22.6623.2604

Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738

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Vietnam In association with

Kim Eng Vietnam Securities Company 1st Floor, 255 Tran Hung Dao St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 838 38 66 36 Fax : (84) 838 38 66 39

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